Thursday, December 1, 2011

Keeping the right rescue crew at the GSEs

by Ethan Handelman, National Housing Conference

Recently, the political spotlight has shone on the compensation of executives at Fannie Mae and Freddie Mac. Fannie Mae’s CEO Michael Williams, Freddie Mac’s CEO Charles "Ed" Haldeman and their regulator, the Federal Housing Finance Agency Acting Director Edward DeMarco are to testify today before the House Financial Services Committee about how the two agencies have managed their expenses since conservatorship began. (See coverage in Housing Wire.)

Some political ire is to be expected, given that the two secondary mortgage market companies are receiving billions in federal bailout funds (combined losses in the first three quarters of 2011 total $22.6 billion). But if what we’re after is effective housing policy and responsible financial management, we should take a collective deep breath and ask ourselves: who are we trying to motivate and how?

Executives who are at Fannie and Freddie now aren’t the leadership who led them into the collapse—indeed, Housing Wire reports that since the current Freddie Mac CEO Haldeman joined the agency in August 2009, “14 of his 18 committee executives have been changed.” Senior leadership has turned over almost entirely at both agencies.

So, many of those who would be affected by pay reductions or caps are people who have stepped in to help right a foundering ship. And the GSEs are a ship that’s very complicated steer through the shoals of disrupted capital markets, severely weakened housing markets, rampant foreclosures, and underwater borrowers. Expertise in those challenges is worth paying for—we don’t want a cut-rate crew.

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