Obama Makes it Official: Fannie Mae and Freddie Mac CEO Pay Rolled Back to $600,000 by Amanda Maher
In an otherwise sleepy day before Thanksgiving, President Obama signed S. 2036, the “Equity in Government Compensation Act of 2015,” or to those of us who follow Fannie Mae and Freddie Mac reform closely, the bill more affectionately known as the Act to Limit GSE CEO Pay.
According to a White House press release, the Act “suspends compensation packages approved for 2015 for the chief executive officers of the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and any of their affiliates, and reinstates the compensation and benefits previously in effect.”
This was the final hurdle to clear in order to roll back the pay increases FHFA’s Mel Watt had initiated earlier this year, which would see the GSE CEOs earning upwards of $4 million each in salary and benefits. Indeed, Watt’s proposal would allow the CEOs’ pay to increase as high as the 25th percentile of the market, which is the equivalent of roughly $7.26 million per year.
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With Obama’s signature, the CEOs will see their pay capped at $600,000—the salary limit established as part of the GSEs’ collective $187.5 billion taxpayer-funded bailout in 2008.
Congress had bucked at Watt’s suggestion that Fannie Mae and Freddie Mac executives needed higher salaries to compete with the private sector. In a rare bipartisan effort, Senator David Vitter (R-Louisiana) and Senator Elizabeth Warren (D-Massachusetts) authored a bill to return GSE CEO pay to the $600,000 threshold, a bill that was later unanimously passed by the House of Representatives.
The Obama Administration had voiced its consent with the cap all along, with White House press secretary, Josh Earnest, stating last May that Fannie Mae and Freddie Mac should be treated differently than other companies because the mortgage giants “benefit significantly from a backstop that is provided by the taxpayer”.
Freddie Mac CEO Donald Layton has already indicated that the pay cap is of no concern to him. “I signed up for this job personally as a public service matter so the compensation wasn’t the big attraction to me and so I really just don’t regard it as a big issue personally,” Layton said in a recent interview with the Wall Street Journal.
Though the pay cap has been heralded as an important first step in housing finance reform, U.S. Representative Ed Royce (R-California), noted that this is just that—a first step.
“While this is a victory for taxpayers, the real battle of winding down Fannie Mae and Freddie Mac and ending the government’s domination of the housing market remains,” said Royce, who sponsored the House’s version of the bill to cap the CEOs’ pay. “My ultimate goal is still comprehensive housing finance reform that brings private capital into the system to eliminate the boom-and-bust cycle that wreaked havoc on the American economy.”