No Golden Parachutes for Fannie and Freddie Execs

The Federal Housing Finance Agency—the regulator that now controls Fannie Mae and Freddie Mac—announced yesterday that it would block millions in exit pay to the companies’ departing chief executives. The “golden parachute” packages could have totaled as much as $24 million, and they have drawn fire from Congress and both presidential candidates ever since the government bailed out Fannie and Freddie two weekends ago. Daniel Mudd, Fannie’s ex-CEO, and Richard Syron, Freddie’s former CEO, learned yesterday that they would not receive the severance pay.

A team from Arnold & Porter has worked as outside counsel to the FHFA on the Fannie and Freddie rescues. Firm chairman Richard Alexander sat in on meetings with the government the weekend of the bailout, as reported in this Legal Times story. The rest of the legal team included partners A. Patrick Doyle, Michael Mierzewski, Brian McCormally, and John Hawke Jr. The firm declined to comment on whether it was involved in advising the FHFA on the decision to bar the severance packages. FHFA general counsel Alfred Pollard did not return a call for comment.

Comments

[DCLawyer]

Stan,

A few thoughts. First, SARBOX didn't pass until 2002, and wasn't in effect during most of Raines' tenure. Next, merely restating the profits does not, in and of itself, mean that criminal activity took place. I agree that Fannie's activities need to looked at carefully, but you've reached conclusions before we have the facts.

-TPB

[Stan]

Hopefully, they have the Attorney General reviewing criminal charges against the former Frannie execs - Franklin Raines, I recall, took in over $38 million and then all profits had to be restated - How is this not a Sarbanes oxley violation? How is this complete failure to oversee, in this case, FannieMae, not a criminal act? Is this different than what Bernard Ebbers did at MCI? Shouldn't executives of GSE's that materially mislead the financial markets face the same consequences for their actions as executives of "regular" public companies?