The House Financial Services Committee has announced that proposed legislation to cap the salaries of CEOs at Fannie Mae and Freddie Mac has advanced to the markup phase, which will take place in the Committee on Tuesday, July 28.
H.R. 2243, also known as the Equity in Government Compensation Act of 2015, was introduced by U.S. Rep. Ed Royce (R-California) in May shortly after Federal Housing Finance Agency (FHFA) director Mel Watt directed the GSEs 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.
Early in July, Fannie Mae and Freddie Mac announced that their respective CEOs, Timothy Mayopoulos and Donald Layton, would receive a raise from their current annual salaries of $600,000 (the cap set by Watt's predecessor, Edward DeMarco) up to $4 million. The announcement of the substantial raise for the GSE's top executives drew the ire of many lawmakers, including Royce, who said it is "unconscionable" that the GSEs would elevate the pay of their CEOs to that level while taxpayers are still on the hook. The GSEs have been under the FHFA's conservatorship since September 2008, when they received a $187.5 billion taxpayer-funded bailout.
Similar legislation was introduced by former Rep. Spencer Bachus (R-Alabama) in January 2012 and passed the House Financial Services Committee on a bipartisan vote of 52-4. One of the four who voted against the legislation was Mel Watt, then a member of the Committee.
"Congress needs to put a stop to the planned multi-million dollar paydays at Fannie Mae and Freddie Mac," Royce said upon the announcement that his bill was scheduled for markup. "Holding compensation packages at taxpayer-backed organizations to responsible limits is in the interest of the public trust. I thank Chairman Hensarling for advancing this legislation and look forward to building the bipartisan backing it previously garnered."
Watt said in a statement earlier this month that the purpose of the pay raises was to "promote CEO retention, allow reliable succession planning, and ensure the continuity, efficiency and stability" at Fannie Mae and Freddie Mac.
Royce's bill would suspend the compensation packages for Fannie Mae and Freddie Mac executives and would limit the salaries to the highest level paid at the FHFA, which the Congressional Budget Office estimated in 2011 to be $255,000 per year. It would also place non-executive GSE employees on the General Schedule (GS) pay scale, where the most they could earn annually would be $132,122.
Other government agencies have weighed in on the pay rate for the top executives at the GSEs. The Department of Treasury released a statement earlier this month saying, "Treasury does not support FHFA’s new approach to CEO compensation at Fannie Mae and Freddie Mac and urged the agency to reject any increase. Treasury has consistently recommended that existing limits on compensation continue." White House press secretary Josh Earnest stated, "I think it is entirely legitimate for the executives at those institutions to be subject to compensation limits."
Click here to see a Committee memorandum. The markup on July 28 will be a full Committee markup.