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.
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.
The Office of Federal Housing Enterprise Oversight has proposed a rule that seeks to weaken the connection between earnings and pay by prohibiting compensation in excess of that which is "reasonable and appropriate" and "consistent with the long-term goals" of the company.
In a comment letter to the agency, Fannie protested that the proposed standard is too vague.
Rep. Barney Frank (D-Mass.), ranking Democrat on the House Financial Services Committee, defended Baker's release of the data, telling Raines that "you are not simply another private corporation. There is a lot of government involvement."
Unlike most other companies, Fannie is able to borrow money at discounted rates because many investors believe that the government would prop it up in a financial crisis. According to the Congressional Budget Office, that advantage saves Fannie and Freddie billions of dollars annually. They are also exempt from state and local taxes.
Being able to borrow "at subsidized rates without any realistic limit" enables Fannie and Freddie to "automatically profit" from investments, Federal Reserve Chairman Alan Greenspan has written.
The compensation totals shown on the chart include salaries, bonuses, the estimated value of stock option grants, long-term compensation awards, fringe benefits and fees for private club memberships.
The list included only those officers whose compensation fell under the review of Fannie's regulator, not necessarily all employees earning that much at the District-based mortgage funding company.
Under federal law, OFHEO is responsible for prohibiting "excessive compensation" of executives at Fannie Mae and Freddie Mac.
The regulatory agency has not found Fannie Mae's compensation to be excessive, said Corinne Russell, an agency spokeswoman. But, she added, "as we review in more detail the conduct of management and as the board of directors reviews management conduct, it could be determined that it is excessive."
The regulators have battled former Freddie Mac executives over the amounts they could keep after leaving Freddie during an accounting scandal last year. Other than that, "we have issued no orders specifically prohibiting instances of excessive compensation, but we have given guidance on occasion," Russell said.
Perhaps the most eye-catching number in the package Baker released was one that Fannie had previously disclosed in a little-noticed footnote in a report filed with the SEC. Last year, Fannie paid an $80,000 initiation fee for its vice chairman and chief operating officer, Daniel H. Mudd, to join a private club.
Baker said the payment seems "a little inconsistent with their overall public mission."
"For an entity that's engaged in providing low-income and first-time homebuyers opportunities, it seems a little unusual [that] you would have [an] exclusive club that would require that kind of down-payment to keep undesirables out," Baker said.
Fannie agreed to pay that benefit when it was recruiting Mudd from his job as president of G.E. Capital in Japan in 2000, to match a benefit he received at G.E., said Janice Daue, a Fannie spokeswoman. She declined to identify the club. Fannie's payment of club fees "is extremely limited and only provided when business needs dictate," she said.