Government-sponsored enterprises (GSE) Fannie Mae, Freddie Mac and Farm Credit have a shared history of federal bailouts. They’re also predisposed to shower their senior leadership with staggering compensation packages.
The saga continued this month as The Washington Times reported that the chief executives of Fannie Mae and Freddie Mac would receive monumental pay increases from $600,000 to $4 million.
“Over the objections of the Obama administration and key lawmakers, the CEOs of bailed-out housing giants Fannie Mae and Freddie Mac are getting massive pay raises, courtesy of the regulator appointed by President Obama himself,” according to the Times.
The article added that “Federal Housing Finance Agency (FHFA) Mel Watt defended his decision to approve the pay hikes…as vital to ‘promote CEO retention, allow reliable succession planning and ensure the continuity, efficiency and stability’ now that both companies have returned to financial health.”
The enormous pay hike reflects a troubling level of naiveté – or even worse, brazenness – of the poor optics of lining the pockets of the executives responsible for leading mortgage giants Fannie Mae and Freddie Mac, both of which required close to $200 billion in combined taxpayer rescue funds less than a decade ago.
The news harkens back to 2013, when Bert Ely reported that Farm Credit’s regulator – the Farm Credit Administration (FCA) – mandated a vote by Farm Credit’s borrowers and stockholders in any event that compensation for its executives or senior leadership was set to increase by upwards of 15 percent. As one might expect, the proposal was met by overwhelming opposition.
“FCS insiders have not accepted this defeat quietly,” Ely wrote. “Using a rarely utilized provision in federal law (‘Interested parties have the right to petition a federal agency to issue, amend, or repeal regulations’), the FCS trade association, the Farm Credit Council, petitioned the FCA to repeal its advisory ‘say on pay’ rule earlier this month. The FCA, as required by law, has published this petition and has requested public comment.”
Whether ignoring the president’s objections or battling the FCA’s credible attempt to increase transparency and accountability, it’s clear that the troubled GSEs’ approach to executive compensation is nearing reckless arrogance. It’s well past time that they, especially the oft-overlooked Farm Credit System, receive a much closer look from Congress before the taxpayer is stuck picking up the tab – again.