This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

5101 

Vol. 74, No. 18 

Thursday, January 29, 2009 

1See Division A, titled the ‘‘Federal Housing 

Finance Regulatory Reform Act of 2008,’’ Title I, 

Section 1101 of HERA. 

2 73 FR 53356 (September 16, 2008), with 

Correcting Amendments at 73 FR 54309 (September 

19, 2008) and at 73 FR 54673 (September 23, 2008), 

to be codified at 12 CFR 1231. The portion of the 

Interim Final Rule published on September 16, 

2008, which relates to indemnification payments, is 

being promulgated by separate rulemaking that is 

subject to public comment. See Proposed 

Amendment for Golden Parachute and 

Indemnification Payments, 73 FR 67424 (November 

14, 2008). 

3See 61 FR 5926 (February 15, 1996) and 12 CFR 

part 359. 

FEDERAL HOUSING FINANCE 

AGENCY 

12 CFR Part 1231 

RIN 2590–AA08 

Golden Parachute Payments 

AGENCY: Federal Housing Finance 

Agency. 

ACTION: Final rule. 

SUMMARY: The Federal Housing Finance 

Agency (FHFA) is issuing a final 

regulation that sets forth factors to be 

considered by the Director of FHFA in 

acting upon the Director’s authority to 

limit golden parachute payments to 

entity-affiliated parties in connection 

with the Federal National Mortgage 

Association, the Federal Home Loan 

Mortgage Corporation, and the Federal 

Home Loan Banks. 

DATES: Effective Date: January 29, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Alfred M. Pollard, General Counsel, 

(202) 414–3788 (not a toll-free number), 

Federal Housing Finance Agency, 

Fourth Floor, 1700 G Street, NW., 

Washington, DC 20552. The telephone 

number for the Telecommunications 

Device for the Deaf is (800) 877–8339. 

SUPPLEMENTARY INFORMATION: 

I. Background 

General Background 

The Housing and Economic Recovery 

Act of 2008 (HERA), Public Law 110– 

289, 122 Stat. 2654, amended the 

Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992 (12 

U.S.C. 4501 et seq.) (Act) to establish 

FHFA as an independent agency of the 

Federal Government.1 FHFA was 

established to oversee the prudential 

operations of the Federal National 

Mortgage Association, the Federal Home 

Loan Mortgage Corporation 

(collectively, Enterprises), and the 

Federal Home Loan Banks (Banks) 

(collectively, regulated entities) and to 

ensure that they operate in a safe and 

sound manner including being 

capitalized adequately; foster liquid, 

efficient, competitive and resilient 

national housing finance markets; 

comply with the Act and rules, 

regulation, guidelines and orders issued 

under the Act, and the respective 

authorizing statutes of the regulated 

entities; and carry out their missions 

through activities authorized and 

consistent with the Act and their 

authorizing statutes; and, that the 

activities and operations of the 

regulated entities are consistent with the 

public interest. 

The Office of Federal Housing 

Enterprise Oversight (OFHEO) and the 

Federal Housing Finance Board (FHFB) 

will be abolished one year after 

enactment of the HERA. However, the 

regulated entities continue to operate 

under regulations promulgated by 

OFHEO and FHFB until such 

regulations are superseded by 

regulations promulgated by the FHFA. 

Background on Golden Parachute 

Payments 

Section 1114 of HERA amended 

12 U.S.C. 4518 to provide additional 

authorities for FHFA in addressing 

certain compensation and benefits, 

specifically golden parachute payments 

and indemnification payments. HERA 

added a new paragraph (e) to section 

4518 addressing regulation and 

prohibition of these benefits. While 

paragraphs (e)(1) and (e)(3)–(6) are self 

executing, Congress provided that for 

paragraph (e)(2) addressing factors to be 

taken into account when acting 

regarding golden parachutes and 

indemnification, FHFA prescribe, by 

regulation, factors to be considered. The 

factors set forth in paragraph (e)(2) are 

explicit and provide guidance to the 

Director in taking an action under the 

statute. 

FHFA published an Interim Final 

Rule that was effective on September 16, 

2008, the date of publication in the 

Federal Register. The rule, which was 

corrected on September 19 and 

September 23, 2008, addresses only 

golden parachute payments.2 During the 

public notice and comment period, 

which closed on October 31, 2008, 

FHFA requested comment on paragraph 

(2) of section 4518(e), i.e., factors to be 

taken into account by FHFA when 

acting regarding golden parachutes. The 

Interim Final Rule also provided that 

FHFA would consider other comments 

on other aspects of the regulation for 

future revision, if necessary or 

appropriate. 

II. Comment on the Interim Final Rule 

General Comment 

FHFA received comments from 

individuals in the general public, nine 

Federal Home Loan Banks, and Fannie 

Mae. In general, the public commented 

that severance should not be paid to 

departing executives of the Enterprises, 

particularly the Chief Executive 

Officers. The consensus among these 

individuals was that any such payment 

would be excessive, irresponsible, and 

grossly unfair to taxpayers. 

The Banks commented that they 

shared widespread public concern over 

excessive golden parachute payments 

paid by failed or failing companies. The 

Banks noted that fulfillment of their 

housing and liquidity mission, 

consistent with safe and sound 

operation, demands a high caliber 

workforce, and that reasonable and 

customary separation benefits are an 

important and appropriate component 

of the Banks’ retention, hiring, and 

workforce management efforts. To that 

end, the Banks requested that FHFA 

consider standards set forth in the 

Federal Deposit Insurance Corporation 

(FDIC) regulations on golden parachute 

payments, which were promulgated 

pursuant to the Federal Deposit 

Insurance Act (FDI Act), for guidance as 

FHFA considers changes to the Interim 

Final Rule.3 The Banks requested 

consideration of the FDIC regulations, as 

the legislative provisions on which they 


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4 12 CFR part 1412. 

are based are similar to the HERA and 

represent industry practice. For these 

reasons, many of the Banks’ comments 

suggest specific aspects of the FDIC 

regulations that the Banks believe 

should be incorporated into the Final 

Rule. 

Similarly, Fannie Mae suggested that 

FHFA revise the Interim Final Rule to 

more closely follow the FDIC 

regulations, and also the Farm Credit 

System Insurance Corporation (FCSIC) 

regulations, which adopted the FDIC’s 

approach.4 Fannie Mae commented that 

the FDIC and FCSIC regulations 

implement legislation similar to the 

HERA so conformance with regulations 

would foster uniformity in regulation, 

public perception of fairness, and 

competition on a level regulatory 

playing field for executive talent. Fannie 

Mae also stated such conformance 

would reduce administrative burden 

because of existing guidance and 

precedent. 

FHFA gave careful consideration to 

the comments of the Banks and Fannie 

Mae requesting conformance of the 

provisions of the Interim Final Rule 

with the provisions of FDIC and FCSIC 

regulations relating to golden 

parachutes. In publishing the Interim 

Final Rule, FHFA primarily sought 

comment on factors the Director would 

consider in acting on golden parachute 

payments. The comments received to 

the Interim Final Rule address other 

elements of a golden parachute 

regulation. For this reason, FHFA has 

determined that it will consider adding 

provisions similar to those of the FDIC 

golden parachute regulation in a 

subsequent rulemaking. The FDIC 

regulation describes more specifically 

benefits included or excluded from the 

term ‘‘golden parachute payment.’’ It 

should be noted that, consistent with 

the FDIC regulation, benefits provided 

under qualified and nonqualified 

deferred compensation plans are 

excluded from the term ‘‘golden 

parachute payment’’ under the Interim 

Final Rule and under this final 

regulation. 

Specific Comment 

For purposes of this regulation, FHFA 

considered a comment by Fannie Mae 

that addressed one of the factors to be 

taken into account by the Director when 

acting regarding golden parachutes, i.e., 

paragraph (f) of § 1231.5. The paragraph 

provides that in determining whether to 

prohibit or limit any golden parachute 

payment, among the factors, the Director 

shall consider— 

(f) Any other factor the Director determines 

relevant to the facts and circumstances 

surrounding the golden parachute payment, 

including but not limited to negligence, gross 

negligence, neglect, willful misconduct, 

breach of fiduciary duty, and malfeasance on 

the part of an entity-affiliated party. 

Fannie Mae requested that paragraph 

(f) of § 1231.5 be amended to mirror the 

‘‘catchall’’ factor adopted by the FDIC 

and the FCSIC in their regulations, 

whereby the Director would consider: 

‘‘Any other factors or circumstances 

which would indicate that the proposed 

payment would be contrary to the intent 

of section 1318(e) of the Act or this 

part.’’ In commenting on the requested 

amendment, Fannie Mae stated that 

there are substantial benefits to 

regulatory uniformity in terms of 

predictability and fairness, and there is 

no apparent difference in congressional 

intent or in the policy implications of 

golden parachute restrictions that would 

call for a different standard in the 

present context. By mirroring the 

‘‘catchall’’ factor adopted by the FDIC 

and the FCSIC, Fannie Mae claimed 

focus would be on the intent of the 

statute, and would permit the Director 

to consider all appropriate factors in 

determining whether to deny or limit 

proposed golden parachute payments. 

After consideration of Fannie Mae’s 

comment, FHFA determined to amend 

paragraph (f) of § 1231.5 to follow more 

closely the statutory language in section 

1318 of the Act that the Director may 

consider in the oversight of 

compensation of an executive officer. To 

that end, as relevant facts and 

circumstances for the Director to 

consider with respect to golden 

parachute payments, FHFA has deleted 

the following language: ‘‘but not limited 

to negligence, gross negligence, neglect’’ 

and has substituted in lieu thereof the 

following language: ‘‘any fraudulent act 

or omission, breach of fiduciary duty, 

violation of law, rule, regulation, order, 

or written agreement, and the level of’’. 

Regulatory Impacts 

Paperwork Reduction Act 

The Final Rule does not contain any 

information collection requirement that 

requires the approval of OMB under the 

Paperwork Reduction Act (44 U.S.C. 

3501 et seq.). 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) requires that a 

regulation that has a significant 

economic impact on a substantial 

number of small entities, small 

businesses, or small organizations must 

include an initial regulatory flexibility 

analysis describing the regulation’s 

impact on small entities. Such an 

analysis need not be undertaken if the 

agency has certified that the regulation 

will not have a significant economic 

impact on a substantial number of small 

entities. 5 U.S.C. 605(b). FHFA has 

considered the impact of the Final Rule 

under the Regulatory Flexibility Act. 

FHFA certifies that the Final Rule is not 

likely to have a significant economic 

impact on a substantial number of small 

business entities because the regulation 

is applicable only to the regulated 

entities which are not small entities for 

the purposes of the Regulatory 

Flexibility Act. 

List of Subjects in 12 CFR Part 1231 

Golden Parachutes, GovernmentSponsored Enterprises. 

Accordingly, the Interim Final Rule at 

part 1231 of Title 12 CFR Chapter XII, 

published at 73 FR 53356 on September 

16, 2008, and corrected at 73 FR 54309 

on September 19, 2008, and at 73 FR 

54673 on September 23, 2008, is 

adopted as a final rule with the 

following changes: 

Subchapter B—Entity Regulations 

■ 1. The heading for subchapter B of 

Chapter XII is revised to read as set forth 

above. 

■ 2. The title of part 1231 is revised to 

read as set forth below. 

PART 1231—GOLDEN PARACHUTE 

PAYMENTS 

■ 3. The authority citation for part 1231 

continues to read as follows: 

Authority: 12 U.S.C. 4518(e). 

■ 4. Amend § 1231.5 by revising 

paragraph (f) to read as follows: 

§ 1231.5 Factors to be taken into account. 

* * * * * 

(f) Any other factor the Director 

determines relevant to the facts and 

circumstances surrounding the golden 

parachute payment, including any 

fraudulent act or omission, breach of 

fiduciary duty, violation of law, rule, 

regulation, order, or written agreement, 

and the level of willful misconduct, 

breach of fiduciary duty, and 

malfeasance on the part of an entityaffiliated party. 

Dated: January 15, 2009. 

James B. Lockhart III, 

Director, Federal Housing Finance Agency. 

[FR Doc. E9–1517 Filed 1–28–09; 8:45 am] 

BILLING CODE 8070–01–P 


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