Fannie-Freddie CEOs Lambasted at Hearing...By Democrats!

TRANSCRIPT:

CAPUANO:

Thank you. The reason - I'm sorry, the reason I ask is because in the final analysis the day-to-day activities of what you're doing, you know, we're going to talk about that today. But when everything's said and done, as I said right in my opening statement, I'm interested in making sure that the next generation of middle income people can afford to buy a home in a reasonable way. Again, hopefully they'll hit good scores and everything else, reasonable people who are going to buy a reasonable home.

And I will tell you that some of the activity that's happened doesn't help that. And it's not about the specifics about what you have done within the agency. But you understand you are no longer operating in private companies. You are now operating in the public world.

I don't like to ask you, Mr. Haldeman, do you know the total salary and bonuses paid to your highest paid employee this past year?

HALDEMAN:

Um...

CAPUANO:

I'm not looking for a name, just a number?

HALDEMAN:

The number? Highest paid, do you mean the top five? The top...

CAPUANO:

Just one. Who is - who made the most money?

HALDEMAN:

At Freddie Mac?

CAPUANO:

Yes.

HALDEMAN:

Yes, it was me.

CAPUANO:

Other than you?

HALDEMAN:

Yes, I know the...

CAPUANO:

How much?

HALDEMAN:

Other than me it was approximately - it was somewhere between three and $3.5 million.

CAPUANO:

Three and-a-half million dollars?

Mr. Williams, do you know, again, other than you?

WILLIAMS:

Yes, Congressman.

CAPUANO:

How much would that be?

WILLIAMS:

It would have been between $2.8 million and $3 million.

CAPUANO:

So in the $3 million range. And do you understand that after what «Freddie» and «Fannie» have been through, not - it was before your watch. I'm not trying to lay this on you. Do you understand the outrage that the American feel when we're looking at an agency that has gotten us to the brink of difficulties - or got us in difficulties - not beyond the brink - and has gotten a lot of taxpayer funding.

It is awfully hard - for me it is impossible - to understand why an individual working for an entity such as yours, which is not a private company, has to make that kind of money? And I'm not against people making money. God bless them. But go into the private market. It's almost impossible for us to understand.

I had to vote for a bill the other day to limit these kind of things, because honestly, I'm outraged. And not about the individual. That's why I don't want names, I'm not looking to lay it at anybody. But in this situation, that kind of activity, the kind of activity of $5 million on meals and entertainment. I think meals and entertainment within the normal course of events is a reasonable business expense. I mean, you should be able to serve coffee at your breakfast meetings. That's fine by me.

But it's outrageous to my constituents and to me when I turn around and I defend the purposes of the agencies every day, and I will continue to do so. And I will agree with my other colleagues that you didn't do anything worse than anybody else, but you did - not you, your predecessors did - and we now have to dig you out of it. It's an obligation to society.

But I guess what I'm saying is in order for people like me to be able to help meet that vision, not help you or your current employees, though I'm not against anybody, that's not my goal. My goal is for the next generation to have someone like you doing what you try to do now, and you're making it tougher.

HALDEMAN:

Congressman?

CAPUANO:

Go ahead, Mr. Haldeman.

HALDEMAN:

I totally get the outrage. I get the outrage about executive compensation in total. I get the outrage about compensation at «Freddie» Mac, in particular. I understand exactly what you're saying and I struggle with it all the time, too.

Let me tell you about the dilemma, and maybe you can help be resolve the dilemma. I came here in August of '09 and there was not a CEO at «Freddie» Mac, there wasn't a chief operating officer and there wasn't a CFO. It felt to me that the right thing to do is do everything we can to try keep the machinery together, to keep it operating, to keep it functioning well, to not have mistakes, and not have it go down the drain.

And there are many, many functions that have to be performed at «Freddie» Mac that require very specialized expertise where we have to get a CFO who's capable of running any complicated bank in the country. We have to have investment people who can run a $700 billion portfolio. If they - if you're running a $700 billion portfolio and you make a mistake that is one tenth of 1 percent, it costs you $700 million.

So, these are very sophisticated things, very complex. And I felt we needed to pay that kind of compensation, which troubles me and troubles you, in order to get people so that we wouldn't have those kinds of mistakes.

CAPUANO:

I appreciate it. If I can just finish up because I know I'm over my time.

And that's a fair and reasonable explanation. But if you were to make that decision, it would have helped and would help going forward for you to present to us and the general public not just your thinking but also backing up and determining so that I can sit here and say, you know what? Like it or not that's what a person in this position makes across the world. There are plenty of companies that can do that or they don't.

So, as opposed to simply picking out a number and being outraged at a number, I will then be able to say, well, it's in the ballpark. Everybody in those positions make this kind of money. And at least it's defensible.

At the moment, it is nothing more than a number in an agency that has caused this country a lot of trouble. And I - I just - for me the most important thing to come out of this hearing is that you walk away knowing that you live in a fishbowl now. And you have to act as if there's a fishbowl if you want the end that we've all discussed.

And I apologize for going over, Mr. Chairman. Thank you for your indulgence.

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$74,000 for Fannie/Freddie Dinners!

 

FITZPATRICK:

The chairman, Mr. Bachus, was mentioning earlier in his remarks about -- I think he was referring to The New York Times article or column -- Morgenson's column, might have been in today's paper, entitled "«Fannie» and «Freddie»: Still the Socialites," which reviewed, as this subcommittee also reviewed, enterprise expenditures relating to an industry conference that was held in October in Chicago.

The conference was only two days long, but the tab is pretty hefty. According to the article, the enterprises spend combined about $700,000 at the two-day conference, including $74,000 in dinners alone. «Freddie» Mac spent nearly $50,000 on just two dinners and «Fannie» Mae spent nearly $25,000 on two dinners.

And so my question is for Mr. Williams and Mr. Haldeman. Given the extraordinary taxpayer support that has already been received, about $170 billion, how do you justify these expenses to my constituents in Bucks County or to the taxpayers of the United States generally?

HALDEMAN:

Maybe I'll start and, Congressman, say that I think we have to begin by saying you're right. We can do a better -- better job. But let me talk about top-line spending before I get to the -- the individual line item because it was where the chairman started.

And as I indicated, I came to the company in August of '09. And one of the things that I started to talk about right away was that we needed to consistently bring down our total spending of the company year after year after year. And that's precisely what we've done at the top line.

If you take our total spending to run «Freddie» Mac for 2009 and compare it to where we are now, we've reduced that top line of spending by $150 million a year. That's almost 10 percent. And that's not one subset, Mr. Chairman, or one line item. It's the total spending of the company. And that's -- and we did -- we brought it down in 2010 and we're bringing it down in 2011, and we're going to do the same thing in 2012. And that's how I've managed the company at the top.

Within that, we have division budgets and I monitor those, but there is some ability of -- of managers below me to make decisions on spending. And I don't think we did as good a job as we should on that MBA program. Do I think it is a legitimate business expenses and it was good that we sent a lot of people there? Absolutely. And it is a very, very efficient way to interact with and educate a broad range of seller-servicers.

There -- literally every seller-servicer in the country comes to that one location in Chicago, and it is the most efficient way I know of to make sure that we can educate them about our credit policy and what we expect of them on the servicing side.

FITZPATRICK:

Sir, do you understand the outrage of the taxpayers...

HALDEMAN:

I do.

FITZPATRICK:

... when they read that in the newspaper? I mean, understanding it's one thing to attend a conference. It's another thing to sponsor a conference, which (inaudible) do with taxpayer dollars.

HALDEMAN JR:

And -- and we -- we did not do it perfectly. And we've got to -- we have -- since I've been there, each year when we've done our -- we have attended the Mortgage Bankers Associations and we've brought our spending done year by year. I think we have to do it faster. And there were some things that were done that we're going to take care of next year.

FITZPATRICK:

Appreciate it. Thank you. Mr. Williams, given that «Fannie» Mae's in conservatorship, do you have discretion as to how to spend those dollars, the dollars that I'm referring to, on a conference and where these dollars budgeted?

WILLIAMS:

Congressman, I do appreciate your concern, as well as the committee's, on this topic. We have taken this seriously. In fact, we have since conservatorship reduced sponsorships and attendance and at these conferences by over 50 percent.

What we felt -- why we felt this was a good business decision was that this was a conference that was going to be attended by over 3,000 industry participants. It gave us the opportunity to hold over 200 meetings with -- with industry players that would allow us to address the important issues facing not only the industry, but are also important to the conservatorship, such as servicing alignment, the rollout of HARP 2, servicing compensation, increasing guarantees, and many other strategic issues. So I understand...

FITZPATRICK:

Could «Fannie» Mae have held those meetings and accomplished those meetings without spending $74,000 on dinner in two days? I mean, could you have gone to Chicago without the dinners and held the meetings?

WILLIAMS:

Congressman, we held many meetings during the course of those days. The dinners were too part of it in which it gave us an opportunity to meet with industry players. We will do a better job, but we felt this was a very...

FITZPATRICK:

Mr. DeMarco, do you believe spending $74,000 as we've talked about here this afternoon, does that advance the interest of the conservatorship?

DEMARCO:

Mr. Fitzpatrick, attendance at the conference certainly did. Certain individual expenditures probably could have been done away with and still meet the essential business proposition of meeting with the entire industry and conducting a tremendous amount of business and business education at one place. So attendance and being actively participant was certainly meeting the conservatorship goal. I wouldn't want to say that every individual expense was necessary. No, sir.

FITZPATRICK:

Thank you.