The top executives at Fannie Mae and Freddie Mac traveled to Capitol Hill on Wednesday to defend the payment of millions of dollars in deferred salary and bonuses to senior leadership at their firms.
The hearing before the House Oversight Committee was somewhat upstaged by a similar hearing in the Senate a day earlier. Still, it marked the first public questioning of the two CEOs about the $12.8 million in bonuses and deferred salary paid last year to 10 top executives at their companies.
Both Freddie Mac chief executive officer Charles Haldeman Jr. and Fannie Mae president and CEO Michael Williams argued that the pay packages are necessary to attract and retain employees capable of managing multi-trillion dollar firms.
"Our employees are committed to Fannie Mae's mission to provide funding to the market, help struggling homeowners and reduce losses on loans originated prior to 2009," Williams said. "Attrition at our company this year is already double our historical experience. If we are to continue to provide the stability our housing finance system needs and protect the taxpayer's investment in our company, we must retain and recruit qualified executives and employees."
Haldeman said that when he joined Freddie Mac in 2009, he decided that gradual change was preferable to radical change at a firm that plays such an important role in the U.S. housing market. He said that pay for Freddie's senior management is down 40% from its peak levels.
"I understand the outrage," Haldeman said. "We have significantly reduced executive compensation and overall spending at Freddie Mac. But we have tried to do it in a way that does not risk disrupting the functioning of the company."
"My belief is that disrupting the functioning of the company would put those families who are suffering at even greater risk of deeper and more prolonged difficulty," he said.
Fannie and Freddie have become favorite punching bags for members of Congress, and the committee's Republican chairman, Darrell Issa, asked Williams a series of pointed questions about his salaries over the years as he rose through the ranks at Fannie Mae.
When Williams was asked what his salary was in 2002, he said that he couldn't remember. Nor could he recall when he first was paid $1 million.
That led to an exasperated response from Democratic Rep. Elijah Cummings, who said, "You all come from a different world than the one I come from. If I had made a $1 million, I sure would know when I made it."
Later in the hearing, Haldeman came under fire from Republican Rep. Trey Gowdy, who asked whether the federal government's decision to take control of Freddie Mac in 2008 was the result of poor business decisions at the firm.
"It's difficult for me to say that, because I don't want to second guess my predecessors," Haldeman said.
"I can talk about some decisions that were made that I hope I would do differently," he added. "But I'd prefer not to characterize them as poor business decisions."
Also testifying at the hearing was Edward DeMarco, acting director of the Federal Housing Finance Agency, who renewed his call for Congress to end the uncertainty about the future of Fannie and Freddie.
"I really would welcome working with the Congress of the United States to get on with the hard work of housing finance reform so that we can bring the conservatorships themselves to an end, which would end this compensation issue and the much larger exposure to the taxpayer," he said.
After the hearing, Democratic Rep. Barney Frank issued a press release accusing Issa of "gross hypocrisy" with regard to executive compensation at Fannie and Freddie. The press release pointed out that in 2009 Issa voted against a bill to restrict executive pay at Fannie, Freddie, and other bailed-out financial institutions.