WASHINGTON, D.C.--Working to make sure the outrageous bonuses issued to Fannie Mae and Freddie Mac executives last year never happens again, U.S. Senators Mark Begich (D-Alaska) and John Thune (R-S.D.) today introduced the Stop the Outrageous Pay (STOP) at Fannie Mae and Freddie Mac Act.
The STOP Act prevents the distribution of undisbursed bonus money and moves all Fannie Mae and Freddie Mac employees onto a structured pay scale similar to that of other federal financial regulators.
The Begich-Thune bill follows a series of events from November of 2011, when reports surfaced that the Federal Housing Finance Agency (FHFA) approved nearly $13 million in bonus pay for ten executives at Fannie and Freddie. In response, Begich and Thune spearheaded a bipartisan letter, signed by a total of 60 senators, to FHFA Acting Director Edward DeMarco and Treasury Secretary Timothy Geithner expressing outrage over the excessive pay.
"Our goal is to make sure the reckless and outrageous bonuses issued to Fannie and Freddie execs last year are never repeated and remain a history lesson on abuse of taxpayer money," Begich said. "The two agencies have received over $150 billion in taxpayer funds since 2008, and those executives should not be living like fat cats while many Alaskans and other Americans are struggling to pay their bills, send their kids to college, and make the mortgage payment."
"It is unbelievable that Congress needs to step in and end these outrageous salaries for Fannie Mae and Freddie Mac executives," said Thune. "The American taxpayers have already bailed out these agencies to the tune of over $150 billion and should not be on the hook for millions of dollars in exorbitant salaries."
The Begich-Thune STOP Act suspends the current compensation packages of Fannie and Freddie executives and limits the pay for all employees. Specifically the legislation:
Places all employees of Fannie Mae and Freddie Mac on the pay scale used by the federal financial regulators such as the FDIC and the SEC, as established by the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989. Under this pay scale, Fannie Mae and Freddie Mac employees would be prohibited from being paid more than employees of other federal financial regulatory agencies (currently capped at $275,000 annually);
Prevents any future pay or bonus payments for 2011 and beyond that are in excess of this new pay cap and that have not yet been disbursed. These funds would be used to pay down the national debt; and
Requires FHFA to make Fannie Mae and Freddie Mac salary disbursements data available to Congress and the public without compromising the privacy of individual employees.
Original cosponsors for the STOP Act include Sens. Claire McCaskill (D-Mo.), Roy Blunt (R-Mo.), Jon Tester (D-Mont.), Chuck Grassley (R-Iowa), John Hoeven (R-N.D.), Scott Brown (R-Mass.), and Mike Enzi (R-Wyo).
The House Financial Services Committee passed similar legislation to suspend the bonuses and limit future compensation packages by a vote of 52-4 on November 15, 2011.
The text of the original Begich-Thune letter from November is below.
November 4, 2011
Mr. Edward DeMarco
Federal Housing Finance Agency
1700 G Street, NW
Washington, DC 20552
Dear Mr. DeMarco:
On November 1, 2011, it was reported that the Federal Housing Finance Agency (FHFA) approved $12.79 million in bonus pay for ten executives at Fannie Mae and Freddie Mac, the Government Sponsored Enterprises (GSEs). At a time when these entities have received nearly $141 billion in taxpayer-provided bailout funding, such excessive compensation seems wildly imprudent. Moreover, the full cost of conservatorship remains a moving target.
We are sincerely concerned about the message this sends to millions of American families when the unemployment rate stands at 9.0% and the housing market remains very weak. As American families are tightening their belts in light of the struggling economy, the federal government must take steps to ensure that the conservatorship is receiving proper oversight. The wasteful nature of these bonuses, however, is a step in the wrong direction.
The idea that Fannie Mae and Freddie Mac, which rely on taxpayer funding to stay afloat, must offer excessive bonuses to its executives to attract effective management strains credulity. We therefore urge you to make substantial changes to the executive compensation policies to more accurately reflect the public mission of your agency and the fiscal reality facing the GSEs and the federal government. We also request an update regarding your actions to reform compensation package protocol and what steps have been taken to address the concerns raised by the FHFA Inspector General in the March, 2011 report "Evaluation of Federal Housing Finance Agency's Oversight of Fannie Mae's and Freddie Mac's Executive Compensation Programs."
Cc: The Honorable Timothy F. Geithner