by Sarah Jawaid, National Housing Conference
The House Financial Services Committee held a hearing Dec. 1, "Oversight of the Federal Housing Finance Agency." Federal Housing Finance Agency Acting Director Edward DeMarco was asked to appear before the committee after criticism by members of Congress on questionable spending by the GSEs as well as answer questions on the future of GSEs. Freddie Mac CEO Charles Haldeman and Michael Williams, head of Fannie Mae, also testified. Members of Congress from both parties asked pointed questions about spending decisions on executive salary compensation and around $74,000 for dinners during a conference.
Halderman and Williams were asked to justify executive pay anywhere between $2.8 and $3.5 million for their second-highest-paid staff. In response to these questions, Halderman and Williams said the salaries were an appropriate amount for the industry. Ranking member Rep. Michael Capuano (D-Mass.) disagreed, saying: “Do you understand the outrage the American people feel?…It’s impossible to understand why an individual, working for an industry such as yours, has to make that kind of money.”
The legislators showed concern that questionable spending on salaries and dinners are costing taxpayers more money. DeMarco said that post-conservatorship, the GSEs needed to offer competitive salaries to attract strong leaders to take over during a difficult time (see a recent blog post from NHC’s Ethan Handelman to this point). The FHFA Acting Director expressed his commitment to transparency moving forward.
In addition to getting questioned about spending, the committee asked about the future of the GSEs. DeMarco told the committee a comprehensive plan for the GSEs would be available soon. He also said that FHFA is pursing private sector risk-sharing opportunities that will shortly come to fruition. "I believe in the coming year you are going to see actual more executions that follow that approach," DeMarco said. He also said FHFA is looking for ways to quickly sell “blocks” of REO properties to unload assets from Fannie Mae and Freddie Mac. "We are most interested in proposals tailored to the needs and economic conditions of local communities," DeMarco said in his written testimony, adding "we are not trying to develop a single, national program for REO disposition."
Representative Miller (R-CA) added that the “GSEs are still outperforming the private sector…to throw the baby out with the bath water is unreasonable. Let’s go back and look to what they did wrong and how do we fix it. It’s a huge problem. But to say we are not going to deal with them at all is unreasonable.” He then went on to describe his credit facility bill which was introduced at NHC’s policy summit earlier this year.
Listen to the hearing and read written testimony from FHFA and the GSE’s leadership here. Read more on the private capital risk sharing at Market News International.