Regulator sets terms to review Fannie, Freddie exec payouts (Reuters)
13.09.2008 21:40 Finance
The Federal Housing Finance Agency (FHFA), which has taken over the two government-sponsored enterprises, said it could weigh a variety of factors, including whether the executives had committed fraud or insider abuse, according to a notice posted to the agency's website on Friday.
The notice, which applies to any severed Fannie Mae or Freddie Mac employee, does not say whether Lockhart would actually take steps to limit the payouts.
Fannie Mae Chief Executive Daniel Mudd and Freddie Mac chief Richard Syron are entitled to combined pay and bonus packages worth about $24 million as part of the government's plan to restructure the troubled companies.
The so-called golden parachute payments have drawn criticism from Democrats, including presidential contender Barack Obama who earlier this week said such a windfall was unacceptable and the government's failure to block the packages violated the public's trust.
Democratic Senators Charles Schumer of New York and Jack Reed of Rhode Island have also urged reconsideration.
It was not immediately clear whether Republican presidential nomineeJohn McCain supported the severance packages, but he has in the past criticized corporate executives who earn big salaries and excessive severance packages.
In its notice, FHFA said its director James Lockhart could weigh whether the executives were "substantially responsible for the insolvency" of the companies or their "troubled condition."
Lockhart could also look at whether the executives broke federal or state law as well as how long they were affiliated with the companies, among other criteria, the notice said.
While federal regulators usually issue a proposal and take public comment before issuing a final decision, the FHFA said Friday's decision was immediately effective. It added members of the public could still submit comment.
The U.S. government took over the two U.S. mortgage giants last Sunday and replaced its management as part of a plan to recapitalize the two firms which own or guarantee about half of the nation's $11 trillion outstanding home mortgages.
The government's bailout of Fannie and Freddie is designed to support the U.S. housing market which has seen house prices fall about 15 percent on average nationwide in the past year.
Defaults and foreclosures on U.S. home mortgages in the past two years have risen, contributing to losses of more than $500 bln by banks worldwide, exacerbating the global credit crisis of the past year.
(Reporting by Susan Heavey)
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