Fannie and Freddie's CEOs Score Big Paydays, and Pay Czar Can't Interfere

It's OK for executives at firms like Goldman Sachs (GS) to be paid well, at least according to the government. Taxpayers, the Obama administration, and congressmen may object to the rich compensation doled out by some investment banks, but those firms that have paid back their TARP funds are no longer restricted by caps on bonus and base salary packages.

On the other hand, firms which got government assistance and haven't paid back the money are supposed to be subject to the decisions of the administration's pay czar. Some of those companies, including AIG (AIG), have chafed as Ken Feinberg has pushed salaries and incentive compensation down. Few firms under his supervision have dodged pay restrictions. The new CFO of GM, Chris Liddell, will get a first-year compensation deal worth $6.9 million, but Feinberg may have decided that no one else was willing to relocate to Detroit, so the incentive would have to be reasonable.

The two firms that have benefited most from the government's bailout decisions are Fannie Mae (FNM) and Freddie Mac (FRE). Both of the mortgage firms would have gone under if they hadn't received tens of billions of dollars in aid, and are now essentially owned by the Federal Housing Finance Agency. And if current trends in the home loan crisis continue, it is expected that they will need tens of billions in future government investment. In fact, neither firm is likely to pay the taxpayers back completely, if at all. All of this makes it is especially odd that the two companies' CEOs will make eye-popping sums for their work in 2009.

According to The Wall Street Journal, "The Federal Housing Finance Agency approved compensation plans for Fannie Chief Executive Michael Williams and Freddie CEO Charles Haldeman Jr. Those packages are expected to be in a range of $4 million to $6 million." Those CEOs are lucky. Czar Feinberg does not set their pay.

There will be a great deal of objection to the amount of money given to these executives. The most troubling part of the news is that it shows how unevenly the compensation restrictions are being applied. It even gives companies like AIG some leverage in their negotiations with Feinberg. If Fannie Mae management can get rich, they may fairly ask, why should AIG management suffer simply because the Treasury Department sets its pay limits? That's a fair question, but one without a fair answer: The government's pay rules simply have too many loopholes.

Douglas A. McIntyre is an editor at 24/7 Wall St.