Obama Objects To Severance For Ousted CEOs
Tuesday, September 9, 2008
Printable FormatAssociated Press By NEDRA PICKLER
FARMINGTON HILLS, Mich. (AP) -- Barack Obama objected to reports Monday that the ousted heads of mortgage giants Fannie Mae and Freddie Mac may receive lucrative severance packages and asked the Bush administration to ensure their "poor leadership" isn't rewarded.
"Under no circumstances should the executives of these institutions earn a windfall at a time when the U.S. Treasury has taken unprecedented steps to rescue these companies with taxpayer resources," Obama said in a letter to Treasury Secretary Henry Paulson and Federal Housing Finance Agency Director James Lockhart. "I urge you immediately to clarify that the agreement with Fannie Mae and Freddie Mac voids any such inappropriate windfall payments to outgoing CEOs and senior management."
Obama was reacting to a report Monday in The New York Times on a consulting firm's analysis that found departing Fannie Mae head Daniel Mudd stands to collect $9.3 million in severance pay, retirement benefits and deferred compensation under the terms of his employment contract, provided his dismissal is deemed to be "without cause."
Treasury spokeswoman Brookly McLaughlin said Treasury would have no immediate response to Obama's letter.
Obama said Congress explicitly gave the Treasury Department authority to block any severance packages as part of a takeover.
"It would be a gross violation of the public trust to fail to use this authority now, while American taxpayers and American homeowners, already struggling in a weak economy, are being asked to accept an historic intervention to rescue these institutions," he said.
Paulson announced Sunday that the government would take control of both Fannie Mae and Freddie Mac, temporarily putting them in a government conservatorship, replacing their CEOs and taking a financial stake in the companies. The move could end up costing taxpayers billions of dollars.
The two companies together own or guarantee more than $5 trillion in mortgages.
Obama said he recognizes government intervention was necessary to help solve the housing crisis, and asked Paulson and Lockhart to report back on "what steps are being taken to ensure that the agreement is responsible and that Fannie and Freddie can continue to fulfill their important missions without wasting taxpayer dollars or rewarding poor leadership."
AP Economics Writer Martin Crutsinger in Washington contributed to this report.