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InsiderOnline Blog: April 2011

Fannie Mae Execs Rewarded for Fed Buying Spree

Selling junk to the Federal Reserve is a business plan that can earn you better pay—if you work for a giant mortgage guarantor that bought too many bad assets and had to enter a government conservatorship. The top three executives at Fannie Mae earned $18.2 million in 2009 and 2010, according to a new IG report. The President and CEO of Fannie Mae, Michael J. Williams, earned $9.3 million in those years. The executives’ pay included  performance bonuses for meeting the goal of Fannie Mae issuing more than 37.5 percent of all new mortgage-backed securities in 2009. But that was questionable as a performance benchmark, says the IG, because

… in November 2008, the Federal Reserve announced that it would purchase up to $1.25 trillion in the Enterprises’ MBS. Under this program, the Federal Reserve purchased essentially all of the Enterprises’ net MBS issuances in 2009. … It seems unlikely that Fannie Mae could have commanded such a large share of the market without the Federal Reserve’s purchases of its MBS.

Since Fannie Mae and Freddie Mac entered a government conservatorship in 2008, they have been propped up to the tune of $153 billion from the Department of the Treasury. During that time, the top six executives from the two companies have earned combined salaries of $35 million, says the IG report. See “Evaluation of Federal Housing Finance Agency’s Oversight of Fannie Mae’s and Freddie Mac’s Executive Compensation Programs,” Federal Housing Finance Agency, Office of Inspector General, March 31, 2011.

Posted on 04/04/11 04:59 PM by Alex Adrianson

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