Another Attack on CEO Pay

The salaries of top executives at Fannie Mae and Freddie Mac are under attack with the introduction of a new Congressional bill. Rep. Ed Royce, R-Calif., is sponsoring legislation that would potentially cap executive salaries within these two companies, making them comparable to the salaries of officials within the government’s executive branch. This move is in response to possible pay increases that are currently under consideration by the Federal Housing Finance Agency (FHFA) Director Melvin Watt, who serves as the ultimate conservator for the two agencies.

In 2011, the highest earning executive at Fannie Mae reportedly made $5.3 million, while Freddie Mac’s top executive earned $3.8 million. In 2012, the former FHFA director substantially decreased their annual pay to $600,000.

The argument for increases

According to Watt, salary increases will help attract top talent to opportunities with Freddie Mac and Fannie Mae, as well as retain these individuals as employees. He is reportedly allowing Freddie Mac executives to submit a report regarding desired increases for CEO salaries.

The argument against increases

In response to Watt’s consideration of the issue, Royce responded, “I’m deeply disappointed with Director Watt’s decision to open the door to multi-million dollar salaries at the GSEs, which continue to be propped up by tax payers.”

Under Royce’s legislation, the CEO salaries could reportedly decrease to around $200,000. He is joined in his opposition to the increases by other members of Congress, as well as the Treasury Department.  Fannie Mae and Freddie Mac are currently under a government conservatorship, which was formed under the 2008 bailout, where the two companies received a combined total of $187 billion. At that time, they were placed under the supervision of the FHFA.

If you have questions about your salary or this proposed legislation, contact our office to speak with a trained attorney.