WASHINGTON — The government is capping pay for Fannie Mae and Freddie Mac executives at $500,000 per year and eliminating annual bonuses, giving in to pressure from Congress to stop big payouts at the bailed-out mortgage giants.
The pay cap will apply to 70 executives at the companies, although not all of them will earn the top salary.
The pay and bonus structure of the government-controlled mortgage giants came under fire last fall after it was revealed that 12 executives got $35.4 million in salary and bonuses in 2009 and 2010. Fannie's chief executive, Michael J. Williams, received about $9.3 million for the two years. Freddie's chief executive, Edward Haldeman Jr., was paid $7.8 million.
Republican lawmakers welcomed the cap, noting that pay at mortgage companies should be more in line with government salaries. But administration officials said such limits will make it harder to attract talent because executives could earn far more in comparable jobs on Wall Street.
There's no start date in place for the cap. Haldeman and Williams will each be paid $5.4 million this year. But Haldeman and Williams are leaving their positions this year, and officials say the cap will be applied to their replacements' salaries.
The government rescued Fannie and Freddie three years ago after they nearly folded because of big losses on risky mortgages. Taxpayers have spent about $170 billion to prop up the companies, the most expensive bailout of the 2008 financial crisis.
Fannie and Freddie executives receive salaries, bonuses and other forms of compensation for their work, including deferred salary, which is tied to the company's performance and is usually paid after one year with the companies. Under the cap, Fannie and Freddie executives will be paid about 50 percent less than the median salary of comparable positions for big private financial firms, including Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, the government says.