WASHINGTON -- A bipartisan group of senators led by Jay Rockefeller (D-W.Va.) and John McCain (R-Ariz.) announced Wednesday that they want to ban bonuses for executives at Fannie Mae and Freddie Mac, the government-backed enterprises placed in conservatorship as part of the 2008 Wall Street bailout.
The Federal Housing Finance Agency, which oversees Fannie and Freddie, approved $12.79 million in bonus pay for 10 executives who met modest performance targets, Politico reported last week. Fannie Mae reported a third-quarter loss of $5.3 billion to the Securities and Exchange on Wednesday.
"It's inexcusable that anyone would think it's okay to hand out these bonuses,” Rockefeller said in a statement. "The American people deserve better and it's time we make sure that Fannie Mae and Freddie Mac act more responsibly with their money."
"It's outrageous that Fannie Mae and Freddie Mac executives would expect multi-million dollar bonuses after $170 billion in taxpayer bailouts and one in every four homeowners' mortgage underwater," McCain said. "This amendment makes clear that so long as Fannie and Freddie are in government conservatorship, bonuses such as these will not be paid out."
More than 10 million homeowners owe more on their mortgages than their homes are worth, according to Corelogic, a housing market data firm. Among "underwater" homeowners -- who comprise 22.5 percent of all mortgage-holders -- nearly three quarters are paying above-market interest rates but have little access to lower rates because of their underwater status.
Fannie and Freddie own or guarantee approximately 50 percent of all mortgages. Several elected officials, including California Attorney General Kamala Harris, have called on the FHFA to reduce principal for underwater borrowers. FHFA director Edward DeMarco has opposed writing down mortgage principal, citing a mandate to limit taxpayer losses, but has suggested he'd be open to a proposal that would make it easier for homeowners to pay down principal in a Chapter 13 bankruptcy.
A FHFA spokeswoman did not immediately provide a comment on the senators' plans for anti-bonus legislation. At least seven other senators will cosponsor the measure, according to a release.