Big paydays for Fannie and Freddie bosses

NEW YORK (CNNMoney.com) -- Top executives at mortgage finance giants Fannie Mae and Freddie Mac, both of which have been under government control since last year, received millions of dollars in pay in 2009, according to documents filed by the companies Thursday.

The chief executive officers of each company got annual pay packages worth $6 million apiece, while other top execs pulled in at least $2 million.

Fannie Mae (FNM, Fortune 500) CEO Michael Williams, who was promoted to CEO on April 21, will receive about $4.2 million in base salary and deferred cash payments for his time in the top job. The filing does not detail how much he was paid for his time as chief operating officer before his promotion, or what he will earn in 2010.

David Johnson, the chief financial officer and No. 2 at the company, was paid at a $3.5 million annual rate. The annual pay rate of five other top Fannie executives topped $2 million apiece.

In addition, Williams and three other top executives are eligible to receive payments pursuant to a 2008 retention program, according to the filing.

At Freddie (FRE, Fortune 500), its slightly smaller rival, CEO Charles Haldeman will receive about half his $6 million package in 2009 since he was named to the top spot on July 21.

Haldeman, former chairman of Putnam Investment Management, is due to receive $6 million in 2010.

Bruce Witherell, Freddie's chief operating officer and No. 2 at the company, was paid at a $4.5 million annual rate and is due to get that amount in 2010, while Ross Kari, the chief financial officer, was paid at a $3.5 million annual rate this year and is also due the same next year. Both joined the company since September so they will get only a fraction of that money this year.

The executives' pay packages were approved by both the Federal Housing Finance Agency, the regulator that oversees their operations, as well as the Treasury Department, according to the filings.

The statements were released just after Congress had adjourned for the holiday recess, which limited the amount of criticism the packages might spark.

One expert said it is important that both firms retain good executives in order to come up with ways to fulfill the government's demands to support the housing market while minimizing the ongoing losses.

"It's a difficult environment for both firms. They've had a hard time keeping people at both places," said Edward Pinto, a financial services industry consultant who was chief credit officer at Fannie back in the 1980s. "Having said that, the government gets a lot of people to work at Housing and Urban Development for a lot less than that."

Both firms have gotten huge bailouts from Treasury to help cover their losses since they were taken over by the government, with Fannie having drawn down $60.9 billion and Freddie having drawn $50.7 billion. Both firms had $200 billion credit lines with Treasury. On Thursday, Treasury announced that it would remove the cap for the next three years.

Treasury spokespeople were not available for comment Thursday. And neither Fannie nor Freddie had any statement beyond their filings with the Securities and Exchange Commission.

The housing regulator issued a statement pointing out that executive pay at the two companies is now on average 40% below the level before they were placed under government control.

In addition, the agency said, Fannie and Freddie are playing a crucial role in fixing the nation's struggling housing market, providing funding for about three-quarters of all mortgage lending.

"The enterprises must attract and retain the talent needed to accomplish these objectives," Edward DeMarco, the agency's acting director, said in a statement.

DeMarco said the pay packages were set in consultation with Kenneth Feinberg, the Obama administration's pay czar, who has to sign off on pay for executives at firms that received the most help from the Troubled Asset Relief Program.

But unlike typical pay packages for public companies, none of the executives are receiving stock grants or options as part of their compensation. That significantly reduces the risks for the executives at Fannie and Freddie.

The top executives at other firms receiving bailouts, such as American International Group (AIG, Fortune 500) and General Motors, are receiving stock in their companies as part of their packages. Even some firms no longer under federal pay limits, such as investment bank Goldman Sachs (GS, Fortune 500), announced that all bonuses would be paid in stock rather than cash this year.

DeMarco pointed out that there is great uncertainty about whether the federal government will continue to operate the firms into the future. The could end up making Fannie and Freddie's current shares worthless.

"As this debate progresses, it will be essential that the enterprises continue to perform their current role," DeMarco said.

Pinto said the lack of any stock in the pay packages are a clear signal that neither company will remain a publicly-traded company in the long-term.

Fannie and Freddie buy mortgages made by banks and other lenders, bundle them into securities and then guarantee payments to the holders of those mortgage securities. Together they own or back about $5 trillion in mortgages.

In September 2008, rising foreclosures and declining home values forced the Treasury Department to place both companies into conservatorship, essentially a form of bankruptcy. While their stock is still publicly traded, the government has control of about 80% of the shares of each.