Fannie Mae’s COO Promoted to CEO But Won’t Get Raise
Michael J. Williams was promoted to president and CEO of Fannie Mae, the now government-controlled mortgage provider. But, because of past failures of the lending giant, Mr. Williams’ salary will not increase and he will be required to seek approval for any major decisions from the federal regulator assigned to Fannie Mae. Mr. Williams succeeds Herb Allison, who was appointed to oversee the Troubled Asset Relief Program, a Treasury Dept. financial bailout plan. Mr. Williams, a 51 year-old from Philadelphia, had been serving as chief operating officer at Fannie Mae. His salary, reportedly $675,000 as of Dec. 31, will not change according to a Fannie Mae spokesman.
In September, both Fannie Mae and its rival Freddie Mac were taken over by the government. The process involved is known as a “conservatorship”, where the Federal Housing Finance Agency (FHFA), as the designated regulator in the case, will oversee the companies’ activities in an attempt to restore their financial well-being. The companies had reported losses of almost $110 billion for fiscal year 2008.
As the regulator, the FHFA has the final authority in all major decisions such as executive hires and fires, pricing, and compensation. The government has yet to decide on the companies’ long-term role. As a result of the government’s control, the promotion for Mr. Williams is pretty much a lateral move with a nicer title as he does not have the final say in decisions. Executive compensation has become a very sensitive topic in recent months, especially within companies that receive federal assistance. Mr. Williams received a retention bonus of $265,000 last year as part of a program designed to keep executives at Fannie Mae. He is also set to receive a bonus of over $1 million next year, though the final amount will be determined by his success at reaching certain performance goals.
Some legisators have asked for retention bonuses to be halted, but the FHFA insists that without them, Fannie Mae would lose much needed talent. Mr. Williams was initially hired on in 1991 and has performed many duties for the company. Among them was the installation of new technologies and a re-accounting of the companies’ earnings after the 2004 scandal where the company was prosecuted for accounting violations. Recently, he has been in charge of minimizing losses related to loan-defaults and prevention of foreclosures. Prior to working for Fannie Mae Mr. Williams worked for DuPont and KPMG Peat Marwick. He attended Drexel University where he received a Masters in business administration.