WASHINGTON, D.C. - U.S. Senator Barack Obama today sent the following letter to Treasury Secretary Henry Paulson and Federal Housing Finance Agency Director James Lockhart, calling on them to address news reports that Fannie Mae and Freddie Mac CEOs will receive millions of dollars in severance packages even as they are removed from their posts. When Congress originally approved the authority for the Treasury Department to step in and rescue these companies this summer, it explicitly included a provision that gave the new regulator the authority to block golden parachute payments to CEOs. As the Bush Administration now takes unprecedented steps to rescue these companies with taxpayer dollars, it would be highly inappropriate and a violation of the public trust to allow windfall CEO severance pay packages.
In the letter, Senator Obama calls on the Administration to provide him with the steps being taken to ensure that these companies fulfill their important missions without wasting taxpayer dollars or rewarding poor leadership.
The text of the letter is below:
Dear Secretary Paulson and Director Lockhart,
News reports indicate that the chief executives of Fannie Mae and Freddie Mac will stand to reap millions of dollars in severance payments when they are removed from their posts. 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. 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.
When Congress granted the Department of the Treasury the authority to step in and rescue Fannie and Freddie, we explicitly included a provision that gave the new regulator the authority to block "any" payments made to CEOs that were "contingent on the termination" of their affiliation with the organization. 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.
I recognize that intervention is necessary to maintain liquidity for the housing market so that homeowners can continue to get affordable mortgages and homes can be bought and sold in neighborhoods across the country. Yet one of the central requirements that I have consistently set in evaluating any intervention under this new legislation is that such action protect taxpayers and not bail out senior management from Fannie Mae and Freddie Mac. Multi-million dollar severance payments for the executives who helped steer these institutions into the current crisis situation would violate the spirit of the authority granted by Congress to the Treasury Department and would violate the public's trust.
I understand that details of the agreement are still being worked out. Please let me know right away 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. The American people are watching and have put their trust in us to look out for their interests.
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