Fannie, Freddie's Former CEOs to Lose $12.6 Million in Severance Pay
Tuesday, September 16, 2008
Former Fannie Mae chief executive Daniel H. Mudd and former Freddie Mac chief executive Richard F. Syron will lose $12.59 million in salary, stock and bonuses but keep $9.43 million in retirement and pension benefits under a Federal Housing Finance Agency plan to block their severance payments.
The agency, which took control of the mortgage giants and removed Mudd and Syron on Sept. 7, announced Sunday that it was eliminating "golden parachute" separation payments to the executives. Congress passed a law this summer granting the agency that power, among others.
In response to a Washington Post inquiry, FHFA provided the compensation information to clarify payment figures outlined in proxy statements.
It was unresolved whether Mudd and Syron, who have agreed to stay on for a transition period, would contest the decision. A lawyer representing Mudd declined to comment on the compensation issue and whether Mudd still planned to remain for the transition. A lawyer representing Syron did not return a phone message left late yesterday afternoon.
The regulator said that without the "golden parachute," Mudd would lose $2.28 million in salary and stock, but he still would have access to a pension and 401(k) plan together worth $5.64 million. Syron would lose $10.31 million in salary, stock and bonuses, but keep a pension and 401(k) plan worth $3.97 million.
FHFA's director, James B. Lockhart III, has been under political pressure to curb Mudd and Syron's compensation. Sens. John McCain (R-Ariz.) and Barack Obama (D-Ill.), the major-party presidential candidates, have called on Lockhart to limit payments, as have other prominent lawmakers.
Mudd, a longtime business executive and former Marine who joined District-based Fannie Mae in 2000, and Syron, a former Federal Reserve official who joined McLean-based Freddie Mac in 2003, oversaw the companies as they bought pools of subprime loans and guaranteed other risky loans. As the mortgage market collapsed, the companies suffered billions of dollars in losses.
Mudd and Syron said their companies could weather the downturn, but recently the government, reviewing the companies' books, disagreed. Last week, Lockhart and Treasury Secretary Henry M. Paulson Jr. seized Fannie Mae and Freddie Mac and named new chief executives.
At that time, Paulson blamed the action mostly on the companies' flawed business models and the housing downturn, and said the managements were responsible for neither.
Lockhart has named Herbert M. Allison Jr. to replace Mudd at Fannie Mae and David M. Moffett to replace Syron at Freddie Mac and has said they would get far less compensation than their predecessors.
Mudd and Syron had been among the best-compensated chief executives in the Washington area, but the brutal decline of Fannie Mae's and Freddie Mac's shares -- 99 percent over the past year -- has taken its toll on them, too.
It is not clear whether they will be able to tap the full value of their pensions at once or will receive monthly payments.