July 21, 2008 -- The chiefs of the nation's two largest mortgage lenders reaped roughly $30 million in salary, incentives and other perks last year, despite setting their banks on courses which now may require government bailouts.
Daniel Mudd, the CEO of Fannie Mae, received $11.6 million in salary, stock and other compensation for 2007. Richard Syron, CEO of Freddie Mac, took home about $18.3 million last year.
In addition to Syron's salary, stock options and a $3.45 million bonus, Freddie Mac paid for a number of other perks for Syron, such as a car and driver, a home security system, travel costs for his wife, even $100,000 to pay his lawyer to negotiate his employment contract with the bank.
"Yes, yes," said Freddie Mac spokeswoman Sharon McHale, when asked if Syron's leadership was worth $18 million a year. "He's done a lot."
Syron led the overhaul of the institution's lax accounting controls following an earlier scandal before his tenure, McHale noted. "Under his leadership the company continues to do a lot for homebuyers and the housing market," she said, including playing "a major stabilizing role in the marketplace."
Fannie and Freddie, which hold or guarantee nearly half of the $12 trillion U.S. mortgage market, have seen their stock prices tumble from over $60 a share in 2007 to under $10 last week as the ongoing foreclosure crisis sparks worry among investors that the companies don't have money at hand to cover defaulting borrowers.
Despite the worries, many believe that the U.S. government would stand behind the lenders even if they faced high default rates. Indeed, the Treasury Department and the Federal Reserve recently took steps to increase the banks' ability to borrow from the government. On Capitol Hill, lawmakers began weighing their options on how best to rescue the beleagured institutions.
Fannie Mae CEO Mudd said last week that while "this is the right time to think about" the federal government coming to his bank's rescue, "I don't think we'll need it."
Federal Reserve chairman Ben Bernanke told Congress last week the two banks "are in no danger of failing." Freddie Mac's McHale said her bank agreed with Mudd and Bernanke.
For some financial analysts, the lenders' crisis is as frustrating as the royal treatment of their CEOs.
"That is the most outrageous of the current financial disasters," well-known bank analyst Richard Bove of investment firm Ladenburg Thalmann told ABC News. The crisis, he said, was caused solely by "mismanagement, for the purpose of massive personal aggrandizement. It's an outrage."
"What worries me is the complete lack of accountability by Fannie's and Freddie's executives" and investment bankers who stand to gain from a government bailout, former Clinton administration Labor secretary Robert Reich told Newsweek magazine recently.
"We've created the worst form of socialized capitalism," Reich said, "private gains combined with public losses."
Neither Fannie Mae nor its CEO Mudd responded to requests for comment. A call to Syron's house on Cape Cod, Mass. was forwarded to the bank's vice president for communications, McHale.
Rep. Barney Frank, the Democratic chairman of the House Financial Services Committee, has proposed requiring the government to approve the salaries of top executives at both firms, to make sure they are "reasonable."