Tester keeping the heat on housing agency over bonuses
Senator demands accountability on executive compensation
(U.S. SENATE) – Senator Jon Tester is demanding that the nation’s leading housing agency put the brakes on bonuses for executives at Fannie Mae and Freddie Mac.
Tester told the head of the Federal Housing Finance Agency, which oversees the two government-sponsored housing organizations, that no bonuses for 2011 should be awarded until the agency adopts the executive compensation recommendations made by its own investigator earlier this year.
In a letter to Acting Director Edward DeMarco, Tester highlighted the agency’s 2011 report, which determined that the agency lacked controls to monitor executive compensation and specifically recommended policy changes – fixes which the agency has agreed to implement.
“Failure to fully implement these recommendations and the award of new compensation without addressing the existing deficiencies would be a further violation of trust with the taxpayers,” Tester wrote DeMarco. “I request a detailed update on your progress as well as your assurance that new executive compensation awards will not be made until all recommendations have been implemented.”
Tester, a leading advocate for accountability in government, also noted that the report identified serious deficiencies in the transparency of the compensation packages.
Tester’s oversight of Fannie Mae and Freddie Mac has been vigilant. In November, after news reports indicated that the Federal Housing Finance Agency approved “performance” bonuses totaling nearly $13 million for top executives, the Senator demanded an investigation, saying that taxpayers have a right to know exactly how their money is being used. In response to Tester’s demand, the Senate Banking Committee held two hearings on excessive executive compensation.
Tester in 2008 supported putting both Fannie Mae and Freddie Mac in conservatorship in order to protect their role in guaranteeing home ownership opportunities for American families.
Tester’s letter to the director of the Federal Housing Finance Agency appears below and online HERE.
The Honorable Edward J. DeMarco
Federal Housing Finance Agency
1700 G Street, NW, 4th Floor
Washington, DC 20552
Acting Director DeMarco:
I have written you in the past to relay my serious concerns about the Federal Housing Finance Agency’s (FHFA) approval of over $12 million in executive compensation for senior executives at Fannie Mae and Freddie Mac in 2009 and 2010. I have also conveyed my belief that the approval of these packages is both inconsistent with the FHFA’s “preserve and conserve” mandate and an inappropriate use of taxpayer resources.
A March 2011 FHFA Inspector General Report suggested that your Agency lacks adequate processes and controls to manage executive compensation for senior officers. Specifically, the report detailed FHFA’s inability to test and independently verify the Agencies’ individual salary recommendations. The report also cites the FHFA’s failure to identify or acknowledge the benefits of federal assistance in enabling senior executives to meet corporate and other performance goals. Additionally, the report questions why the FHFA has not considered the disparities between compensation at Fannie and Freddie and that of other federal housing agencies and identified other deficiencies in the transparency of compensation packages for senior executives.
The FHFA Inspector General made a number of recommendations to address the deficiencies identified in their report and I understand that the FHFA has agreed to address all of these recommendations before the end of the year. However, there is some concern that these recommendations may not be implemented until after the FHFA awards 2011 executive compensation. At a minimum, I would request that the FHFA honor the recommendations that it agreed to implement and not make any compensation awards for 2011 unless and until such recommendations are fully implemented and operational.
Failure to fully implement these recommendations and the award of new compensation without addressing the existing deficiencies with the FHFA’s oversight of executive compensation would be a further violation of trust with the taxpayers. In responding to this letter, I would request a detailed update on the FHFA’s progress in implementing the recommendations identified in the FHFA Inspector General’s March 2011 report as well as your assurance that new executive compensation awards will not be made until all recommendations have been implemented.
America’s taxpayers deserve at least a straightforward assurance that their money won’t be used to provide excessive compensation in a process that lacks sufficient oversight by the Agency established to protect this investment and honor their trust. My constituents and all Americans deserve nothing less.