[House Report 112-366]
[From the U.S. Government Publishing Office]
112th Congress Rept. 112-366
HOUSE OF REPRESENTATIVES
2d Session Part 1
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EQUITY IN GOVERNMENT COMPENSATION ACT OF 2011
_______
January 17, 2012.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Bachus, from the Committee on Financial Services, submitted the
following
R E P O R T
[To accompany H.R. 1221]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 1221) to suspend the current compensation
packages for the senior executives of Fannie Mae and Freddie
Mac and establish compensation for such positions in accordance
with rates of pay for senior employees in the Executive Branch
of the Federal Government, and for other purposes, having
considered the same, report favorably thereon with an amendment
and recommend that the bill as amended do pass.
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Equity in Government Compensation Act
of 2011''.
SEC. 2. CONGRESSIONAL FINDINGS.
The Congress finds that--
(1) the Federal National Mortgage Association (known as
Fannie Mae) and the Federal Home Loan Mortgage Corporation
(known as Freddie Mac), which are both privately owned but
publicly chartered Government-sponsored enterprises (GSEs),
were at the center of the mortgage market meltdown that caused
the financial crisis that commenced in 2008;
(2) the failures of Fannie Mae and Freddie Mac helped
precipitate the deepest economic decline since World War II;
(3) in September 2008, the Bush Administration, Federal
Reserve Board, and Federal Housing Finance Agency (FHFA)
exercised authority granted by the Congress to place the two
GSEs in conservatorship, a form of nationalization that puts
the regulators firmly in control of the GSEs' daily operations;
(4) in September 2008, the Bush Administration established a
$200 billion facility to purchase senior preferred stock in the
enterprises to backstop their losses;
(5) in February 2009, the Obama Administration raised the
senior preferred stock purchase commitment to $400 billion;
(6) on Christmas Eve 2009, the Obama Administration removed
any limits on the use of Federal funds to cover losses at the
enterprises, significantly expanding a commitment that has
resulted in the expenditure of so far nearly $175 billion in
taxpayer funds to purchase senior preferred stock in the two
enterprises;
(7) as a result of the Government's actions, the taxpayers of
the United States now own nearly 80 percent of the two GSEs;
(8) the Congressional Budget Office has concluded that Fannie
Mae and Freddie Mac have effectively become Government entities
whose operations should be included in the Federal budget;
(9) the GSEs are expected to be a long-term drain on the
taxpayers as a result of market conditions and the political
and public policy mandates imposed on them by the
Administration and the Congress;
(10) in spite of these liabilities, the Treasury Department
and FHFA approved compensation packages for the chief executive
officers of Fannie Mae and Freddie Mac in 2009, 2010, and 2011
that were nearly 15 times greater than the annual compensation
of the President of the United States and 30 times greater than
the annual compensation of a Cabinet Secretary;
(11) the Treasury Department and the FHFA also approved
multi-million dollar compensation packages for a number of the
GSEs' top executives, payable in cash rather than in the type
of stock options that have characterized compensation
arrangements at other large financial institutions that have
received extraordinary government assistance;
(12) on September 17, 2008, FHFA determined that no executive
officer of Fannie Mae or Freddie Mac would be entitled to
receive a cash bonus or long-term incentive awards for 2008;
(13) FHFA's five-year Strategic Plan for Fannie Mae and
Freddie Mac includes a commitment that the GSEs will operate in
a safe and sound manner; and
(14) section 1318(c) of the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992 (12 U.S.C. 4518(c),
as added by section 1113(a)(4) of the Housing and Economic
Recovery Act of 2008 (Public Law 110-289; 122 Stat. 2678)),
permits the Director of FHFA to withhold any payment, transfer,
or disbursement of compensation to an executive officer, or to
place such compensation in an escrow account, during the review
of the reasonableness and comparability of compensation.
SEC. 3. DEFINITIONS.
In this Act:
(1) Director.--The term ``Director'' means the Director of
the Federal Housing Finance Agency.
(2) Employee.--The term ``employee'' means an employee of an
enterprise, except that such term does not include any employee
who would be defined as a prevailing rate employee (as defined
in section 5342(2) of title 5, United States Code) if such
employee were employed by an agency (as defined in paragraph
(1) of such section).
(3) Enterprise.--The term ``enterprise'' means--
(A) the Federal National Mortgage Association and any
affiliate thereof; and
(B) the Federal Home Loan Mortgage Corporation and
any affiliate thereof.
(4) Executive officer.--The term ``executive officer'' has
the same meaning as is given such term in section 1303(12) of
the Federal Housing Enterprises Financial Safety and Soundness
Act of 1992 (12 U.S.C. 4502(12)).
SEC. 4. REASONABLE PAY FOR EXECUTIVE OFFICERS.
(a) Suspension of Current Compensation Packages.--The Director shall
suspend the compensation packages approved for 2011 for the executive
officers of an enterprise and, in lieu of such packages, subject to the
limitation under subsection (d), establish a compensation system for
the executive officers of such enterprise in accordance with the
schedules of compensation and benefits established and adjusted
pursuant to section 1206 of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 (12 U.S.C. 1833b).
(b) Clawback of 2010 and 2011 Compensation.--
(1) Sense of the congress.--It is the sense of the Congress
that each executive officer performing services for an
enterprise on the date of the enactment of this Act whose
compensation package is suspended under subsection (a) should
return to the Secretary of the Treasury any compensation earned
in 2010 and 2011 that was in excess of the maximum annual rate
of basic pay authorized for a position in level I of the
Executive Schedule.
(2) Use to reduce national debt.--The Secretary of the
Treasury shall transfer any amounts referred to in paragraph
(1) that are returned to the Secretary to the special account
established by section 3113(d) of title 31, United States Code
(relating to reducing the public debt).
(c) Additional Requirement.--An executive officer of an enterprise
shall be subject to section 111 of the Emergency Economic Stabilization
Act of 2008 (12 U.S.C. 5221), which relates to executive compensation
and corporate governance.
(d) Limitation on Compensation.--An executive officer of an
enterprise whose compensation package is suspended under subsection (a)
shall not be compensated more than the highest compensated employee of
the Federal Housing Finance Agency.
SEC. 5. COMPENSATION RATE OF EMPLOYEES OF FANNIE MAE AND FREDDIE MAC.
(a) In General.--During any period that an enterprise is federally
chartered under the Federal National Mortgage Association Charter Act
(12 U.S.C. 1716 et seq.) or the Federal Home Loan Mortgage Corporation
Act (12 U.S.C. 1451 et seq.), the compensation of the positions held by
employees shall be in accordance with this section.
(b) Conversion of Compensation Rate for Current Employees.--
(1) In general.--Except for as provided in section 4,
effective for pay periods beginning after the date of the
enactment of this Act, the Director shall fix the rate of basic
compensation of positions held by employees performing services
for an enterprise as of the date of the enactment of this Act
in accordance with the General Schedule set forth in section
5332 of title 5, United States Code. In fixing such rate--
(A) if the employee is receiving a rate of basic
compensation that is less than the minimum rate of
basic compensation of the appropriate grade of the
General Schedule in which his or her position is
placed, such employee's rate of basic compensation
shall be increased to such minimum rate;
(B) if the employee is receiving a rate of basic
compensation that is equal to a rate of basic
compensation of the appropriate grade of the General
Schedule in which his or her position is placed, such
employee's rate of basic compensation shall be equal to
that rate of basic compensation of the appropriate
grade of the General Schedule;
(C) if the employee is receiving a rate of basic
compensation that is between 2 rates of basic
compensation of the appropriate grade of the General
Schedule in which his or her position is placed, such
employee's rate of basic compensation shall be at the
higher of those 2 rates under the General Schedule; and
(D) if the employee is receiving a rate of basic
compensation that is in excess of the maximum rate of
basic compensation of the appropriate grade of the
General Schedule in which his or her position is
placed, such employee's rate of basic compensation
shall be reduced to such maximum rate.
(2) Not considered transfers or promotions.--The conversion
of positions and employees to the appropriate grades of the
General Schedule and the initial adjustment of rates of basic
compensation of those positions and employees provided for by
this subsection, shall not be considered to be transfers or
promotions within the meaning of section 5334(b) of title 5,
United States Code, and the regulations issued thereunder.
(3) Credit for increase in compensation before adjustment.--
Each employee performing services for an enterprise on the date
of the enactment of this Act whose position is converted under
this subsection to the General Schedule and who prior to the
initial adjustment of his or her rate of basic compensation
under paragraph (1) has earned, but has not been credited with,
an increase in that rate, shall be granted credit for such
increase before his or her rate of basic compensation is
initially adjusted under such paragraph.
(4) Service performed since last compensation increase.--Each
employee performing services for an enterprise on the date of
the enactment of this Act whose position is converted under
this subsection to the General Schedule shall be granted
credit, for purposes of his or her first step increase under
the General Schedule, for all satisfactory service performed
since his or her last increase in compensation prior to the
initial adjustment of his or her rate of basic compensation
under paragraph (1).
(5) Compensation increase under this section.--An increase in
the rate of basic compensation by reason of the enactment of
paragraph (1) shall not be considered to be an equivalent
increase with respect to step increases for employees whose
positions are converted to the General Schedule under authority
of this subsection.
(c) New Employees.--Except for as provided in section 4, the grade
and rate of basic pay of any individual beginning employment with an
enterprise after the date of enactment of this Act shall be fixed in
accordance with the General Schedule set forth in section 5332 of title
5, United States Code.
SEC. 6. FANNIE AND FREDDIE EMPLOYEES NOT FEDERAL EMPLOYEES.
Any executive officer or employee affected by any provision under
sections 4 and 5, respectively, shall not be considered a Federal
employee.
PURPOSE AND SUMMARY
H.R. 1221, the Equity in Government Compensation Act of
2011, suspends the current compensation packages for all of
Fannie Mae and Freddie Mac's senior executives and establishes
a compensation system for the Government Sponsored Enterprises'
(GSEs') executive officers consistent with the compensation and
benefits provided under the Financial Institution Reform,
Recovery, and Enforcement Act of 1989 (FIRREA). The bill
requires the GSEs' regulator--the Federal Housing Finance
Agency (FHFA)--to adjust the salaries of Fannie Mae's and
Freddie Mac's nonsupervisory employees to conform to the
General Schedule, a statutory pay system that pays employees
based on surveys of non-federal pay for similar work. Finally,
H.R. 1221 expresses the Sense of the Congress that the 2010 and
2011 pay packages for Fannie Mae's and Freddie Mac's senior
executives were excessive and that the money should be returned
to the Treasury to reduce the national debt.
BACKGROUND AND NEED FOR LEGISLATION
Fannie Mae and Freddie Mac were established by Congress to
make credit available to mortgage lenders to finance home
purchases. Owned by private shareholders but imbued with a
public mission to promote affordable homeownership, these GSEs
bought mortgages from lenders and either held these mortgages
in their portfolios or packaged them into mortgage-backed
securities, for which the GSEs guaranteed the timely payment of
principal and interest, that were sold to investors. The GSEs
were able to fund their purchases of mortgages by borrowing at
below-market rates because GSE bondholders assumed that the
government would stand behind the GSEs if they ever failed.
Since entering a Federal conservatorship in September 2008,
Fannie Mae and Freddie Mac have received nearly $177 billion in
government funds, making the GSE conservatorship by far the
costliest of all the taxpayer bailouts carried out over the
past three years. And there is no evidence that these
government contributions will end any time soon. On November 3,
2011, Freddie Mac announced that it would need $6 billion from
taxpayers following its worst quarterly loss this year. On
November 8, 2011, Fannie Mae reported that it would need
another $7.8 billion.
The genesis of H.R. 1221 can be found in the Treasury
Department's decision on Christmas Eve of 2009 to grant top
executives at Fannie Mae and Freddie Mac multi-million dollar
bonuses. The FHFA ratified $42 million worth of Wall Street-
style pay packages for the GSEs' 12 top executives. The
Treasury Department's Christmas Eve announcement was coupled
with news that the Administration had decided to remove all
limits on the amount of taxpayer assistance to the GSEs. In
2010, FHFA approved pay packages similar to the ones it
approved in 2009. According to its SEC 10-K filings, Fannie Mae
paid its top six executives $15.4 million in salaries and
bonuses, and its CEO, Michael Williams, received $5.6 million.
Freddie Mac paid its top five executives nearly $18.5 million,
and its CEO, Charles E. Haldeman, Jr., received $5.4 million.
And on November 1, 2011, it was announced that FHFA had
approved $12.79 million in bonus pay for 10 GSE executives.
Executive pay for 2012 has not yet been determined.
Edward J. DeMarco, the FHFA's Acting Director, has defended
these pay packages. Mr. DeMarco has asserted that for the GSEs
to continue funding nearly three-fourths of all U.S.
residential mortgages, they need to ``attract and retain the
talent needed to accomplish these objectives.'' Mr. DeMarco has
described the GSEs' compensation plans as ``competitive
packages that benefit'' from the standards imposed on firms
that received government funds under the Troubled Asset Relief
Program.
Meanwhile, the FHFA's Inspector General has published a
report criticizing the FHFA's oversight of the GSEs'
compensation practices.\1\ In the report published on March 31,
2011, the Inspector General wrote that the FHFA has approved
compensation packages with little scrutiny or analysis, adding
that ``FHFA lacks key controls necessary to monitor the
Enterprises' ongoing executive compensation decisions under the
approved packages.'' The Inspector General's report cited a
``lack of standardized evaluation criteria, documentation of
management procedures and internal controls'' at FHFA, which
may have resulted in overpayments. The inspector general noted
that the ``FHFA has a responsibility to Congress and taxpayers
to efficiently, consistently, and reliably ensure that the
compensation paid to Fannie Mae's and Freddie Mac's senior
executives is reasonable.''
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\1\FHFA Office of Inspector General, ``Evaluation of Federal
Housing Finance Agency's Oversight of Fannie Mae's and Freddie Mac's
Executive Compensation Programs,'' March 31, 2011, available at http://
www.fhfaoig.gov/Content/Files/Exec%20Comp%20DrRpt%2003302011%
20final,%20signed.pdf.
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HEARINGS
On March 31, 2011, the Subcommittee on Capital Markets and
Government Sponsored Enterprises held a hearing entitled
``Legislative Hearing on Immediate Steps to Protect Taxpayers
from the Ongoing Bailout of Fannie Mae and Freddie Mac,'' at
which a draft version of what was later introduced as H.R. 1221
was discussed. The following witnesses testified:
Mr. Edward J. DeMarco, Acting Director,
Federal Housing Finance Agency
The Honorable John H. Dalton, President,
Housing Policy Council, The Financial Services
Roundtable
Mr. Christopher Papagianis, Managing
Director, Economics21
Mr. Edward Pinto, Resident Fellow, American
Enterprise Institute
Mr. Bob Nielsen, Chairman of the Board,
National Association of Home Builders
Mr. Ronald Phipps, President, National
Association of Realtors
COMMITTEE CONSIDERATION
The Subcommittee on Capital Markets and Government
Sponsored Enterprises met in open session on April 5, 2011 and
April 6, 2011, and ordered H.R. 1221, as amended, favorably
reported to the full Committee by a record vote of 27 yeas and
6 nays. (Record vote no. CM-9).
The Committee on Financial Services met in open session on
November 15, 2011, and ordered H.R. 1221, as amended, favorably
reported to the House by a record vote of 52 yeas and 4 nays.
(Record vote no. FC-52).
COMMITTEE VOTES
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. A
motion by Chairman Bachus to report the bill, as amended, to
the House with a favorable recommendation was agreed to by a
record vote of 52 yeas and 4 nays (Record vote no. FC-52). The
names of Members voting for and against follow:
RECORD VOTE NO. FC-52
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus..................... X ........ ......... Mr. Frank (MA)... X ........ .........
Mr. Hensarling................. X ........ ......... Ms. Waters....... X ........ .........
Mr. King (NY).................. X ........ ......... Mrs. Maloney..... X ........ .........
Mr. Royce...................... X ........ ......... Mr. Gutierrez.... ........ X .........
Mr. Lucas...................... X ........ ......... Ms. Velazquez.... X ........ .........
Mr. Paul....................... ........ ........ ......... Mr. Watt......... ........ X .........
Mr. Manzullo................... X ........ ......... Mr. Ackerman..... X ........ .........
Mr. Jones...................... X ........ ......... Mr. Sherman...... X ........ .........
Mrs. Biggert................... X ........ ......... Mr. Meeks........ X ........ .........
Mr. Gary G. Miller (CA)........ X ........ ......... Mr. Capuano...... X ........ .........
Mrs. Capito.................... X ........ ......... Mr. Hinojosa..... X ........ .........
Mr. Garrett.................... X ........ ......... Mr. Clay......... X ........ .........
Mr. Neugebauer................. X ........ ......... Mrs. McCarthy ........ ........ .........
(NY).
Mr. McHenry.................... X ........ ......... Mr. Baca......... X ........ .........
Mr. Campbell................... ........ X ......... Mr. Lynch........ ........ X .........
Mrs. Bachmann.................. ........ ........ ......... Mr. Miller (NC).. X ........ .........
Mr. McCotter................... X ........ ......... Mr. David Scott X ........ .........
(GA).
Mr. McCarthy (CA).............. ........ ........ ......... Mr. Al Green (TX) X ........ .........
Mr. Pearce..................... X ........ ......... Mr. Cleaver...... ........ ........ .........
Mr. Posey...................... X ........ ......... Ms. Moore........ X ........ .........
Mr. Fitzpatrick................ X ........ ......... Mr. Ellison...... X ........ .........
Mr. Westmoreland............... X ........ ......... Mr. Perlmutter... X ........ .........
Mr. Luetkemeyer................ X ........ ......... Mr. Donnelly..... X ........ .........
Mr. Huizenga................... X ........ ......... Mr. Carson....... X ........ .........
Mr. Duffy...................... X ........ ......... Mr. Himes........ X ........ .........
Ms. Hayworth................... X ........ ......... Mr. Peters....... X ........ .........
Mr. Renacci.................... X ........ ......... Mr. Carney....... X ........ .........
Mr. Hurt....................... X ........ .........
Mr. Dold....................... X ........ .........
Mr. Schweikert................. X ........ .........
Mr. Grimm...................... X ........ .........
Mr. Canseco.................... X ........ .........
Mr. Stivers.................... X ........ .........
Mr. Fincher.................... X ........ .........
----------------------------------------------------------------------------------------------------------------
During consideration of H.R. 1221, the following
amendments, motion and request were considered:
1. An amendment offered by Mr. Bachus, no. 1, to make
technical changes to include 2011 compensation packages, was
agreed to by voice vote.
2. An amendment offered by Mr. Frank, no. 2, to insert
references to the Bush Administration, was agreed to by voice
vote.
3. An amendment offered by Messrs. Green and Bachus, no. 3,
as amended by an amendment offered by Mr. Frank, no. 3a, to
provide that the compensation system for Fannie Mae and Freddie
Mac executives be the same as the schedules of compensation and
benefits established in the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 and to cap GSE executive
pay to that of the highest paid manager at the Federal Housing
Finance Agency, was agreed to by voice vote.
4. A Unanimous Consent request by Mr. Frank to orally offer
a second degree amendment to the amendment offered by Messrs.
Green and Bachus, no. 3, was granted.
5. An amendment offered by Mr. Frank, no. 3a, to an
amendment offered by Messrs. Green and Bachus, no. 3, to strike
section 4(d) of the bill, which requires that profitability be
taken into account when determining executive compensation, was
agreed to by voice vote.
6. A motion offered by Mr. Bachus to move the previous
question on H.R. 1221 was agreed to by voice vote.
COMMITTEE OVERSIGHT FINDINGS
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee has held hearings and
made findings that are reflected in this report.
PERFORMANCE GOALS AND OBJECTIVES
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee establishes the
following performance related goals and objectives for this
legislation:
The objectives of H.R. 1221 are to suspend the current
compensation packages for all of Fannie Mae and Freddie Mac's
senior executives and to establish a compensation system for
the Government Sponsored Enterprises' (GSEs') executive
officers consistent with the compensation and benefits provided
under the Financial Institution Reform, Recovery, and
Enforcement Act of 1989 (FIRREA). It is also the objective of
H.R. 1221 to require the GSEs' regulator--the Federal Housing
Finance Agency (FHFA)--to adjust the salaries of Fannie Mae's
and Freddie Mac's nonsupervisory employees to conform to the
General Schedule, a statutory pay system that pays employees
based on surveys of non-federal pay for similar work.
NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
COMMITTEE COST ESTIMATE
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
CONGRESSIONAL BUDGET OFFICE ESTIMATE
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
January 4, 2012.
Hon. Spencer Bachus,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1221, the Equity
in Government Compensation Act of 2011.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Aurora
Swanson.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
H.R. 1221--Equity in Government Compensation Act of 2011
H.R. 1221 would direct the Federal Housing Finance Agency
(FHFA) to adjust the compensation of employees at the Federal
National Mortgage Association (Fannie Mae) and the Federal Home
Loan Mortgage Corporation (Freddie Mac) to levels comparable to
executive branch employees. CBO estimates that enacting the
legislation would have no significant impact on the federal
budget because the bill would not directly change the income of
the organizations nor would it restrict how those firms could
spend amounts realized by reducing certain salaries. The
legislation would affect direct spending; therefore, pay-as-
you-go-procedures apply. CBO estimates, however, that any
changes in direct spending would be insignificant. Enacting the
bill would not affect revenues.
The bill would direct FHFA to reduce compensation levels
for executive officers at Fannie Mae and Freddie Mac to align
with compensation levels at financial regulatory agencies in
the executive branch. Compensation levels at those firms would
be capped at the maximum attainable salary at FHFA--currently
around $255,000. The bill would require that other employees at
Fannie Mae and Freddie Mac be compensated in accordance with
the federal government's General Schedule pay rates--the
predominant pay schedule for executive branch agencies.
In the past several years, total compensation--including
salaries and benefits--for employees of Fannie Mae and Freddie
Mac combined has averaged around $2 billion. Assuming enactment
in early 2012, CBO estimates that H.R. 1221 would reduce
salaries for current employees by around $300 million annually,
based on information from FHFA, FHFA's Office of Inspector
General, Fannie Mae's and Freddie Mac's quarterly financial
reports, and salary schedules for federal employees.
Implementing H.R. 1221 would result in less spending for
compensation of current employees of Fannie Mae and Freddie
Mac. However, the legislation would not require any amounts
saved by lowering compensation to be returned to the U.S.
Treasury or to be used to offset the cost of mortgage
guarantees made by those firms. Under the bill, any such funds
could be used to cover new administrative costs, such as hiring
additional employees, contracting for necessary services, or
changing the retirement plans for existing employees.
H.R. 1221 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would impose no costs on state, local, or tribal governments.
The CBO staff contact for this estimate is Aurora Swanson.
The estimate was approved by Theresa Gullo, Deputy Assistant
Director for Budget Analysis.
FEDERAL MANDATES STATEMENT
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates reform
Act.
ADVISORY COMMITTEE STATEMENT
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
APPLICABILITY TO LEGISLATIVE BRANCH
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of the section
102(b)(3) of the Congressional Accountability Act.
EARMARK IDENTIFICATION
H.R. 1221 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION
Section 1. Short title
This section provides the short title of ``Equity in
Government Compensation Act of 2011.''
Section 2. Congressional findings
The Congress finds that Fannie Mae and Freddie Mac--two
privately-owned but publicly-chartered Government Sponsored
Enterprises (GSEs)--were at the center of the mortgage market
meltdown that caused the financial crisis and that their
failures helped precipitate the deepest economic decline since
World War II. The Bush Administration put the GSEs in
conservatorship in September 2008, placing the Federal Housing
Finance Agency (FHFA) in control of the GSEs' daily operations.
Since then, the Obama Administration removed any limits on the
use of Federal funds to cover losses at the GSEs. The taxpayers
have so far spent nearly $175 billion to purchase GSE preferred
stock and own nearly 80 percent of Fannie Mae and Freddie Mac.
The Congressional Budget Office has concluded that Fannie Mae
and Freddie Mac have effectively become government agencies
whose liabilities should be included in the Federal budget; the
GSEs are expected to be a long-term drain on taxpayers. Yet, in
spite of their liabilities, the Treasury Department and the
FHFA approved compensation packages for Fannie Mae's and
Freddie Mac's chief executive officers in 2009, 2010 and 2011
that were nearly 15 times greater than the compensation of the
President of the United States and 30 times greater than the
annual compensation of a Cabinet Secretary; it also approved
multi-million dollar compensation packages for a number of the
GSEs' top executives, payable in cash, even though in 2008, the
FHFA determined that no executive officer of Fannie Mae or
Freddie Mac would be entitled to receive a cash bonus or long-
term incentive award in 2008. Congress also finds that the
Federal Housing Enterprises Financial Safety and Soundness Act
permits the FHFA Director to ``withhold any payment, transfer,
or disbursement of compensation to an executive officer, or to
place such compensation in an escrow account, during the review
of the reasonableness and comparability of compensation.''
Section 3. Definitions
This section defines the following terms:
(1) ``Director'' means the Director of the FHFA.
(2) ``Employee'' means an employee of an Enterprise, except
the term does not include an employee defined as a prevailing
rate employee.
(3) ``Enterprise'' means the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation, and
their affiliates.
(4) ``Executive Officer'' means, with respect to an
enterprise, the chairman of the board of directors, chief
executive officer, chief financial officer, president, vice
chairman, any executive vice president, and any senior vice
president in charge of a principal business unit, division, or
function.
Section 4. Reasonable pay for executive officers
This section directs the FHFA Director to suspend the
compensation packages approved for 2011 for the executive
officers of Fannie Mae and Freddie Mac and to establish a
compensation system for the executive officers in accordance
with the compensation and benefits schedules established
pursuant to the Financial Institution Reform, Recovery, and
Enforcement Act of 1989. No GSE executive compensation package
shall exceed that of the highest paid employee of the FHFA.
The section also expresses the Sense of the Congress that
the 2010 and 2011 pay packages for Fannie Mae's and Freddie
Mac's senior executives were excessive and that the money
should be returned to the Treasury to reduce the national debt.
Section 5. Compensation rate of employees of Fannie Mae and Freddie Mac
This section establishes a compensation system for the
executive officers of Fannie Mae and Freddie Mac that is
consistent with that of the Executive Schedule and the Senior
Executive Service of the Federal Government and for all other
employees that is in accordance with the General Schedule.
Section 6. Fannie and Freddie employees not Federal employees
This section clarifies that no executive officer or
employee of Fannie Mae or Freddie Mac shall be considered a
Federal employee.