Lawmakers question Freddie Mac pay deals
WASHINGTON (AP) – Lawmakers raised questions Tuesday about the pay deals Freddie Mac is giving top executives ousted in a shakeup over accounting problems. The mortgage-market giant was not making complete terms of the executives’ packages public. Federal Reserve Chairman Alan Greenspan insisted that Freddie Mac and its larger sister Fannie Mae, major players in the multibillion-dollar home mortgage market, shouldn’t be exempt from the public disclosure requirements that apply to nearly all other publicly traded companies.
“There’s no reason to differentiate Fannie and Freddie from the rest of the securities industry as far as I’m concerned,” Greenspan told lawmakers at a House hearing on an unrelated matter.
Rep. Christopher Shays, R-Conn., said, “Freddie Mac’s failure to disclose this information illustrates why voluntary disclosure, without the force of law, is meaningless.”
Possibly under pressure by regulators and policymakers, Freddie Mac posted on its Web site Tuesday some compensation details – but not the complete departure deal – for chairman and chief executive Leland Brendsel, who resigned. Brendsel has received a salary of $1.1 million a year and has company stock options worth more than $22 million, according to the new information.
No. 32 on the Fortune 500 list with $39.7 billion in revenue, Freddie Mac now has its accounting under investigation by the Securities and Exchange Commission and the federal agency that supervises it and Fannie Mae. Its auditor until March 2002 was the now-fallen Arthur Andersen LLP.
Freddie Mac said Monday it had fired its president and chief operating officer, David Glenn, because he didn’t fully cooperate with an internal review of the company’s accounting – now under investigation by federal regulators. Vaughn Clarke, Freddie Mac’s executive vice president and chief financial officer, resigned along with Brendsel.
Glenn will not receive special compensation benefits because he was fired, Freddie Mac officials said Tuesday. Terms of the separation deals with Brendsel and Clarke were not disclosed.
The executives signed the agreements with the company in September 1990, long before Freddie Mac voluntarily agreed last summer amid the wave of corporate scandals to begin filing audited annual and quarterly financial reports to the SEC. It had been exempt from the disclosure requirements that apply to most publicly traded companies.
Some senior lawmakers expressed concern about what impact Freddie Mac’s troubles may have on the housing market, as banks could sell fewer mortgages to the company and the international stream of capital into the U.S. mortgage market could be reduced. The company boasts that it bought a mortgage every 11 seconds in 2001: $384 billion of single-family mortgages and double the rate the year before.
The new revelations “might have systemic implications and touch even the smallest and most innocent participants in the housing market,” said Rep. Richard Baker, R-La., chairman of a House Financial Services subcommittee.
___
On the Net:
Freddie Mac: http://www.freddiemac.com
Fannie Mae: http://www.fanniemae.com
Office of Federal Housing Enterprise Oversight: http://www.ofheo.gov