More Pay Challenges at Fannie & Freddie (FNM, FRE)

Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) may finally be getting some added pay regulation.  After regulators and politicians have gone after Wall Street compensation, House Republicans have introduced a bill to significantly cut the pay packages for senior executives at the two government sponsored entities under government conservatorship.  We are still awaiting the details whether this is new other than comments that have already been made on Fannie and Freddie executive pay or if this is just more promised legislation that will be coming down the pipe.

This aims to replace the recent multi-million dollar compensation packages which were recently approved for senior executives at Fannie Mae and Freddie Mac.  Those packages, depending upon what performance are met and depending upon a myriad of factors, were worth more than $5 million at the CEO level.  If these two entities were nationalized overnight, those caps would potentially be capped at $200,000 if the federal mandates took hold.

Fannie Mae and Freddie Mac are not immune from blame here as they did not exactly sit on the sidelines in the financial crisis.  Who lifted the conforming loan limits to keep the house lending machines going on and on as the public borrowed against equity and then refinanced over and over at higher and higher home valuations?  Who helped to rubber-stamp all the mortgages and allowed these to be repackaged into large pools over and over?  Yep, Fannie and Freddie… among dozens and dozens of other entities.

Whether this has a chance of passing, that is not yet clear as details are still not fully out.  We have already seen Barney Frank and others comment in recent weeks that the pay packages were perhaps too high, so this may be more formalized efforts over what has been building since the last weeks of 2009.

JON C. OGG