```
[House Report 112-366]
[From the U.S. Government Printing Office]


112th Congress                                            Rept. 112-366
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

======================================================================



 
             EQUITY IN GOVERNMENT COMPENSATION ACT OF 2011

                                _______
                                

January 17, 2012.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Bachus, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 1221]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 1221) to suspend the current compensation 
packages for the senior executives of Fannie Mae and Freddie 
Mac and establish compensation for such positions in accordance 
with rates of pay for senior employees in the Executive Branch 
of the Federal Government, and for other purposes, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Equity in Government Compensation Act 
of 2011''.

SEC. 2. CONGRESSIONAL FINDINGS.

  The Congress finds that--
          (1) the Federal National Mortgage Association (known as 
        Fannie Mae) and the Federal Home Loan Mortgage Corporation 
        (known as Freddie Mac), which are both privately owned but 
        publicly chartered Government-sponsored enterprises (GSEs), 
        were at the center of the mortgage market meltdown that caused 
        the financial crisis that commenced in 2008;
          (2) the failures of Fannie Mae and Freddie Mac helped 
        precipitate the deepest economic decline since World War II;
          (3) in September 2008, the Bush Administration, Federal 
        Reserve Board, and Federal Housing Finance Agency (FHFA) 
        exercised authority granted by the Congress to place the two 
        GSEs in conservatorship, a form of nationalization that puts 
        the regulators firmly in control of the GSEs' daily operations;
          (4) in September 2008, the Bush Administration established a 
        $200 billion facility to purchase senior preferred stock in the 
        enterprises to backstop their losses;
          (5) in February 2009, the Obama Administration raised the 
        senior preferred stock purchase commitment to $400 billion;
          (6) on Christmas Eve 2009, the Obama Administration removed 
        any limits on the use of Federal funds to cover losses at the 
        enterprises, significantly expanding a commitment that has 
        resulted in the expenditure of so far nearly $175 billion in 
        taxpayer funds to purchase senior preferred stock in the two 
        enterprises;
          (7) as a result of the Government's actions, the taxpayers of 
        the United States now own nearly 80 percent of the two GSEs;
          (8) the Congressional Budget Office has concluded that Fannie 
        Mae and Freddie Mac have effectively become Government entities 
        whose operations should be included in the Federal budget;
          (9) the GSEs are expected to be a long-term drain on the 
        taxpayers as a result of market conditions and the political 
        and public policy mandates imposed on them by the 
        Administration and the Congress;
          (10) in spite of these liabilities, the Treasury Department 
        and FHFA approved compensation packages for the chief executive 
        officers of Fannie Mae and Freddie Mac in 2009, 2010, and 2011 
        that were nearly 15 times greater than the annual compensation 
        of the President of the United States and 30 times greater than 
        the annual compensation of a Cabinet Secretary;
          (11) the Treasury Department and the FHFA also approved 
        multi-million dollar compensation packages for a number of the 
        GSEs' top executives, payable in cash rather than in the type 
        of stock options that have characterized compensation 
        arrangements at other large financial institutions that have 
        received extraordinary government assistance;
          (12) on September 17, 2008, FHFA determined that no executive 
        officer of Fannie Mae or Freddie Mac would be entitled to 
        receive a cash bonus or long-term incentive awards for 2008;
          (13) FHFA's five-year Strategic Plan for Fannie Mae and 
        Freddie Mac includes a commitment that the GSEs will operate in 
        a safe and sound manner; and
          (14) section 1318(c) of the Federal Housing Enterprises 
        Financial Safety and Soundness Act of 1992 (12 U.S.C. 4518(c), 
        as added by section 1113(a)(4) of the Housing and Economic 
        Recovery Act of 2008 (Public Law 110-289; 122 Stat. 2678)), 
        permits the Director of FHFA to withhold any payment, transfer, 
        or disbursement of compensation to an executive officer, or to 
        place such compensation in an escrow account, during the review 
        of the reasonableness and comparability of compensation.

SEC. 3. DEFINITIONS.

  In this Act:
          (1) Director.--The term ``Director'' means the Director of 
        the Federal Housing Finance Agency.
          (2) Employee.--The term ``employee'' means an employee of an 
        enterprise, except that such term does not include any employee 
        who would be defined as a prevailing rate employee (as defined 
        in section 5342(2) of title 5, United States Code) if such 
        employee were employed by an agency (as defined in paragraph 
        (1) of such section).
          (3) Enterprise.--The term ``enterprise'' means--
                  (A) the Federal National Mortgage Association and any 
                affiliate thereof; and
                  (B) the Federal Home Loan Mortgage Corporation and 
                any affiliate thereof.
          (4) Executive officer.--The term ``executive officer'' has 
        the same meaning as is given such term in section 1303(12) of 
        the Federal Housing Enterprises Financial Safety and Soundness 
        Act of 1992 (12 U.S.C. 4502(12)).

SEC. 4. REASONABLE PAY FOR EXECUTIVE OFFICERS.

  (a) Suspension of Current Compensation Packages.--The Director shall 
suspend the compensation packages approved for 2011 for the executive 
officers of an enterprise and, in lieu of such packages, subject to the 
limitation under subsection (d), establish a compensation system for 
the executive officers of such enterprise in accordance with the 
schedules of compensation and benefits established and adjusted 
pursuant to section 1206 of the Financial Institutions Reform, 
Recovery, and Enforcement Act of 1989 (12 U.S.C. 1833b).
  (b) Clawback of 2010 and 2011 Compensation.--
          (1) Sense of the congress.--It is the sense of the Congress 
        that each executive officer performing services for an 
        enterprise on the date of the enactment of this Act whose 
        compensation package is suspended under subsection (a) should 
        return to the Secretary of the Treasury any compensation earned 
        in 2010 and 2011 that was in excess of the maximum annual rate 
        of basic pay authorized for a position in level I of the 
        Executive Schedule.
          (2) Use to reduce national debt.--The Secretary of the 
        Treasury shall transfer any amounts referred to in paragraph 
        (1) that are returned to the Secretary to the special account 
        established by section 3113(d) of title 31, United States Code 
        (relating to reducing the public debt).
  (c) Additional Requirement.--An executive officer of an enterprise 
shall be subject to section 111 of the Emergency Economic Stabilization 
Act of 2008 (12 U.S.C. 5221), which relates to executive compensation 
and corporate governance.
  (d) Limitation on Compensation.--An executive officer of an 
enterprise whose compensation package is suspended under subsection (a) 
shall not be compensated more than the highest compensated employee of 
the Federal Housing Finance Agency.

SEC. 5. COMPENSATION RATE OF EMPLOYEES OF FANNIE MAE AND FREDDIE MAC.

  (a) In General.--During any period that an enterprise is federally 
chartered under the Federal National Mortgage Association Charter Act 
(12 U.S.C. 1716 et seq.) or the Federal Home Loan Mortgage Corporation 
Act (12 U.S.C. 1451 et seq.), the compensation of the positions held by 
employees shall be in accordance with this section.
  (b) Conversion of Compensation Rate for Current Employees.--
          (1) In general.--Except for as provided in section 4, 
        effective for pay periods beginning after the date of the 
        enactment of this Act, the Director shall fix the rate of basic 
        compensation of positions held by employees performing services 
        for an enterprise as of the date of the enactment of this Act 
        in accordance with the General Schedule set forth in section 
        5332 of title 5, United States Code. In fixing such rate--
                  (A) if the employee is receiving a rate of basic 
                compensation that is less than the minimum rate of 
                basic compensation of the appropriate grade of the 
                General Schedule in which his or her position is 
                placed, such employee's rate of basic compensation 
                shall be increased to such minimum rate;
                  (B) if the employee is receiving a rate of basic 
                compensation that is equal to a rate of basic 
                compensation of the appropriate grade of the General 
                Schedule in which his or her position is placed, such 
                employee's rate of basic compensation shall be equal to 
                that rate of basic compensation of the appropriate 
                grade of the General Schedule;
                  (C) if the employee is receiving a rate of basic 
                compensation that is between 2 rates of basic 
                compensation of the appropriate grade of the General 
                Schedule in which his or her position is placed, such 
                employee's rate of basic compensation shall be at the 
                higher of those 2 rates under the General Schedule; and
                  (D) if the employee is receiving a rate of basic 
                compensation that is in excess of the maximum rate of 
                basic compensation of the appropriate grade of the 
                General Schedule in which his or her position is 
                placed, such employee's rate of basic compensation 
                shall be reduced to such maximum rate.
          (2) Not considered transfers or promotions.--The conversion 
        of positions and employees to the appropriate grades of the 
        General Schedule and the initial adjustment of rates of basic 
        compensation of those positions and employees provided for by 
        this subsection, shall not be considered to be transfers or 
        promotions within the meaning of section 5334(b) of title 5, 
        United States Code, and the regulations issued thereunder.
          (3) Credit for increase in compensation before adjustment.--
        Each employee performing services for an enterprise on the date 
        of the enactment of this Act whose position is converted under 
        this subsection to the General Schedule and who prior to the 
        initial adjustment of his or her rate of basic compensation 
        under paragraph (1) has earned, but has not been credited with, 
        an increase in that rate, shall be granted credit for such 
        increase before his or her rate of basic compensation is 
        initially adjusted under such paragraph.
          (4) Service performed since last compensation increase.--Each 
        employee performing services for an enterprise on the date of 
        the enactment of this Act whose position is converted under 
        this subsection to the General Schedule shall be granted 
        credit, for purposes of his or her first step increase under 
        the General Schedule, for all satisfactory service performed 
        since his or her last increase in compensation prior to the 
        initial adjustment of his or her rate of basic compensation 
        under paragraph (1).
          (5) Compensation increase under this section.--An increase in 
        the rate of basic compensation by reason of the enactment of 
        paragraph (1) shall not be considered to be an equivalent 
        increase with respect to step increases for employees whose 
        positions are converted to the General Schedule under authority 
        of this subsection.
  (c) New Employees.--Except for as provided in section 4, the grade 
and rate of basic pay of any individual beginning employment with an 
enterprise after the date of enactment of this Act shall be fixed in 
accordance with the General Schedule set forth in section 5332 of title 
5, United States Code.

SEC. 6. FANNIE AND FREDDIE EMPLOYEES NOT FEDERAL EMPLOYEES.

  Any executive officer or employee affected by any provision under 
sections 4 and 5, respectively, shall not be considered a Federal 
employee.

                          PURPOSE AND SUMMARY

    H.R. 1221, the Equity in Government Compensation Act of 
2011, suspends the current compensation packages for all of 
Fannie Mae and Freddie Mac's senior executives and establishes 
a compensation system for the Government Sponsored Enterprises' 
(GSEs') executive officers consistent with the compensation and 
benefits provided under the Financial Institution Reform, 
Recovery, and Enforcement Act of 1989 (FIRREA). The bill 
requires the GSEs' regulator--the Federal Housing Finance 
Agency (FHFA)--to adjust the salaries of Fannie Mae's and 
Freddie Mac's nonsupervisory employees to conform to the 
General Schedule, a statutory pay system that pays employees 
based on surveys of non-federal pay for similar work. Finally, 
H.R. 1221 expresses the Sense of the Congress that the 2010 and 
2011 pay packages for Fannie Mae's and Freddie Mac's senior 
executives were excessive and that the money should be returned 
to the Treasury to reduce the national debt.

                  BACKGROUND AND NEED FOR LEGISLATION

    Fannie Mae and Freddie Mac were established by Congress to 
make credit available to mortgage lenders to finance home 
purchases. Owned by private shareholders but imbued with a 
public mission to promote affordable homeownership, these GSEs 
bought mortgages from lenders and either held these mortgages 
in their portfolios or packaged them into mortgage-backed 
securities, for which the GSEs guaranteed the timely payment of 
principal and interest, that were sold to investors. The GSEs 
were able to fund their purchases of mortgages by borrowing at 
below-market rates because GSE bondholders assumed that the 
government would stand behind the GSEs if they ever failed.
    Since entering a Federal conservatorship in September 2008, 
Fannie Mae and Freddie Mac have received nearly $177 billion in 
government funds, making the GSE conservatorship by far the 
costliest of all the taxpayer bailouts carried out over the 
past three years. And there is no evidence that these 
government contributions will end any time soon. On November 3, 
2011, Freddie Mac announced that it would need $6 billion from 
taxpayers following its worst quarterly loss this year. On 
November 8, 2011, Fannie Mae reported that it would need 
another $7.8 billion.
    The genesis of H.R. 1221 can be found in the Treasury 
Department's decision on Christmas Eve of 2009 to grant top 
executives at Fannie Mae and Freddie Mac multi-million dollar 
bonuses. The FHFA ratified $42 million worth of Wall Street-
style pay packages for the GSEs' 12 top executives. The 
Treasury Department's Christmas Eve announcement was coupled 
with news that the Administration had decided to remove all 
limits on the amount of taxpayer assistance to the GSEs. In 
2010, FHFA approved pay packages similar to the ones it 
approved in 2009. According to its SEC 10-K filings, Fannie Mae 
paid its top six executives $15.4 million in salaries and 
bonuses, and its CEO, Michael Williams, received $5.6 million. 
Freddie Mac paid its top five executives nearly $18.5 million, 
and its CEO, Charles E. Haldeman, Jr., received $5.4 million. 
And on November 1, 2011, it was announced that FHFA had 
approved $12.79 million in bonus pay for 10 GSE executives. 
Executive pay for 2012 has not yet been determined.
    Edward J. DeMarco, the FHFA's Acting Director, has defended 
these pay packages. Mr. DeMarco has asserted that for the GSEs 
to continue funding nearly three-fourths of all U.S. 
residential mortgages, they need to ``attract and retain the 
talent needed to accomplish these objectives.'' Mr. DeMarco has 
described the GSEs' compensation plans as ``competitive 
packages that benefit'' from the standards imposed on firms 
that received government funds under the Troubled Asset Relief 
Program.
    Meanwhile, the FHFA's Inspector General has published a 
report criticizing the FHFA's oversight of the GSEs' 
compensation practices.\1\ In the report published on March 31, 
2011, the Inspector General wrote that the FHFA has approved 
compensation packages with little scrutiny or analysis, adding 
that ``FHFA lacks key controls necessary to monitor the 
Enterprises' ongoing executive compensation decisions under the 
approved packages.'' The Inspector General's report cited a 
``lack of standardized evaluation criteria, documentation of 
management procedures and internal controls'' at FHFA, which 
may have resulted in overpayments. The inspector general noted 
that the ``FHFA has a responsibility to Congress and taxpayers 
to efficiently, consistently, and reliably ensure that the 
compensation paid to Fannie Mae's and Freddie Mac's senior 
executives is reasonable.''
---------------------------------------------------------------------------
    \1\FHFA Office of Inspector General, ``Evaluation of Federal 
Housing Finance Agency's Oversight of Fannie Mae's and Freddie Mac's 
Executive Compensation Programs,'' March 31, 2011, available at http://
www.fhfaoig.gov/Content/Files/Exec%20Comp%20DrRpt%2003302011%
20final,%20signed.pdf.
---------------------------------------------------------------------------

                                HEARINGS

    On March 31, 2011, the Subcommittee on Capital Markets and 
Government Sponsored Enterprises held a hearing entitled 
``Legislative Hearing on Immediate Steps to Protect Taxpayers 
from the Ongoing Bailout of Fannie Mae and Freddie Mac,'' at 
which a draft version of what was later introduced as H.R. 1221 
was discussed. The following witnesses testified:
          Mr. Edward J. DeMarco, Acting Director, 
        Federal Housing Finance Agency
          The Honorable John H. Dalton, President, 
        Housing Policy Council, The Financial Services 
        Roundtable
          Mr. Christopher Papagianis, Managing 
        Director, Economics21
          Mr. Edward Pinto, Resident Fellow, American 
        Enterprise Institute
          Mr. Bob Nielsen, Chairman of the Board, 
        National Association of Home Builders
           Mr. Ronald Phipps, President, National 
        Association of Realtors

                        COMMITTEE CONSIDERATION

    The Subcommittee on Capital Markets and Government 
Sponsored Enterprises met in open session on April 5, 2011 and 
April 6, 2011, and ordered H.R. 1221, as amended, favorably 
reported to the full Committee by a record vote of 27 yeas and 
6 nays. (Record vote no. CM-9).
    The Committee on Financial Services met in open session on 
November 15, 2011, and ordered H.R. 1221, as amended, favorably 
reported to the House by a record vote of 52 yeas and 4 nays. 
(Record vote no. FC-52).

                            COMMITTEE VOTES

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. A 
motion by Chairman Bachus to report the bill, as amended, to 
the House with a favorable recommendation was agreed to by a 
record vote of 52 yeas and 4 nays (Record vote no. FC-52). The 
names of Members voting for and against follow:

                                              RECORD VOTE NO. FC-52
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................        X   ........  .........  Mr. Frank (MA)...        X   ........  .........
Mr. Hensarling.................        X   ........  .........  Ms. Waters.......        X   ........  .........
Mr. King (NY)..................        X   ........  .........  Mrs. Maloney.....        X   ........  .........
Mr. Royce......................        X   ........  .........  Mr. Gutierrez....  ........        X   .........
Mr. Lucas......................        X   ........  .........  Ms. Velazquez....        X   ........  .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........  ........        X   .........
Mr. Manzullo...................        X   ........  .........  Mr. Ackerman.....        X   ........  .........
Mr. Jones......................        X   ........  .........  Mr. Sherman......        X   ........  .........
Mrs. Biggert...................        X   ........  .........  Mr. Meeks........        X   ........  .........
Mr. Gary G. Miller (CA)........        X   ........  .........  Mr. Capuano......        X   ........  .........
Mrs. Capito....................        X   ........  .........  Mr. Hinojosa.....        X   ........  .........
Mr. Garrett....................        X   ........  .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................        X   ........  .........  Mrs. McCarthy      ........  ........  .........
                                                                 (NY).
Mr. McHenry....................        X   ........  .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................  ........        X   .........  Mr. Lynch........  ........        X   .........
Mrs. Bachmann..................  ........  ........  .........  Mr. Miller (NC)..        X   ........  .........
Mr. McCotter...................        X   ........  .........  Mr. David Scott          X   ........  .........
                                                                 (GA).
Mr. McCarthy (CA)..............  ........  ........  .........  Mr. Al Green (TX)        X   ........  .........
Mr. Pearce.....................        X   ........  .........  Mr. Cleaver......  ........  ........  .........
Mr. Posey......................        X   ........  .........  Ms. Moore........        X   ........  .........
Mr. Fitzpatrick................        X   ........  .........  Mr. Ellison......        X   ........  .........
Mr. Westmoreland...............        X   ........  .........  Mr. Perlmutter...        X   ........  .........
Mr. Luetkemeyer................        X   ........  .........  Mr. Donnelly.....        X   ........  .........
Mr. Huizenga...................        X   ........  .........  Mr. Carson.......        X   ........  .........
Mr. Duffy......................        X   ........  .........  Mr. Himes........        X   ........  .........
Ms. Hayworth...................        X   ........  .........  Mr. Peters.......        X   ........  .........
Mr. Renacci....................        X   ........  .........  Mr. Carney.......        X   ........  .........
Mr. Hurt.......................        X   ........  .........
Mr. Dold.......................        X   ........  .........
Mr. Schweikert.................        X   ........  .........
Mr. Grimm......................        X   ........  .........
Mr. Canseco....................        X   ........  .........
Mr. Stivers....................        X   ........  .........
Mr. Fincher....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    During consideration of H.R. 1221, the following 
amendments, motion and request were considered:
    1. An amendment offered by Mr. Bachus, no. 1, to make 
technical changes to include 2011 compensation packages, was 
agreed to by voice vote.
    2. An amendment offered by Mr. Frank, no. 2, to insert 
references to the Bush Administration, was agreed to by voice 
vote.
    3. An amendment offered by Messrs. Green and Bachus, no. 3, 
as amended by an amendment offered by Mr. Frank, no. 3a, to 
provide that the compensation system for Fannie Mae and Freddie 
Mac executives be the same as the schedules of compensation and 
benefits established in the Financial Institutions Reform, 
Recovery, and Enforcement Act of 1989 and to cap GSE executive 
pay to that of the highest paid manager at the Federal Housing 
Finance Agency, was agreed to by voice vote.
    4. A Unanimous Consent request by Mr. Frank to orally offer 
a second degree amendment to the amendment offered by Messrs. 
Green and Bachus, no. 3, was granted.
    5. An amendment offered by Mr. Frank, no. 3a, to an 
amendment offered by Messrs. Green and Bachus, no. 3, to strike 
section 4(d) of the bill, which requires that profitability be 
taken into account when determining executive compensation, was 
agreed to by voice vote.
    6. A motion offered by Mr. Bachus to move the previous 
question on H.R. 1221 was agreed to by voice vote.

                      COMMITTEE OVERSIGHT FINDINGS

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has held hearings and 
made findings that are reflected in this report.

                    PERFORMANCE GOALS AND OBJECTIVES

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    The objectives of H.R. 1221 are to suspend the current 
compensation packages for all of Fannie Mae and Freddie Mac's 
senior executives and to establish a compensation system for 
the Government Sponsored Enterprises' (GSEs') executive 
officers consistent with the compensation and benefits provided 
under the Financial Institution Reform, Recovery, and 
Enforcement Act of 1989 (FIRREA). It is also the objective of 
H.R. 1221 to require the GSEs' regulator--the Federal Housing 
Finance Agency (FHFA)--to adjust the salaries of Fannie Mae's 
and Freddie Mac's nonsupervisory employees to conform to the 
General Schedule, a statutory pay system that pays employees 
based on surveys of non-federal pay for similar work.

   NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        COMMITTEE COST ESTIMATE

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  CONGRESSIONAL BUDGET OFFICE ESTIMATE

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                                   January 4, 2012.
Hon. Spencer Bachus,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1221, the Equity 
in Government Compensation Act of 2011.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Aurora 
Swanson.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 1221--Equity in Government Compensation Act of 2011

    H.R. 1221 would direct the Federal Housing Finance Agency 
(FHFA) to adjust the compensation of employees at the Federal 
National Mortgage Association (Fannie Mae) and the Federal Home 
Loan Mortgage Corporation (Freddie Mac) to levels comparable to 
executive branch employees. CBO estimates that enacting the 
legislation would have no significant impact on the federal 
budget because the bill would not directly change the income of 
the organizations nor would it restrict how those firms could 
spend amounts realized by reducing certain salaries. The 
legislation would affect direct spending; therefore, pay-as-
you-go-procedures apply. CBO estimates, however, that any 
changes in direct spending would be insignificant. Enacting the 
bill would not affect revenues.
    The bill would direct FHFA to reduce compensation levels 
for executive officers at Fannie Mae and Freddie Mac to align 
with compensation levels at financial regulatory agencies in 
the executive branch. Compensation levels at those firms would 
be capped at the maximum attainable salary at FHFA--currently 
around $255,000. The bill would require that other employees at 
Fannie Mae and Freddie Mac be compensated in accordance with 
the federal government's General Schedule pay rates--the 
predominant pay schedule for executive branch agencies.
    In the past several years, total compensation--including 
salaries and benefits--for employees of Fannie Mae and Freddie 
Mac combined has averaged around $2 billion. Assuming enactment 
in early 2012, CBO estimates that H.R. 1221 would reduce 
salaries for current employees by around $300 million annually, 
based on information from FHFA, FHFA's Office of Inspector 
General, Fannie Mae's and Freddie Mac's quarterly financial 
reports, and salary schedules for federal employees.
    Implementing H.R. 1221 would result in less spending for 
compensation of current employees of Fannie Mae and Freddie 
Mac. However, the legislation would not require any amounts 
saved by lowering compensation to be returned to the U.S. 
Treasury or to be used to offset the cost of mortgage 
guarantees made by those firms. Under the bill, any such funds 
could be used to cover new administrative costs, such as hiring 
additional employees, contracting for necessary services, or 
changing the retirement plans for existing employees.
    H.R. 1221 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    The CBO staff contact for this estimate is Aurora Swanson. 
The estimate was approved by Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                       FEDERAL MANDATES STATEMENT

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates reform 
Act.

                      ADVISORY COMMITTEE STATEMENT

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  APPLICABILITY TO LEGISLATIVE BRANCH

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         EARMARK IDENTIFICATION

    H.R. 1221 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

             SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title

    This section provides the short title of ``Equity in 
Government Compensation Act of 2011.''

Section 2. Congressional findings

    The Congress finds that Fannie Mae and Freddie Mac--two 
privately-owned but publicly-chartered Government Sponsored 
Enterprises (GSEs)--were at the center of the mortgage market 
meltdown that caused the financial crisis and that their 
failures helped precipitate the deepest economic decline since 
World War II. The Bush Administration put the GSEs in 
conservatorship in September 2008, placing the Federal Housing 
Finance Agency (FHFA) in control of the GSEs' daily operations. 
Since then, the Obama Administration removed any limits on the 
use of Federal funds to cover losses at the GSEs. The taxpayers 
have so far spent nearly $175 billion to purchase GSE preferred 
stock and own nearly 80 percent of Fannie Mae and Freddie Mac. 
The Congressional Budget Office has concluded that Fannie Mae 
and Freddie Mac have effectively become government agencies 
whose liabilities should be included in the Federal budget; the 
GSEs are expected to be a long-term drain on taxpayers. Yet, in 
spite of their liabilities, the Treasury Department and the 
FHFA approved compensation packages for Fannie Mae's and 
Freddie Mac's chief executive officers in 2009, 2010 and 2011 
that were nearly 15 times greater than the compensation of the 
President of the United States and 30 times greater than the 
annual compensation of a Cabinet Secretary; it also approved 
multi-million dollar compensation packages for a number of the 
GSEs' top executives, payable in cash, even though in 2008, the 
FHFA determined that no executive officer of Fannie Mae or 
Freddie Mac would be entitled to receive a cash bonus or long-
term incentive award in 2008. Congress also finds that the 
Federal Housing Enterprises Financial Safety and Soundness Act 
permits the FHFA Director to ``withhold any payment, transfer, 
or disbursement of compensation to an executive officer, or to 
place such compensation in an escrow account, during the review 
of the reasonableness and comparability of compensation.''

Section 3. Definitions

    This section defines the following terms:
    (1) ``Director'' means the Director of the FHFA.
    (2) ``Employee'' means an employee of an Enterprise, except 
the term does not include an employee defined as a prevailing 
rate employee.
    (3) ``Enterprise'' means the Federal National Mortgage 
Association, the Federal Home Loan Mortgage Corporation, and 
their affiliates.
    (4) ``Executive Officer'' means, with respect to an 
enterprise, the chairman of the board of directors, chief 
executive officer, chief financial officer, president, vice 
chairman, any executive vice president, and any senior vice 
president in charge of a principal business unit, division, or 
function.

Section 4. Reasonable pay for executive officers

    This section directs the FHFA Director to suspend the 
compensation packages approved for 2011 for the executive 
officers of Fannie Mae and Freddie Mac and to establish a 
compensation system for the executive officers in accordance 
with the compensation and benefits schedules established 
pursuant to the Financial Institution Reform, Recovery, and 
Enforcement Act of 1989. No GSE executive compensation package 
shall exceed that of the highest paid employee of the FHFA.
    The section also expresses the Sense of the Congress that 
the 2010 and 2011 pay packages for Fannie Mae's and Freddie 
Mac's senior executives were excessive and that the money 
should be returned to the Treasury to reduce the national debt.

Section 5. Compensation rate of employees of Fannie Mae and Freddie Mac

    This section establishes a compensation system for the 
executive officers of Fannie Mae and Freddie Mac that is 
consistent with that of the Executive Schedule and the Senior 
Executive Service of the Federal Government and for all other 
employees that is in accordance with the General Schedule.

Section 6. Fannie and Freddie employees not Federal employees

    This section clarifies that no executive officer or 
employee of Fannie Mae or Freddie Mac shall be considered a 
Federal employee.
```