Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) Receive Treasury Support, Disclose Executive Pay Packages

It looks like it is a Merry Christmas and Happy New Year for Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). Shares of both firms soared at times today, as the Treasury Department announced what basically sounds like a blank check is being given to the firms, in an effort to bail them out.

The Treasury Department lifted a $200 billion limit on the amount it was ready to pump into each of the two mortgage giants, after US markets closed Thursday for the Christmas holiday. Bose George, an analyst with Keefe, Bruyette & Woods, said the lifting of the $200 billion limit is likely a sign that the Obama administration wants to use Fannie and Freddie to provide additional help to the housing market. As housing starts are a key to any economic recovery, this could serve as another much needed stimulus.

As of this morning, Fannie Mae shares rose 17% to $1.23, while Freddie Mac shares jumped 21% to $1.53.

As the Treasury is giving the firms a vote of confidence in this measure, the firm’s own management seem to have no interest in owning the stock. The pay packages received by top managers, a matter of public record, show that no stock or options are being issued to any of the top managers, which is unusual for shareholder-owned firms.

Which makes this even more unusual is when comparing these packages to the compensation of executives at other firms in similar circumstances – General Motors and AIG (NYSE: AIG) were pushed by compensation czar Ken Feinberg to pay executives with stock (an effort to align management interests with shareholder interests).

Michael Williams, CEO of Fannie Mae, and Charles Haldeman, CEO of Freddie Mac, were both given $6 million annual pay rates for 2009, all of which was paid in cash. According to company filings, other top executives also received all compensation in cash payments, with some topping $2 million.

This may be a troubling sign for stockholders of the firm. As the Obama Administration and Congress debate on what to do with the mortgage firms, perhaps the equity will be abolished, leaving shares worthless.

Although both firms are still publicly traded, the federal government placed the companies into conservatorship in September 2008 due to losses from rising home foreclosures and falling home values. Together, the firms own or insure about $5 trillion of mortgage-backed securities between them, so preventing their collapse is critical to some stability in the housing market.