Regulators have approved generous executive compensation at Fannie Mae and Freddie Mac, the taxpayer-backed mortgage finance giants, with little scrutiny or analysis, according to a report published Thursday by the inspector general of the Federal Housing Finance Agency.
The companies, whose fates are to be decided by Congress this year, paid a combined $17 million to their chief executives in 2009 and 2010, the two full years when Fannie Mae and Freddie Mac were wards of the state, the report found.
The top six executives at the companies received $35.4 million over the two years. Since Fannie Mae and Freddie Mac were taken over in September 2008, the companiesí mounting mortgage losses have required a $153 billion infusion from taxpayers. Total losses may reach $363 billion through 2013, according to government estimates.
Those that say that the subprime crisis resulted from lack of regulation are absolutely right...just not quite in the way that they think:
Formerly known as the Federal Home Mortgage Corporation, Freddie Mac is one of the nationís largest mortgage companies. What makes it different from other loan companies, however, is that Freddie Mac was created by Congress. Like Fannie Mae, another government-mandated company, Freddie Macís charter is to boost the housing market by purchasing mortgages from banks, thus freeing up financial institutions to hand out other home loans. Its status as a quasi-governmental entity has infuriated its competitors, namely investment banks, because Freddie Mac is not regulated as other mortgage companies are. And thatís a perk that Freddie Mac has lobbied heavily to maintain over the last 10 years. Freddie Mac's illegal involvement in fundraisers for members of Congress, including members who regulate the company, resulted in the Federal Election Commission levying a record fine in 2006--$3.8 million.