Executive pay brouhaha snares Newt Gingrich

Newt Gingrich

Public outrage over the millions of dollars paid top executives in the government-sponsored mortgage giants Fannie Mae and Freddie Mac took a new twist today with the disclosure that Republican presidential hopeful Newt Gingrich received between $1.6 million and $1.8 million in consulting fees from two contracts with Freddie Mac over the past eight years.

During the CNBC-sponsored debate for GOP candidates last week, he admitted to receiving some $300,000.

The consulting fees were paid not to Gingrich directly, but to his consulting firm, The Gingrich Group, according to a report published by Bloomberg.

His first contract with Freddie Mac began in 1999, five months after he resigned from Congress where he had been House Speaker. Bloomberg further reported Gingrich was paid a self-renewing, monthly retainer of $25,000 to $30,000 between May 1999 and 2002.

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Former Freddie Mac officials familiar with Gingrich's work told Bloomberg Gingrich was asked "to build bridges to Capitol Hill Republicans and develop an argument on behalf of the company's public-private structure that would resonate with conservatives seeking to dismantle it."

Doug Duvall, a spokesman for Freddie Mac, confirmed to WND that Gingrich was a consultant, not a lobbyist, but declined to elaborate on the nature of Gingrich's work.

Until now, the House Committee on Oversight and Government Reform has pressed the Obama administration to justify paying seven-figure compensation to the government employees managing Freddie and Fannie since the federal government took over the two mortgage government-sponsored giants, while President Obama has roundly critiqued private bankers and Wall Street executives for receiving high compensation during the continuing government-bailout era.

The dilemma Democrats in Washington face is whether an attack on Gingrich will backfire, raising additional questions why the Obama administration has not intervened in Freddie and Fannie executive compensation levels.

Or will a double standard apply, with the mainstream media investigating and reporting extensively on Gingrich's compensation, while ignoring the role Democrats have played in mismanaging the two agencies, dating back to the Clinton administration?

In 2006, the Federal Housing Enterprise Oversight office reported Democratic Party operatives James Johnson and Franklin Raines earned millions – Johnson earning roughly $100 million as Fannie Mae CEO from 1991-1998 and Raines earning more than $90 million as Fannie Mae CEO from 1999-2005 – while manipulating accounting to bolster their pay.

Yesterday, three top housing agency officials – Edwardo J. DeMarco, acting director of the Federal Housing Finance Agency; Michale J. Williams, president and CEO of Fannie Mae, and Charles E. "Ed" Haldeman, Jr., president and CEO of Freddie Mac, admitted under tough questioning from Republican and Democratic members alike of the House Committee on Oversight and Government Reform that the nearly $170 billion in federal government bailouts that Freddie and Fannie have received since 2008 may never be repaid taxpayers.

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Issa exposes Obama hypocrisy

Yesterday, Rep. Darrell Issa, R-Calif., chairman of the House Oversight and Government Reform Committee, posted a video on YouTube that displayed clips highlighting Obama's repeated rhetoric attacking private bankers and Wall Street executives for excessive compensation, while during the same years, 2009-2010, Fannie and Freddie paid $35 million in executive bonuses:

"While taxpayers are saddled with billions in losses, executives at Fannie Mae and Freddie Mac are being rewarded with millions for their efforts to pursue public policy goals of this administration," Issa said, releasing a 13-page committee staff report on the issue.

"This report examines and explains fundamental criticisms of executive compensation decisions for Fannie Mae and Freddie Mac – decisions made under an administration that excoriates private companies for big bonuses on the backs of taxpayers but looks the other way when our own federal entities heap cash on their executives for a job undone."

The staff report documents that the U.S. Department of Treasury has provided $169 billion in bailout funds since September 2008, when the Federal Housing Finance Administration, FHFA, took Fannie and Freddie into conservatorship as a result of mounting loses in mortgage-backed securities.

The government-sponsored enterprises, or GSEs, Fannie and Freddie became de facto government agencies since 2008, with the two agencies funded largely through preferred stock purchase agreements from the Treasury.

According to FHFA projections, by the end of 2014, Treasury assistance to Fannie and Freddie is estimated to total somewhere between $220 billion to $311 billion.

"Since the enterprises (Fannie and Freddie) have become government-funded entities, lavish payments have been doled out to their senior executives, and taxpayers have been footing the bill," the House Oversight and Government Reform Committee report concluded.

Consider the following staff report findings:

• In 2009 and 2010, the enterprises' top six officers were given a total of $35 million in compensation;
• Of that amount, a total of $17 million in compensation was given to the CEOs of the enterprises;
• Additional bonus installments for 2010 may still be forthcoming, and the two CEOs stand to make a total of $12 million in 2011;
• In addition, an executive has been awarded a substantial signing bonus – $1.7 million – upon joining Fannie Mae.

"As these figures indicate, senior executives at Fannie Mae and Freddie Mac have become the highest compensated workers on the federal payroll – making as much as eight times more than the president of the United States," the staff report noted. "The executives even make more than their conservator, FHFA Acting Director Edward J. DeMarco."

The chart below, prepared by the House Oversight and Government Reform Committee staff, summarizes the compensation for the top six executives at Fannie Mae and Freddie Mac in 2009 and 2010, the first two years after they were placed in conservatorship:

The staff report contrasted the Obama administration's lack of outrage at the Fannie and Freddie executive compensation packages, compared to Obama's reaction in March 2009, after reports surfaced that AIG executives had been awarded $121 million in bonuses after AIG received a $170 billion taxpayer-funded bailout.

Then, speaking from the East Room, President Obama responded angrily, saying, "This is not just a matter of dollars and cents. It's about our fundamental values."

Referring to the AIG executives, Obama asked pointedly, "How do they justify this outrage to the taxpayers who are keeping the company afloat?"

At the hearing yesterday, DeMarco defended the Freddie and Fannie executive compensation by arguing the existing level of compensation was necessary to attract and retain the talent needed to run the entities.