U.S. Congressman Ed Royce (R-California) has announced that he plans to submit legislation by the end of the week to prevent a potential pay increase for Freddie Mac CEO Donald Layton and Fannie Mae CEO Timothy Mayopoulos.
The Federal Housing Finance Agency (FHFA) has given Freddie Mac and its fellow GSE, Fannie Mae, authorization to review the salaries of their respective CEOs, Layton and Mayopoulos. Both CEOs made $600,000 each without bonuses in 2014. The pay reviews for the top executives at the GSEs are largely due to concerns that the Enterprises will not be able to stay competitive because their CEOs make less than some lower-ranked executives.
Earlier this week, FHFA director Mel Watt directed Freddie Mac to submit a proposed executive compensation for the CEO position that could be as high as $7.26 million a year, the 25th percentile of the market.
Royce said in a statement on his website that it is "unconscionable" that Freddie Mac would elevate the pay of its CEO to that level while taxpayers are still on the hook. The fact that the GSEs are still under conservatorship of the FHFA, where they have been since September 2008, is still a contentious one among politicians and stakeholders in the housing market.
Nearly seven years ago, Fannie Mae and Freddie Mac needed a combined $187.5 billion taxpayer bailout to continue operations. They returned to profitability in 2012, but their future profitability remains in doubt; just last week, a stress test administered by the FHFA revealed that the GSEs would need a bailout of up to $157 billion when certain hypothetical adverse economic conditions were applied.
"At a time when American families are still struggling to find their footing financially, it is absolutely unconscionable that regulators would allow the taxpayer-bailed out Freddie Mac to pay its CEO over $7 million dollars a year," Royce said. "Just last week a stress test of the GSEs showed the possibility of a future taxpayer bailout to the tune of $150 billion, yet FHFA appears to be pursuing the pre-crisis model of private gains and public losses. We can't simply put the blinders on and say the GSEs are just like other companies. We need to move towards a model that allows the private sector to compete on a level-playing field, not one where Fannie and Freddie act like the private corporations with taxpayers on the hook for losses. In the interim, I will be introducing legislation to block this potential hike in CEO pay."