Taxpayer funded signing bonus at Freddie Mac?
Last we checked, Freddie Mac (FRE) was still operating under a conservatorship, having received over $51 billion in taxpayer money. And, we seem to recall lots of chest-beating last year about sharply lower salaries and fewer perks for the new group of top executives charged with setting Freddie (and Fannie Mae) back on the path to prosperity.
So you can imagine our surprise when we came across this employment contract yesterday for Freddie’s newly named CFO, Ross J. Kari. Here’s a few key bullets:
- annual compensation of $3.5 million (this includes $675K in salary, $1.6 million in something called “additional annual salary” and $1.1 million in a target incentive
- a $1.95 million signing bonus
- immediate buyout of Kari’s house (or perhaps houses)
- reimbursement for travel between Washington D.C. and Kari’s residences in Ohio, Washington and Oregon
Needless to say, none of this — and certainly not the ridiculous sounding additional annual salary — was included in the press release that Freddie put out earlier this week. But Freddie CEO Charles Haldeman Jr. did say this: “Ross will be leading a proven group of finance executives who continue to strengthen our financial controls. When I came to Freddie Mac I said that building out our senior executive team was near the top of my agenda, and with a new CFO and COO both now on board, we’ve met that goal.”
No doubt that Kari is a talented executive — one who clearly gets around. He spent the past 10 months at Fifth Third Bancorp (FITB) where he was paid substantially less working for the private sector: $580K plus a $100K signing bonus when he joined the bank last November. Before that, he was at insurance giant Safeco, which was bought by Liberty Mutual last year.
Still, you don’t have to be a tea-bagger to wonder why something like Freddie, which is being propped up by the government to the tune of billions of dollars, is able to hand out such a generous welcome package to a new executive.
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Posted in Tags: 8Ks, CFOs |
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September 25th, 2009 at 10:19 am
And what a wonderful performer FITB over past 9 months. Was $41 three years
ago then during his time @$10 to 1.01 back to @$10. Oh joy.
September 25th, 2009 at 10:44 am
Thanks for sharing this insightful information. One should wonder why people aren’t in the streets yet. In terms of Kari, do you have some background info about his salary, track record and performance during his career? I recently did a blog post about Lloyd Blankfein, CEO of Goldman Sachs http://fxinvestmentstrategies.blogspot.com/2009/09/market-insights-13-september-2009.html comparing his compensation with Goldman’s stock performance up to the crisis. Thanks again, I enjoy reading your blog.
September 25th, 2009 at 4:56 pm
Many thanks for highlighting Mr. Kari’s excessive compensation package. Executive greed can be stopped by sending them to where they came from. In this case, send Mr. Ross J. Kari back to Fifth Third Bancorp. (Shame on you, Mr. Kari!)
P.S.- Representative Barney Frank is correct pushing for bonus programs at Fannie Mae and Freddie Mac to be halted amid controversy over the huge payouts to employees at companies getting taxpayer bailouts.
September 25th, 2009 at 8:15 pm
Funny how people would say that somebody else’s Salary is ‘excessive’. As long as someone is willing to pay a salary and receive the other’s time and talent that is what the market going rate for a CFO is.
With regards FITB, no the stock has not been immune to the economic pressures that has befallen the financial services industry. If you compare FITB to an index such as the KBW index of regional banks, FITB performed well compared to its peers.
I am so tired of people who know very little about financial services complaining about ‘excessive’ this and ‘excessive’ that.
The only thing that has been ‘excessive’ is the government intervention and involvement in the industry.
September 26th, 2009 at 8:11 am
When will the people erect a guillotine on Time Square I wonder… ??
September 26th, 2009 at 10:49 am
@W So you think it’s perfectly OK for an entity essentially propped up by the government to hand out a nearly $2 million signing bonus? How would you have reacted if instead of giving that to Kari, they had given the signing bonus to Hillary Clinton when she signed on as Secretary of State?
September 28th, 2009 at 2:50 am
I had to read this from “W”
“Funny how people would say that somebody else’s Salary is ‘excessive’.”
Simple, taxpayers are paying for this. Fannie Mae isn’t making money, they are taking money from people like me, using the government who will most happily put me in prison, if I don’t hand over the cash for them to do it.
I don’t care what people in the PRIVATE sector get paid, as long as I am not responsible at all for any of their poor stupid decisions, like having to pay 10 grand to bail their asses out when they screw up.
September 28th, 2009 at 5:16 am
W writes: “… As long as someone is willing to pay a salary and receive the other’s time and talent that is what the market going rate for a CFO is.”
The point of this discussion is that the taxpayer is NOT willing to pay excessive salaries to financial executives. We don’t have direct control but we are the stuckee’s who have to cover the costs and don’t see any benefits commensurate with the costs.
I support President Obama and, if you haven’t notice, the G20 nations in establishing some limits to financial executive compensation.
RCharles
September 30th, 2009 at 1:23 pm
W says
“I am so tired of people who know very little about financial services complaining about ‘excessive’ this and ‘excessive’ that. ”
so that makes it O.K. for the government to support an industry via my taxes and I’m not allowed to complain as I know little about financial services. We used to have a saying that he who pays the piper calls the tune. In my case the tune is not to pay excessive compensation with my hard earned taxes. I don’t care what the rate for a CFO is but if I’m having to pay without any say in the amount then a dollar is too much.
December 16th, 2009 at 8:47 pm
It appears that Mr. Kari has had 6 jobs in the last eight years, going back to his brief tenure as Wells Fargo’s CFO in 2001. Since that time, he has had positions at Safeco, MyCFO, Federal Home Loan Bank of San Francisco, Fifth Third Bank, and now Freddie Mac. Where I come from, that kind of job history is a red flag. Who’s to say Mr. Kari won’t bail when a better offer comes his way? Where is the FHA and congressional oversight on how senior managers are selected? Statistics show that Mr. Kari’s compensation package is out of line, even compared to large financial institutions. Freddie Mac’s bailout preceeded TARP, so they are not subject ot executive pay restrictions. Where’s the new Federal pay Czar?
I’ve worked for a large bank before and I now work for a small community bank. I see every day how the system is rigged in the favor of the big guy and for Wall Street.
December 28th, 2009 at 12:54 pm
One must wonder, what makes these individuals so doggone special. This is only an organization…he leads people (or should) who bring him background papers, research, recommendations, and ideas. All the CEO does is choose which road to take. The CEOs are generalists. It’s not that they are decoding the answers to the universe. I can’t be convinced that they are worth the bucks that they get. They have simply constructed a living myth that they are “indespensible.” Look at Timmy G. (our tax avoiding Secretary of the Treasury). If we didn’t hire him, and only him, our whole country was going down in a blaze. Only SUPER G could save us from ourselves. “Meet the new boss, same as the old boss.” Have a Happy New Year, whoever may read this.
December 28th, 2009 at 2:42 pm
I guess we have no one to blame for the $1.9 million bonus but ourselves. We elected the morons that run our government then take a wait and see attitude rather than let them know every time they screw up that we will not tolerate their actions or lack thereof.