Mark Calabria

Earlier this week the Inspector General (IG) of the Federal Housing Finance Agency released a report documenting the current pay levels of mid-level executives at Fannie Mae and Freddie Mac, those mortgage giants which contributed to the financial crisis and have so far cost the taxpayer over $180 billion.   Despite the bail-outs, it seems the GSEs are still a comfortable place to work, all at the taxpayers’ expense.

This chart, reproduced from the IG report, illustrates that the GSEs’ over 300 Vice Presidents actually got paid more in 2011 than 2010, with a median compensation of $388,000.  Those poor directors, of which there are over 1,650, had to make due on a median compensation of only $205,300.  For running two companies into the ground, these executives seems pretty well paid to me.

One of the arguments against cutting pay at Fannie and Freddie is that all the good employees will leave, ultimately costing the taxpayer even more.  First I question whether we want the same people running these companies that ran them into the ground.  Shouldn’t we be cleaning house at Fannie and Freddie?  Secondly, voluntary employee attrition rates since the GSEs have been taken over aren’t all that much higher than before their bail-outs.  If anything these rates are too low.  Again given their role in the companies’ failures, we should encouraging long-time Fannie/Freddie employees to leave, not stay.

I have long proposed that since the taxpayer now outright owns Fannie and Freddie, their employees should be paid like federal government employees (who are already over-paid).   To continue to allow the same people who stuck the taxpayer with a $180 billion bill to be paid lavishly, is to add insult to injury.


Mark Calabria

Mark A. Calabria, is director of financial regulation studies at the Cato Institute.
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