US pay czar: Fannie Mae, Freddie Mac unique when it comes to pay
WASHINGTON, Dec 30 (Reuters) – Mortgage finance firms Fannie Mae and Freddie Mac face a unique set of problems that distinguish them from other companies receiving government aid when it comes to setting executive pay, the Obama administration’s pay czar said on Wednesday.
The two government-controlled companies, which have tapped Treasury credit lines to the tune of a combined $111 billion, said last week they would pay their CEOs up to $6 million in cash for this year.
Kenneth Feinberg, the Treasury Department official charged with overseeing executive pay at firms receiving aid from the government’s $700 billion bailout fund, told CNBC the uncertainty over the future of the mortgage finance companies was one factor that made their situation unique.
While Feinberg has been forcing companies under his jurisdiction to center compensation more heavily on long-term stock, he said it was fair that the regulator for Fannie Mae and Freddie Mac had approved cash compensation.
“One, there is no stock, so all of the compensation needs to be in cash … And secondly, the future of Fannie and Freddie politically remains very uncertain and as a result of that, it’s very difficult to convince people to come to work for Fannie and Freddie when they don’t know how long there will even be a Fannie and Freddie,” he said.
Fannie Mae’s stock closed at $1.16 a share on Wednesday, while Freddie Mac’s stock ended at $1.42, making it unattractive as part of a compensation package, particularly given the uncertain future both firms face.
The Obama administration has said it would lay out its vision for the companies, which were seized by the government in September 2008, in February.
You can’t pay people in long-term stock … if you can’t do that then you’ve got to pay people in cash,” Feinberg said. “You can try to limit the cash and tie it to performance, but it’s a little hard to do that more than a year ahead because there may not be a Fannie and Freddie.”
“So I’m somewhat sympathetic to the notion that there are unique problems at Fannie and Freddie that don’t exist at the companies that are before my mandatory jurisdiction,” he said.
While Feinberg does not oversee executive compensation at Fannie Mae and Freddie Mac, the firms’ regulator, the Federal Housing Finance Agency, sought his guidance in approving the pay packages. (Reporting by Tim Ahmann; Editing by Diane Craft)
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