The bonuses paid to Fannie Mae and Freddie Mac executives are structured to retain managers who have the skills to run the giant mortgage companies, according to a letter Federal Housing Finance Agency acting director Edward DeMarco sent to several senators on Thursday.
Despite growing criticism of the bonuses, it would be "irresponsible of me," DeMarco says, to risk rapid turnover of experienced managers and staff to save a few million dollars when small mistakes by their replacements could result in much greater losses.
In the Nov. 10 letter, the GSE regulator stresses that the bonuses are really deferred compensation so executives would forfeit part of their salary if they exit early.
"Simply put, most of the so-called bonuses are simply deferred salaries," he says.
DeMarco goes on to point out that the executives responsible for the "Enterprises' failures" in 2008 are gone and the compensation for senior executives running the conservatorships today has been reduced by 40%.
The GSE regulator is scheduled to testify Tuesday (Nov. 15) before the Senate Banking Committee about reports that top GSE executives are in line to receive $12.8 million in bonuses.
