NEW YORK – The government has handed its ATM card to beleaguered mortgage giants Fannie Mae and Freddie Mac.

The Treasury Department said Thursday it removed the $400 billion financial cap on the money it will provide to keep the companies afloat. Already, taxpayers have shelled out $111 billion to the pair, and a senior Treasury official said losses are not expected to exceed the government's estimate this summer of $170 billion over 10 years.

Treasury Department officials said it will now use a flexible formula to ensure the two agencies can stand behind the billions of dollars in mortgage-backed securities they sell to investors. Under the formula, financial support would increase according to how much each firm loses in a quarter. The cap in place at the end of 2012 would apply thereafter.

By making the change before year-end, Treasury sidestepped the need for an OK from a bailout-weary Congress.

While most analysts say the companies are unlikely to use the full $400 billion, Treasury officials said they decided to lift the caps to eliminate any uncertainty among investors about the government's commitments. But the timing of the announcement on a traditionally slow news day raised eyebrows.

"The companies are nowhere close to using the $400 billion they had before, so why do this now?" said Bert Ely, a banking consultant in Alexandria, Va. "It's possible we may see some horrendous numbers for the fourth quarter and, thus 2009, and Treasury wants to calm the markets."

Fannie Mae and Freddie Mac provide vital liquidity to the mortgage industry by purchasing home loans from lenders and selling them to investors. Together, they own or guarantee almost 31 million home loans worth about $5.5 trillion, or about half of all mortgages. Without government aid, the firms would have gone broke, leaving millions of people unable to get a mortgage.

The biggest headwind facing the housing recovery has been the rise in foreclosures as unemployment remains high. The two companies, facing mounting losses from mortgage defaults, were taken over by the government in September 2008 under the authority of a law Congress passed in the summer of 2008.

So far the government has provided $60 billion to Fannie Mae and $51 billion to Freddie Mac. The assistance is being provided in exchange for preferred stock paying a 10 percent dividend. The Bush administration first pledged up to $100 billion in support for each company, an amount that was doubled to $200 billion for each by the Obama administration in February.

Treasury officials will provide an updated estimate for Fannie and Freddie losses in February when President Barack Obama sends his 2011 budget to Congress. Though the administration has yet to disclose its long-term plans for the two companies, they are unlikely to return to their former power and influence.

The news followed an announcement Thursday that the CEOs of Fannie and Freddie could get paid as much as $6 million for 2009, despite the companies' dismal performances this year.

Fannie's CEO, Michael Williams, and Freddie CEO Charles "Ed" Haldeman Jr. each will receive $900,000 in salary, $3.1 million in deferred payments next year and another $2 million if they meet certain performance goals, according to filings with the Securities and Exchange Commission.

The pay packages were approved by the Treasury Department and the Federal Housing Finance Agency, which regulates Fannie and Freddie.

That pay is far less than what their predecessors earned. Former Fannie CEO Daniel Mudd received $10.2 million in 2008 and former Freddie CEO Richard Syron pocketed $13.1 million. Both execs were ousted when federal regulators seized the companies in September 2008. The federal government blocked exit packages for the pair worth up to $24 million.

The chief executives' pay could spark new criticism about the government's numerous bailouts, but that may be unfounded, said Mark Borges, principal with management consulting firm Compensia.

Haldeman and Williams each could command between $5 million and $10 million in a similar position in the private sector, Borges estimated, and without the notable challenges and public scrutiny they face at these companies.

"I doubt too many people would look at these jobs and say, 'Gosh, I would love to go there for my next career move,'" Borges said. "The government is getting top notch executives to solve problems that are not easy to solve."

The bulk of their pay is also not guaranteed, Borges said, so these executives can't pocket and run and must meet certain long-term goals or risk giving some of it back.

Freddie Mac's board sets the performance goals for the chief executive, which won't be disclosed until next year. Fannie Mae's filing outlined its corporate goals including "being a recognized leader in the housing recovery," "protecting taxpayers," and "managing risk more effectively."

Fannie Mae and Freddie Mac declined to offer further details on CEO performance goals.

Public anger over Wall Street pay boiled over earlier this year. In response, the Obama administration imposed pay curbs on banks that received government bailouts. All the major banks have since repaid their federal money, largely to escape caps on executive pay.

Former Bank of America Corp. CEO Ken Lewis, for example, agreed to forgo his salary and bonus this year under pressure from the government. Last year, he pocketed more than $9 million in total compensation. Bank of America received $45 billion in government assistance, which it has since repaid.

Freddie Mac hired Haldeman, a former mutual fund executive, in July. At the time, the company disclosed his annual salary of $900,000 but did not disclose other incentive payments. In September, the company hired a new chief financial officer, Ross Kari, and said his pay package would be worth up to $5.5 million.

Williams, formerly Fannie Mae's chief operating officer, took over as CEO in April after the first government-appointed CEO, Herbert Allison, took a job at the Treasury Department. Williams earned a base salary of $676,000 last year, plus a retention award of $260,000.

Washington-based Fannie Mae was created in 1938 in the aftermath of the Great Depression. It was privatized 30 years later to limit budget deficits during the Vietnam War. In 1970, the government formed its sibling and competitor McLean, Va.-based Freddie Mac.

http://news.yahoo.com/s/ap/20091225/ap_on_bi_ge/us_mortgage_giants_ceos

Do you think that might give a boost to employment?

How would it??

The companies that do the bulk of the hiring in this country < small businesses > are still leery to hire any new people until they know for sure what their tax burden is going to wind up being.

Now that the health care bill has passed, most companies know that their tax burden is going to increase, and that they are going to be required to provide coverage for the employees.

They are also, due to income levels, going to be taxed more than before.

That combination makes it cheaper to just " do more with less ".

pfffffttttt..
LOL

Come, Fanta. Is that the best you can do??

Find one of your favorite Democratic blogs and refute what I say.

Tell me where I am mistaken.

SHOW me where the tax burden on small businesses is going to go down.

Let me know exactly HOW the current idea is going to be conducive to small businesses' desire to hire more people.

Come on.

Tell me how it's going to be cheaper for a small business to hire people, pay their wages, AND provide health insurance instead of just working with what they have to save money.

All Business needs capital to grow.

Besides, small business complies with globalization and the lowering of the American standard of living.
Small business only aides the growth in the gap between the haves and have nots. It seeks and relies on a cheap labor force, and results in bulk consolidation of profits into the private accounts of the owners.

What America needs is to realize that we have the largest market in the world and reestablish our manufacturing economy.
Put back the tariffs and equal the economic playing field. Wages will readjust, the trade deficit will decline, and Americans will have jobs that can raise families on again.

And this, right here, is exactly the flaw in your argument.

Increased tax burden and forcing them to provide health care results in increased costs to the business. Increased costs means they have LESS capital to work with.




This, hands DOWN, is THE most absurd thing I have ever seen you say.

Small businesses operate in THIS country. The LARGE corporations are the ones that continually send jobs overseas.

Also, small businesses complying with " globalization " is mainly because they are FORCED to.




Wow. The more I read of this, the more absurd it gets.

You do realize, do you not, that small business are what this entire country was BUILT ON????

Multi billion dollar corporations and CEOs making MILLIONS when their companies are failing is what increased the difference between the haves and have nots.



Ah, but here's the rub. The Dems that you are so fond of at this point are doing their damndest to make absolutely SURE that America can NEVER rebuild the manufacturing base.

All of the regulations they want to impose because of " Global Warming/Climate Change " whatever the word of the day is gonna be, will choke out ANY reasonable ability for a manufacturer to produce goods in this country at a price that people can afford to pay.

PoppyCock!

I the poppycock argument. Oh how I have missed that

Yep. That's the normal fallback position when he can't actually refute what I have to say because it doesn't fit into his Democrat Fantasyland.

LOL

That's what I say when there is just too much wrong in a post to consider responding to.

I was tired and busy and it would have taken too long.