Details on FNM and FRE

From today's WSJ...

The Treasury will acquire $1 billion of preferred shares in each company without providing immediate cash, and has pledged to provide as much as $100 billion to each of the companies as they cope with heavy losses on mortgage defaults. The Treasury's plan puts the two companies under a conservatorship, giving management control to their regulator, the Federal Housing Finance Agency.

The WSJ doesn't mention this, but the government also acquires warrants to buy 80% of both companies at a nominal price. This essentially wipes out common shareholders, as is quite proper.

The Treasury plan limits the size of each company's mortgage portfolios to a maximum of $850 billion as of the end of 2009. (Fannie currently owns about $758 billion of mortgages and related securities, while Freddie's total is about $798 billion.) After that, the Treasury intends for the mortgage holdings to shrink about 10% a year until they reach about $250 billion at each company.

Fannie's CEO Daniel Mudd is succeeded by Herb Allison, who formerly served as chairman of the investment company TIAA-CREF. Freddie's CEO Richard Syron is succeeded by David Moffett, who has been vice chairman and CFO of US Bancorp.

Potentially, Mr. Syron could walk away with an exit package totaling as much as $15 million, said David Schmidt, a senior consultant at James Reda compensation consulting. That includes a pension and deferred compensation, about $3.7 million in severance pay and a possible payment of $8.8 million to compensate for forfeiting recent equity grants. A Freddie spokesman said Mr. Syron had said he doesn't "anticipate receiving nearly that much."

Not nearly? How nice! He shouldn't get anything. If you f up so bad that the federal government has to put your company in receivership and promise to inject $100 BILLION into it, you should get jack. If I were in charge, I might be convinced to let him have his pension and not send him to jail and I'd expect him to thank me for my generosity.

Mr. Mudd's exit package, including stock he already owns, could total $14 million, Mr. Schmidt estimates. That includes $5 million in pension and deferred compensation, $4.2 million in severance pay and $3.4 million of restricted stock, based on Friday's closing price. The value of that stock could fall sharply, however.

The stock is essentially worthless already so that problem takes care of itself, but $4.2M in severance pay? Hell, no!