[1]A proposed bi-partisan bill to cap the salaries of the CEOs at both Fannie Mae [2] and Freddie Mac [3] passed in the U.S. Senate by a unanimous vote on Wednesday.
S.236, known as the Equity in Government Compensation Act of 2015, was co-sponsored Sen. David Vitter (R-Louisiana) and Sen. Elizabeth Warren (D-Massachusetts). The bill was modeled after a similar bill in the House, H.R. 2243 [4], also called the Equity in Government Compensation Act of 2015, introduced by Rep. Ed Royce (R-California) earlier this year. Royce's bill passed in the House Financial Services Committee [5] by a vote of 57-1 on July 29.
"Giving massive taxpayer-funded pay raises to Fannie Mae and Freddie Mac isn’t just out of touch – it’s downright offensive," Vitter said. "These two companies are wards of the state. They exist in the current form only because folks across the country paid to bail out the mortgage giants during the financial crisis. In fact, they’d still be on the hook if Fannie Mae and Freddie Mac incurred further losses. Congressman Royce’s hard work in the House built momentum to pass this important bill, and with last night’s vote, the Senate has unanimously agreed that capping these pay raises is the common-sense, responsible course of action."
"Giving massive taxpayer-funded pay raises to Fannie Mae and Freddie Mac isn’t just out of touch – it’s downright offensive."
Royce introduced his bill in May in response to Mel Watt, Director of the FHFA (the GSEs' conservator), authorizing the GSEs to propose new executive compensation plans for Fannie Mae CEO Timothy Mayopoulos and Freddie Mac CEO Donald Layton that could be as high as the 25th percentile of the market, which computes to about $7.26 million per year. On July 1, Watt announced a proposed compensation package that would raise the annual pay of Mayopoulos and Layton from the current level of $600,000 up to $4 million. Watt's predecessor, Ed DeMarco, capped the GSE CEO pay at $600,000 more than three years ago after four years of conservatorship.
The Vitter-Warren bill would re-instate DeMarco's cap of the salaries at $600,000 per year.
"Near universal support in both the House and Senate for capping GSE CEO pay is proof positive that multi-million dollar raises at taxpayer bailed-out and backed organizations are unconscionable," Royce said. "I applaud Senator Vitter for his quick work in getting this bill through the Senate and will work to replicate his success in the House."
Both the U.S. Department of Treasury and the White House publicly stated that they did not agree with Watt's proposal. Treasury said [6] it "does not support FHFA’s new approach to CEO compensation at Fannie Mae and Freddie Mac and urged the agency to reject any increase," and White House Press Secretary Josh Earnest said [7] "I think it is entirely legitimate for the executives at those institutions to be subject to compensation limits" when asked about the White House's view on executive raises at the GSEs."