This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Fannie, Freddie Execs to Kiss Bonus Goodbye (Update 1)

(Updated with additional information on comparable CEOs compensation.)

NEW YORK (TheStreet) -- The Federal Housing Finance Agency (FHFA) said it will slash executive compensation at Fannie Mae (FNMA) and Freddie Mac (FMCC) by eliminating bonuses from the executive compensation program and capping base salaries for top executives including new CEOs at $500,000 per year.

The new compensation program for 2012 will result in total reductions of roughly 75% in the pay of the top five positions at the GSEs compared to the pre-conservatorship level. The total target pay for the top 15 executives will drop 63% in 2012 from the pay received prior to conservatorship.

"I believe the new compensation program strikes the balance between prudent executive pay including the elimination of bonuses, with the need to safeguard quality staffing in order to protect the taxpayers' investment and achieve the objectives in the Conservatorship Scorecard," said FHFA Acting Director Edward DeMarco.

"A sudden and sharp change in pay from these levels would certainly risk a substantial exodus of talent, the best leaving first in many instances. A significant increase in safety and soundness risks and in costly operational failures would, in my opinion, be highly likely," he said.

Millions of dollars in bonuses were paid out in 2011 to the CEOs at the housing finance giants, even as the companies continued to request additional bailouts from the government. That created a furor in Washington, with Senator John McCain calling for heads to roll .

Since then, both Michael Williams, CEO of Fannie Mae, and Freddie Mac CEO Charles Edelman, have said they would step down from their positions. The hunt is now on for new CEOs at both the companies.

Whoever is appointed as the next CEO at either of the agencies will have to be content with a salary that is more than 50% below the median compensation for comparable positions, according to FHFA.

Former Fannie and Freddie CEOs have been from Wall Street. Herb Allison, Williams' predecessor, began his career at Merrill Lynch, for instance.

Wall Street execs of other bailed out firms have seen their bonuses fall in 2011, but certainly not disappear. In fact, Citigroup (C) CEO Vikram Pandit received $14.8 million in compensation, including a $1.6 million, a bonus of $5.3 million and stock options worth $7.8 million in 2011, according to its latest regulatory filing.

This was the first time he received a bonus since 2008, when the bank nearly collapsed before it was rescued by the government. In February 2009, Pandit said he would accept a salary of $1 until the bank reported a profit.

Bank of America (BAC) has frozen CEO Brian Moynihan's pay at $950,000, according to a Bloomberg report. It gave him $5.9 million in restricted stock units mostly linked to future performance, according to a regulatory filing, less than the $9 million granted in 2010.

Moynihan has had the unpleasant task of cleaning up his predecessor's mess, wading through the tons of mortgage-related litigation brought on by the acquisition of Countrywide, battling investors' concerns on its capital adequacy and resisting calls for the breaking up of the big bank.

Fannie and Freddie CEOs have the mandate to reduce losses to the taxpayer, which is sometimes at cross purposes with policymakers' attempts to revive the housing market.

The conservator also introduced a new 2012 Conservatorship scorecard which provides a roadmap for its new strategic plan, which includes building a new infrastructure that would allow the private sector to gradually replace the GSEs in the secondary mortgage market.

Separately, Freddie Mac reported its fourth quarter results on Friday. The company will go back to Uncle Sam for more money after bailout repayments to Uncle Sam dug a $146 million hole in the housing giant's balance sheet.

Stock quotes in this article: FNMA, FMCC, BAC, C 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 +2.54 0.14%
NASDAQ 4,095.5160 +9.2910 0.23%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs