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Fannie Mae Salaries Rile Hill

High Compensation Called Mismatch With Lending Mission

By David S. Hilzenrath
Washington Post Staff Writer
Monday, October 11, 2004; Page E01

During a packed hearing on Fannie Mae's accounting practices last week, Rep. Richard H. Baker (R-La.), a leading critic of the District-based mortgage finance company, displayed a poster-size chart of the compensation of 22 of its top executives.

The document showed that 20 of the individuals received more than $1 million each in total compensation in 2002. Twelve received more than $2 million. Nine received more than $3 million. Some lawmakers were outraged at the compensation. Others were outraged at Baker for making it public in a confrontation with Fannie's chairman and chief executive, Franklin D. Raines.

Chairman and chief executive Franklin D. Raines arrives at a House Financial Services Committee hearing held last week on accounting irregularities at Fannie Mae. (Susan Biddle -- The Washington Post)

_____In Today's Post_____
Making Way for Fannie Mae (The Washington Post, Oct 11, 2004)
Both Sides Critical At Fannie Hearing (The Washington Post, Oct 7, 2004)
On Fannie's Board, Many Bonds (The Washington Post, Oct 6, 2004)
Fannie Executives to Defend Accounting Practices (The Washington Post, Oct 6, 2004)
Restatement Decision Deferred (The Washington Post, Sep 30, 2004)
As Fannie, Freddie Regroup, Impact May Be Minimal (The Washington Post, Sep 29, 2004)
Regulator Says Fannie Resisted (The Washington Post, Sep 25, 2004)
Regulator Has No Confidence in Fannie Leadership (The Washington Post, Sep 24, 2004)
Fannie Employee Raised Concerns (The Washington Post, Sep 24, 2004)
Report Slams Fannie Mae (The Washington Post, Sep 23, 2004)
Warnings Shadowed Firms' Rapid Growth (The Washington Post, Sep 23, 2004)
Probe Examining Fannie's Promises (The Washington Post, Sep 23, 2004)
_____Related Coverage_____
Futures of Fannie's CEO, CFO Unclear As Directors Meet (The Washington Post, Dec 17, 2004)
Banks Scrutinize Their Accounting (The Washington Post, Dec 17, 2004)
Fannie Took the Shortcut (The Washington Post, Dec 16, 2004)
SEC Tells Fannie Mae To Restate Earnings (The Washington Post, Dec 16, 2004)

Raines protested that the release of the information was an invasion of privacy and would provide a road map for recruiters trying to raid Fannie Mae's talent. The company had fought to keep the information private, hiring Kenneth W. Starr, the attorney who investigated President Bill Clinton, in the effort.

Baker said that he was within his rights to introduce the material as part of a hearing on regulators' allegations that Fannie executives manipulated financial results, in part to ensure bonus packages. And he said he would seek similar data for the past 10 years.

Fannie Mae had previously disclosed the compensation of Raines and its four other most highly compensated executive officers in a filing with the Securities and Exchange Commission.

The data Baker released offer a broader view of what is at stake for the people who run Fannie Mae, one of the nation's largest and most complex financial institutions and a major instrument of government policy to make mortgages available to minority and low-income home buyers.

Baker, who chairs the subcommittee on capital markets, said in an interview after the hearing that he wanted to show fellow lawmakers "the scope of the benefits being paid to these executives for an entity created by the Congress which is intended to help low-income people get access to housing."

"There seems to be a mismatch here," he said.

The chart showed that 16 Fannie executives received bonuses in 2002 that were larger than their salaries. According to a report Fannie filed with the SEC, executive bonuses in 2002 were linked to an "aggressive" earnings target that Fannie exceeded.

Fannie's regulator has argued that pay incentives focused primarily on short-term earnings can lead to "improper conduct," such as the earnings manipulations disclosed last year at its smaller rival, Freddie Mac.

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