Government-controlled mortgage finance firms, Fannie and Freddie, have received around $169 billion of taxpayer’s money in an effort to prop them up, but it was recently revealed the firms were paying just 10 executives around $12.79 million in bonuses.
This unwelcome news has prompted lawmakers to look at ways of blocking these hefty bonus packages, and according to an article in Reuters, the House Financial Services Committee is due to meet on November 15 to vote on a bill which would allow the suspension of such compensation packages. The House bill has already been approved by a subcommittee in April, and under its terms employees’ salaries at Fannie Mae and Freddie Mac would be tied to government pay scales.
At the same time a bipartisan group of senators is due to file a similar amendment in the Chamber this week. This would prohibit top executives from receiving huge bonuses for as long as the company was under the control of the government. Both Fannie Mae and Freddie Mac were taken into government control in 2008 to avoid insolvency. They are the major sources of mortgage funding for the US, and because of this the Treasury gave them access to an unlimited credit line to help protect the housing market. Both firms reported third-quarter losses and are looking towards the federal government for more handouts. Fannie reported a quarterly loss of $5.1 billion, while Freddie had a quarterly loss at $2.5 billion. Apparently they need another $7.8 billion and another $6 billion respectively from the federal government in order to stay afloat.
The majority of pay packages for both companies are approved by the Federal Housing Finance Agency in consultation with the Treasury Department, but this hasn’t stopped them drawing criticism, and the acting director of the FHFA is due to appear on Capitol Hill on Tuesday and Wednesday to answer questions about these incredibly generous bonuses.