Fannie Mae and Freddie Mac employees don’t need outsized pay. Whatever their quasi-private sector past, they’re now managing the U.S. government’s money – and they’re paid by Uncle Sam, too. The Treasury secretary and the Federal Reserve chairman take home just under $200,000 (U.S.). There’s no reason for dozens of housing agency staff to pocket multiples of that.
The Federal Housing Finance Agency (FHFA), the regulator and conservator of the two housing finance enterprises, has published a new report showing that 23 executive vice-presidents across both firms made a median $1.7-million last year, while another 62 senior vice-presidents typically pulled in $723,500. That’s a lot for people who are, in essence, in public service.
Sure, Fannie and Freddie used to be publicly traded, and they rewarded employees generously. But that all came to an end in 2008, and they are now on a Treasury drip-feed. FHFA boss Edward DeMarco has in the past defended the companies’ Wall Street-like pay. But this year he finally took a hatchet to the pay of the two giants’ chief executives, reducing it by nearly 90 per cent to $600,000. It’s logical the rest should follow.
There’s a plan to cut the cash compensation of some executives by 10 per cent. Yet that would still leave pay that looks high. Fannie argues that it needs to pay salaries that will attract bankers so that it can manage the “risk and operational complexity associated with a $3-trillion business.” But highly paid executives didn’t prevent Fannie and Freddie being sucked into the mortgage crisis. And other areas of government need plenty of financial nous, too.
The Fed, for instance, has about the same $3-trillion of assets to keep tabs on. Bill Dudley, the president of the central bank’s New York unit, makes just $410,780 – still double what his Washington boss, Ben Bernanke, is paid – and his organization is at the sharp end of the Fed’s market activity. Meanwhile Timothy Geithner’s team at Treasury has to figure out how to avoid default every time the U.S. debt approaches the maximum allowed.
In 2008, the last thing the government needed was for useful employees to flee Fannie and Freddie. But four years later the two groups are stuck in the public sector, their CEO pay reflects that, and austerity is in the air. It’s time to own up to reality and make overdue reductions in their other pay scales.