CNN pointed this out in their Christmas Eve story "Big paydays for Fannie and Freddie bosses":
...DeMarco said the pay packages were set in consultation with Kenneth Feinberg, the Obama administration's pay czar, who has to sign off on pay for executives at firms that received the most help from the Troubled Asset Relief Program.
But unlike typical pay packages for public companies, none of the executives are receiving stock grants or options as part of their compensation. That significantly reduces the risks for the executives at Fannie and Freddie.
The top executives at other firms receiving bailouts, such as American International Group (AIG, Fortune 500) and General Motors, are receiving stock in their companies as part of their packages. Even some firms no longer under federal pay limits, such as investment bank Goldman Sachs (GS, Fortune 500), announced that all bonuses would be paid in stock rather than cash this year.
DeMarco pointed out that there is great uncertainty about whether the federal government will continue to operate the firms into the future. The could end up making Fannie and Freddie's current shares worthless.
"As this debate progresses, it will be essential that the enterprises continue to perform their current role," DeMarco said.
Pinto said the lack of any stock in the pay packages are a clear signal that neither company will remain a publicly-traded company in the long-term....
Here MarketWatch's take:
...recently disclosed pay packages for Fannie (FNM 1.31, +0.04, +3.15%) and Freddie (FRE 1.59, -0.01, -0.63%) executives suggest the shares are worthless, Bose George, an analyst at Keefe, Bruyette & Woods, wrote in a note to investors.See also:Fannie Chief Executive Michael Williams and Freddie CEO Charles Haldeman got $6 million annual compensation packages, according to regulatory filings last week. See details of their pay.
To get all that money, the companies have to meet longer-term performance targets. But the packages don't include any stock, despite the fact that the government's pay czar Kenneth Feinberg has been pushing for more stock-based compensation to better align management and shareholder interests.
A portion of Williams' and Haldeman's compensation will come from "deferred salary," which is cash that will be paid only if Fannie and Freddie meet performance goals set by the companies' boards and reviewed by the Federal Housing Finance Agency, their regulator.
This is supposed to replicate "stock salary" that Feinberg approved for executives at companies that benefited from huge government bailouts. However, because of Fannie and Freddie's "unique circumstances," this part of their CEOs' compensation will be in cash, the Federal Housing Finance Agency said in a Dec. 24 statement.
What makes Fannie and Freddie unique is that the companies can't issue new common stock for executive compensation without getting Treasury's approval first. But that probably wasn't a "meaningful impediment," KBW's George noted.
"The more obvious reason is that the shares have no long-term value and that no executive would accept unvested shares of the companies as part of their compensation package," the analyst said.
"This reinforces our view that the common shares will eventually trade to zero," George concluded. "The companies will never be able to repay the government.
Fannie's And Freddie's Last Man Standing (FRE; FNM)
An excellent piece by Maurna Desmond at Forbes:KBW says Fannie, Freddie common shares worthless (FRE; FNM)
KBW analyst Bose George is the only Wall Street analyst still covering the mortgage giants. He talks to Forbes about their future.
Fannie, Freddie shares dive on zero-value prediction (FRE; FNM)
Fannie Mae, Freddie Mac "The new GSE as zero meme – laying the assumptions bare – and a modest plan for Obama" (FNM; FRE)
