The regulator of Fannie Mae and Freddie Mac
said Sunday that it won't allow the companies to make "golden
parachute" severance payments to the mortgage companies' ousted chief
In a statement, the Federal Housing Finance Agency
said such payments wouldn't be made to Daniel Mudd and Richard Syron,
despite provisions in their contracts. Mr. Mudd served as chief
executive of Fannie and Mr. Syron was chairman and CEO of Freddie until
last weekend, when the regulator seized control of the companies,
saying they were in danger of running out of capital.
News reports that the two executives stood to receive
millions of dollars in severance payments under their contracts
triggered public protests from numerous politicians and inspired
political cartoons in newspapers.
The FHFA cited "applicable statute and regulation" for
its decision. The regulator has taken management control of the two
companies under a legal process known as "conservatorship," which could
last for years while Fannie and Freddie are restored to financial
health. The U.S. Treasury has pledged to provide as much capital as the
companies need to continue in their role as the main suppliers of
funding for home mortgages.
The FHFA last week named Herb Allison as CEO at Fannie and David Moffett as CEO at Freddie.
Spokesmen for Fannie and Freddie declined to comment
on the pay decision. Messrs. Syron and Mudd couldn't be reached
immediately for comment.
David Schmidt, a senior consultant at James F. Reda
& Associates LLC, a compensation consulting concern in New York,
estimated that, without the regulator's intervention, Mr. Mudd's exit
package could total as much as $6 million to $8 million and Mr. Syron's
$15 million. Those totals include pensions, continuing benefits and
other payments the companies' boards might grant. It isn't clear what
pension and other payments may still be made to Messrs. Syron and Mudd,
given the regulator's ruling.
The collapse in the share prices of Fannie and Freddie
already has wiped out much of the two executives' wealth. Since March,
for instance, the value of Mr. Mudd's shares in Fannie has dropped to
about $683,000 from $23.7 million.
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