Farmer Mac Criticized For Hefty Pay Packages
WASHINGTON -- The Federal Agricultural Mortgage Corp. paid $1.3 million in salaries, bonuses, and benefits to six top executives in 1990 - a year in which the secondary-market agency for farm loans lost $2.2 million, paid no dividends, and pooled no loans.
The pay packages - disclosed in proxy statements distributed at the government-chartered corporation's fourth annual meeting earlier this month - are drawing fire from an influential member of the House Agriculture Committee.
Leading the pay list was Henry D. Edelman, president and chief executive officer, who received cash compensation of $298,800. The total consists of a base salary of $200,000 and a bonus of $98,800 - $1,200 shy of the maximum bonus for which he was eligible.
Deferred compensation and insurance benefits brought Mr. Edelman's total pay package to $339,563.
The compensation is excessive and unjustified, given Farmer Mac's slow progress in establishing a secondary market for farm loans, Rep. Glenn English, D-Okla., said at a hearing of the House Agriculture subcommittee on conservation, credit, and rural development. He chairs the panel, which oversees Farmer Mac.
Attracting the Right People
The agency's vice president for communications, Thomas R. Clark, defended the company's pay practices, saying that the salaries and bonuses were set by the board to attract the right people to a startup organization.
He added that the executives' compensation is lower than that of their peers at other government-sponsored enterprises, such as the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp.
"It is a fraction of the kinds of salaries being paid in other similar organizations," said Mr. Clark. "In 1990, the CEO of Fannie Mae made $1.238 million."
But a spokesman for Rep. English said it doesn't matter what the chief executives of other government-sponsored enterprises are paid: "They're up and running, and Farmer Mac is not. I don't think [Rep. English] was satisfied with their explanation, because they haven't done anything."
"They have some high-priced people, but when you set your headquarters in Washington, D.C., you have to pay people more just to cover their living expenses," said Leslie W. Peterson, president of Farmers State Bank, Trident, Minn., and a Farmer Mac stockholder.
"I'm sure there are going to be stockholders that are bothered by that," Mr. Peterson said. Noting that he was involved in recruiting Mr. Edelman, he added, "From my perspective, his technical expertise, and connections, and knowledge of secondary markets were absolutely essential."
Congress chartered Farmer Mac in 1987 to boost liquidity and stabilize interest rates in farm lending by creating a secondary market for farm real estate and land loans. Getting off the ground has been frustrating. Regulatory hurdles had to be overcome, and investors had to be educated about farm securities.
Meanwhile, a significant contraction in farm debt outstanding has made it difficult for Farmer Mac to generate business: farmers aren't borrowing, and lenders aren't selling loans.
Rep. English has asked whether the agency should continue to exist at all. "Farmer Mac has not demonstrated to me that it has achieved any of those purposes for which it created," Rep. English said at last week's hearing.
But Mr. Clark, the Farmer Mac spokesman, said the agency has accomplished a great deal toward setting up the secondary market. Farmer Mac earlier this year issued $2.5 million in securities backed by Farmers Home Administration loans, through a spinoff program known as Farmer Mac II that Congress authorized last year. And it is putting together the securities pricing information needed to begin issuing securities under its flagship program.