UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K/A

 

 

(Amendment No. 2)

 

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the fiscal year ended December 31, 2009

 

Commission File Number: 000-53330

 

Federal Home Loan Mortgage Corporation

(Exact name of registrant as specified in its charter)

 

 

Freddie Mac

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o  No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o  No x

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x   No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o   No o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  Large accelerated filer o   Accelerated filer x   Non-accelerated filer (Do not check if a smaller reporting company) o   Smaller reporting company o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o   No x 

 

The aggregate market value of the common stock held by non-affiliates computed by reference to the price at which the common equity was last sold on June 30, 2009 (the last business day of the registrant’s most recently completed second fiscal quarter) was $401.9 million.

 

As of February 11, 2010, there were 648,377,977 shares of the registrant’s common stock outstanding.

 

            

 

TABLE OF CONTENTS

 

 

 

 

The Federal Home Loan Mortgage Corporation (“Freddie Mac” or the “company”) is filing this Amendment No. 2 on Form 10-K/A to its Annual Report on Form 10-K for the fiscal year ended December 31, 2009, or the Form 10-K, to provide the additional information required by Part III of Form 10-K. This Amendment No. 2 on Form 10-K/A does not change the previously reported financial statements or any of the other disclosures contained in Part I or Part II of the Form 10-K, filed on February 24, 2010, as amended by Amendment No. 1 on Form 10-K/A filed on March 4, 2010. Part IV is being amended solely to add as exhibits certain new certifications in accordance with Rule 13a-14(a) promulgated by the Securities and Exchange Commission, or the SEC, under the Securities Exchange Act of 1934, or the Exchange Act.

 

 

Background

 

On September 6, 2008, the Director of the Federal Housing Finance Agency, or FHFA, appointed FHFA as the Conservator of Freddie Mac. Upon its appointment as Conservator, FHFA immediately succeeded to all rights, titles, powers and privileges of Freddie Mac, and of any stockholder, officer or director of Freddie Mac with respect to Freddie Mac and its assets, including, without limitation, the right of holders of Freddie Mac common stock to vote with respect to the election of directors and any other matter for which stockholder approval is required or deemed advisable. In view of the Conservator’s succession to all of the voting power of Freddie Mac’s stockholders, stockholders no longer have the ability to recommend director nominees or vote for the election of the directors of Freddie Mac. Accordingly, Freddie Mac will not solicit proxies, distribute a proxy statement to stockholders, or hold an annual meeting of stockholders in 2010. Instead, the Conservator has elected directors by a written consent in lieu of an annual meeting, as it did in 2009.

 

Directors

 

On November 24, 2008, the Conservator reconstituted the Board of Directors, or the Board, of Freddie Mac and delegated certain powers to the Board while reserving certain powers of approval to itself. See “Authority of the Board and Board Committees.” The Conservator determined that the Board is to have a non-executive Chairman, and is to consist of a minimum of nine and not more than 13 directors, with the Chief Executive Officer being the only corporate officer serving as a member of the Board.

 

On December 21, 2009, Freddie Mac announced that Barbara T. Alexander had notified FHFA that she would not stand for re-election to our Board at the expiration of her then-current term.

 

The Conservator executed a written consent, effective March 19, 2010, electing all of the then-current directors other than Ms. Alexander to another term as directors of Freddie Mac. The terms of those directors will end (i) on the date of the next annual meeting of stockholders of Freddie Mac, or (ii) when the Conservator next elects directors by written consent, whichever occurs first.

 

The Board is engaged in the process of identifying an appropriate and qualified candidate to fill the vacancy created by Ms. Alexander’s departure from the Board. If such a candidate is identified, we anticipate that the Board will appoint that individual to fill the vacancy, subject to review by the Conservator, pursuant to authority delegated to the Board by the Conservator. The term of a director appointed by the Board to fill the vacancy would end at the same time as the terms of the directors elected by the Conservator by written consent.

 

Freddie Mac’s Board seeks candidates for the Board who have achieved a high level of stature, success and respect in their principal occupations. Each of our current directors was selected as a candidate because of his or her character, judgment, experience and expertise. The qualifications of candidates also were evaluated in light of the requirement in our charter, as amended by the Reform Act, that our Board must at all times have at least one individual from the homebuilding, mortgage lending and real estate industries, and at least one person from an organization representing consumer or community interests or one person who has demonstrated a career commitment to the provision of housing for low-income households. Consistent with the examination guidance for Corporate Governance issued by FHFA, the factors considered also include the knowledge directors would have, as a group, in the areas of business, finance, accounting, risk management, public policy, mortgage lending, real estate, low-income housing, homebuilding, regulation of financial institutions and any other areas that may be relevant to the safe and sound operation of Freddie Mac. Additionally, in accordance with the guidance issued by FHFA, we considered whether a candidate’s other commitments, including the number of other board memberships, would permit the candidate to devote sufficient time to the candidate’s duties and responsibilities as a Freddie Mac director.

 

The following is a brief discussion of: the age and length of Board service of each director; the directors’ experience, qualifications, attributes and/or skills; and other biographical information about our directors, as of April 8, 2010:

 

 

Ms. Bammann was Executive Vice President, Deputy Chief Risk Officer for JPMorgan Chase & Co. from July 2004 until her retirement in January 2005. Prior to that, Ms. Bammann held several positions with Bank One Corporation beginning in 2000, including Executive Vice President and Chief Risk Management Officer from 2001 until Bank One’s acquisition by JPMorgan Chase & Co. in July 2004. Ms. Bammann also was a member of Bank One’s executive planning group. From 1992 to 2000, Ms. Bammann was a Managing Director with UBS Warburg LLC and predecessor firms. Ms. Bammann was a board member of the Risk Management Association, and chairperson of the Loan Syndications and Trading Association. Ms. Bammann currently is a director of Manulife Financial Corporation, where she is a member of the Risk Committee and the Conduct, Review and Ethics Committee, and of The Manufactures Life Insurance Company, a subsidiary of Manulife Financial Corporation.

 

 

Ms. Byrd has been Chairman and Chief Executive Officer of GlobalTech Financial, LLC, a financial services company she founded, since 2000. From 1997 to 2000, Ms. Byrd was President of Coca-Cola Financial Corporation. From 1977 to 1997, Ms. Byrd held a variety of domestic and international positions with The Coca-Cola Company, including Chief of Internal Audits and Director of the Corporate Auditing Department. She is currently a director of AFC Enterprises, Inc., where she is the Chair of the Audit Committee and a member of the People Services (Compensation) Committee. Ms. Byrd is a former member of the board of directors and audit committee member of Circuit City Stores, Inc. and RARE Hospitality International, Inc., and she also served on the board of directors of St. Paul Travelers Companies, Inc.

 

 

From March 13, 2009 until August 10, 2009, Mr. Glauber served as our Interim Non-Executive Chairman while Mr. Koskinen served as our Interim Chief Executive Officer. Mr. Glauber is a Lecturer at Harvard’s Kennedy School of Government and was a visiting professor at the Harvard Law School in 2007 and 2009. Previously, he served as Chairman and Chief Executive Officer of the National Association of Securities Dealers, or the NASD (now the Financial Industry Regulatory Authority, Inc., or FINRA), the private-sector regulator of U.S. securities firms, from September 2001 to September 2006, after becoming NASD’s CEO in November 2000. Prior to becoming an officer at NASD, he was a Lecturer at the Kennedy School from 1992 until 2000, Under Secretary of the Treasury for Finance from 1989 to 1992 and, prior to that, a Professor of Finance at the Harvard Business School for 25 years. In 1987-88, Mr. Glauber served as Executive Director of the Task Force (“Brady Commission”) appointed by President Reagan to report on the October 1987 stock market break. He has served on the boards of the Federal Reserve Bank of Boston, a number of Dreyfus mutual funds, the Investment Company Institute, Quadra Realty Trust and as president of the Boston Economic Club. Mr. Glauber currently is a director of Moody’s Corporation, where he is a member of the Audit Committee and the Governance and Compensation Committee; Chairman of XL Capital Ltd. (an insurance company), where he is the Chair of the Management Development and Compensation Committee and a member of the Governance and External Affairs Committee and the Finance

 

Committee; and a Trustee of the International Accounting Standards Committee Foundation. He has been a Senior Advisor at Peter J. Solomon Co., an investment bank, since November 2006.

 

 

Prior to joining Freddie Mac, Mr. Haldeman served as Chairman of Putnam Investment Management, LLC, the investment advisor for the Putnam Funds, from July 2008 though June 2009. He joined Putnam Investments in 2002 as Senior Managing Director and Co-Head of the investment division, was appointed President and Chief Executive Officer in November 2003, and served in that capacity until June 2008. He was a member of Putnam Funds’ Board of Trustees from 2004 until July 2009, and was named President of the Putnam Funds in 2007. He served as a member of Putnam Investments’ Board of Trustees from November 2003 until June 2009, where he served as a member of the audit committee. Prior to joining Putnam, Mr. Haldeman served as Chief Executive Officer of Delaware Investments from 2000 to 2002, and as chairman from 2001 to 2002. He was the President and Chief Operating Officer of United Asset Management Corporation (“UAM”) from 1998 to 1999. Before his service at UAM, he worked in various roles at Cooke & Bieler, Inc., an investment management firm and affiliate of UAM, from 1974 to 1998, most recently as Managing Partner. Mr. Haldeman is currently chairman of Dartmouth College’s Board of Trustees. He also serves on the Harvard Business School Board of Dean’s Advisors.

 

 

Mr. Hirsch has been Chairman of Highlander Partners, L.P., a private equity firm, since April 2004. Mr. Hirsch was Chief Executive Officer of Centex Corporation, a large homebuilder, from 1988 until his retirement in March 2004 and its Chairman from 1991 until March 2004. Mr. Hirsch is the Chairman of Eagle Materials Inc., where he is also Chairman of the Executive Committee. Mr. Hirsch is a director of A. H. Belo Corporation, where he is a member of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee, and formerly served on the board of directors of Belo Corp., its parent company. In addition, Mr. Hirsch is Chairman of the Center for European Policy Analysis in Washington, D.C.

 

 

Mr. Koskinen served as Non-Executive Chairman of Freddie Mac from September 2008 until March 13, 2009, when he became our Interim Chief Executive Officer. He resumed the role of Non-Executive Chairman on August 10, 2009. In addition, Mr. Koskinen performed the function of principal financial officer on an interim basis from April 22, 2009 until August 10, 2009. Previously, Mr. Koskinen was President of the United States Soccer Foundation for four years, deputy mayor and city administrator of Washington, D.C. from 2000 to 2003, assistant to the president and chair of the President’s Council on Year 2000 Conversion from 1998 to 2000 and deputy director for management of the Office of Management and Budget from 1994 to 1997. Prior to his government service, Mr. Koskinen worked as a senior executive of The Palmieri Company, including serving as President and Chief Executive Officer, participating in the restructuring of a range of large, troubled enterprises including Penn Central, the Teamsters Pension Fund, Levitt and Sons, Inc. and Mutual Benefit. Mr. Koskinen also is a director of The AES Corporation, where he is a member of the Financial Audit Committee and the Compensation Committee, and American Capital, Ltd., where he is a member of the Audit and Compliance Committee.

 

 

Mr. Lynch is an independent consultant providing a variety of services to financial intermediaries, including risk management, strategy, governance, financial and regulatory reporting and troubled-asset management. Prior to retiring from KPMG LLP in May 2007, Mr. Lynch held a variety of leadership positions at KPMG, including National Partner in Charge — Financial Services, the U.S. firm’s largest industry division. Mr. Lynch chaired KPMG’s Americas Financial Services Leadership team, was a member of the Global Financial Services Leadership and the U.S. Industries Leadership teams and led the Banking & Finance practice. Mr. Lynch also served as a partner in KPMG’s Department of Professional Practice and as a Practice Fellow at the Financial Accounting Standards Board. Mr. Lynch was the lead and audit signing partner for some of KPMG’s largest financial services clients. Mr. Lynch also is a director of American International Group, Inc., where he is the Chair of the Audit Committee and a member of the Finance and Risk Management Committee.

 

 

Since 1998, Mr. Retsinas has been Director of Harvard University’s Joint Center for Housing Studies. He also is a lecturer in Housing Studies at the Graduate School of Design and the Harvard Kennedy School of Government, and is a lecturer in Real Estate at the Harvard Business School. Prior to his Harvard appointment, Mr. Retsinas served as Assistant Secretary for Housing— Federal Housing Commissioner at the United States Department of Housing and Urban Development from 1993 to 1998 and as Director of the Office of Thrift Supervision from 1996 to 1997. He served on the Board of the Federal Deposit Insurance Corporation from 1996 to 1997, the Federal Housing Finance Board from 1993 to 1998 and the Neighborhood Reinvestment Corporation from 1993 to 1998. Mr. Retsinas serves on the Board of Trustees for the National Housing Endowment and for Enterprise Community Partners and on the Board of Directors of the Center for Responsible Lending.

 

 

Mr. Shanks is a Trustee of Vanderbilt University, a member of the Advisory Board of the Stanford Institute for Economic Policy Research, a director of NewPower Holdings, Inc., and a founding director at The Posse Foundation. From November 2007 until August 2008, Mr. Shanks was the acting Chief Executive Officer of Trinsum Group, Incorporated, a strategic consulting and asset management company. From 1997 until its sale in 2002, Mr. Shanks was President and Chief Executive Officer of NetRisk, Inc., a risk management software and advisory services company he founded. From 1973 to 1978 and from 1980 to 1995, Mr. Shanks held a variety of positions with Bankers Trust New York Corporation, including head of Global Markets from 1986 to 1992 and President and Director from 1992 to 1995.

 

 

Mr. Williams is the William H. Bloomberg Lecturer in Public Management at Harvard’s Kennedy School of Government. Since January 4, 2010, he has served as Executive Director of the Government Practice at The Corporate Executive Board Company. Since May 2009, Mr. Williams has been affiliated with Arent Fox LLP. Prior to this, Mr. Williams served as the Chief Executive Officer of Primum Public Realty Trust, beginning in January 2007. Mr. Williams served as the Mayor of Washington, D.C. from 1999 to January 2007, and as its Chief Financial Officer from 1995 to 1998. In

 

2005, Mr. Williams served as Vice Chair of the Metropolitan Washington Council of Governments, and in 2004, Mr. Williams served as President of the National League of Cities. From 1993 to 1995, Mr. Williams was the first Chief Financial Officer for the U.S. Department of Agriculture. From 1991 to 1993, Mr. Williams was the Deputy State Comptroller of Connecticut. From 1989 to 1991, Mr. Williams was the Executive Director of the Community Development Agency of St. Louis, Missouri. From 1988 to 1989, Mr. Williams was an Assistant Director with the Boston Redevelopment Authority where he led the Department of Neighborhood Housing and Development, one of the Authority’s four primary divisions. Mr. Williams also is a director of Meruelo Maddux Properties, Inc., where he is a member of the Audit Committee and the Nominating and Corporate Governance Committee.

 

Authority of the Board and Board Committees

 

The directors serve on behalf of, and exercise authority as directed by, the Conservator. The Conservator has delegated to the Board and its committees authority to function in accordance with the duties and authorities set forth in applicable statutes, regulations and regulatory examination and policy guidance, and Freddie Mac’s Bylaws and Board committee charters, as such duties or authorities may be modified by the Conservator. The Conservator has instructed the Board that it should consult with and obtain the approval of the Conservator before taking action in the following areas:

 

 

The Board has five standing committees: Audit; Business and Risk; Compensation; Executive; and Nominating and Governance. The membership of current Board members on each committee is shown in the table below.

 

 

The charters reflecting the duties of the committees have been adopted by the Board and approved by the Conservator. All the charters of the standing committees are available on our website at www.freddiemac.com/governance/bd_committees.html.

 

Freddie Mac’s Board has an independent Non-Executive Chairman, whose responsibilities include presiding over meetings of the Board, regularly scheduled executive sessions of the non-employee directors and executive sessions including only the independent directors that occur at least once annually if any of the non-employee directors are not independent. Mr. Koskinen was appointed to the position of Non-Executive Chairman by the Conservator in September 2008. He served in that position until March 13, 2009, when he assumed the position of Interim Chief Executive Officer. He resumed his duties as the Non-Executive Chairman on August 10, 2009 after Mr. Haldeman became Chief Executive Officer. Mr. Glauber assumed the position of Interim Non-Executive Chairman during the same period that Mr. Koskinen temporarily vacated that position.

 

Communications with Directors

 

Interested parties wishing to communicate any concerns or questions about Freddie Mac to the Non-Executive Chairman of the Board or to our non-employee directors as a group may do so by U.S. mail, addressed to the Corporate Secretary, Freddie Mac, Mail Stop 200, 8200 Jones Branch Drive, McLean, VA 22102-3110. Communications may be addressed to a specific director or directors or to groups of directors, such as the independent or non-employee directors.

 

Executive Officers

 

As of April 8, 2010, our executive officers are as follows:

 

 

The following is a brief biographical description of each executive officer who is not also a member of the Board.

 

Bruce M. Witherell was appointed Freddie Mac’s Chief Operating Officer effective September 2009. From May 2008 until he joined Freddie Mac, Mr. Witherell served as Managing Director of PrimeStone Partners, LLC, a private investment and advisory firm. Previously, Mr. Witherell served as Managing Director and Global Co-Head of the residential mortgage business of Morgan Stanley, a global financial services firm, from December 2006 to May 2008. Before his service at Morgan Stanley, he worked in various roles at Lehman Brothers Holdings Inc., a global investment bank, for 15 years, including as Chief Executive Officer of Lehman Brothers Bank and as Chief Executive Officer of Aurora Loan Services from 2003 to 2006.

 

Ross J. Kari was appointed the company’s Executive Vice President — Chief Financial Officer, effective October 2009. Mr. Kari joined Freddie Mac from Fifth Third Bancorp, a financial services firm, where he served as Executive Vice President and Chief Financial Officer beginning in November 2008. Previously, he served as Executive Vice President and Chief Financial Officer of Safeco Corporation, an insurance firm, from June 2006 to October 2008. Prior to that, Mr. Kari served as Executive Vice President and Chief Operating Officer of the Federal Home Loan Bank of San Francisco, a government sponsored enterprise and part of the Federal Home Loan Bank System, from February 2002 to June 2006. Mr. Kari is a member of the board of directors of KKR Financial Holdings LLC where he is the Chairman of the Audit Committee.

 

Donald J. Bisenius was appointed Executive Vice President — Single Family Credit Guarantee in May 2009. Prior to holding his current position, he served as Senior Vice President — Single Family Credit Guarantee from May 2008 until May 2009 and Senior Vice President — Credit Policy and Portfolio Management from November 2003 until April 2008. From October 2001 until October 2003. Mr. Bisenius was Senior Vice President — Credit Risk Management. Prior to that, he served in a number of positions with Freddie Mac since joining us in January 1992. Before his service at Freddie Mac, Mr. Bisenius served in a variety of positions with the Federal Housing Finance Board and the Federal Home Loan Bank Board in Washington, DC.

 

Robert E. Bostrom was appointed Executive Vice President — General Counsel & Corporate Secretary in February 2006. Prior to joining us, Mr. Bostrom was the managing partner of the New York office of Winston & Strawn LLP, a member of that firm’s executive committee and head of its financial institutions practice. Mr. Bostrom originally joined Winston & Strawn in 1990. From 1992 until 1996, Mr. Bostrom served as Executive Vice President of Legal, Regulatory and Compliance and General Counsel of National Westminster Bancorp.

 

Paul G. George was appointed Executive Vice President — Human Resources & Corporate Services in December 2006. He joined us in August 2005 as Executive Vice President, Human Resources. Prior to joining us, Mr. George was Senior Executive Vice President of Human Resources at Wachovia Corp. from July 1999 through December 2004. Prior to that, he was a member of Waste Management Inc.’s interim management team from 1998 to 1999. He also served for approximately nine years as Senior Vice President of Human Resources at United Airlines. Between 1985 and 1988 he was Vice President of Human Resources at Pacific Southwest Airlines. Prior to that, he was a partner at the law firm Meserve, Mumper & Hughes.

 

Michael Perlman was appointed Executive Vice President — Operations & Technology in August 2007. Prior to joining us, Mr. Perlman was a managing director at Morgan Stanley until July 2007, where he developed operations and technology infrastructure to support their Fixed Income and Global Operations Divisions. Mr. Perlman also played significant roles in building Morgan Stanley’s institutional processing systems. Before joining Morgan Stanley in September 1997, Mr. Perlman was a founding partner at AT&T Solutions’ Financial Services Group and a partner in the Washington, DC and New York offices of Deloitte & Touche, where he specialized in large-scale business and technology renovation.

 

Raymond G. Romano was appointed Executive Vice President — Chief Credit Officer in April 2009. Prior to this appointment, he served as our Senior Vice President — Chief Credit Officer from December 2008 until March 2009 and as acting Chief Credit Officer from September 2008 until December 2008. Before being appointed Chief Credit Officer, Mr. Romano served as Senior Vice President — Credit Risk Oversight, a position he held since March 2004. Prior to that, Mr. Romano served as Senior Vice President and Chief

 

Credit Risk Officer and other executive positions at different major financial institutions including North American Mortgage Company in Tampa, Dime Savings Bank of NY, and with Citicorp’s Investment Bank.

 

Peter J. Federico was appointed Senior Vice President — Investments & Capital Markets and Treasurer in May 2009. In this position, Mr. Federico is responsible for managing all of Freddie Mac’s mortgage investment activities for the mortgage-related investments portfolio. He also manages the company’s short- and long-term debt issuance program. Mr. Federico joined Freddie Mac in 1988. From December 2008 until May 2009, he served as Treasurer and Senior Vice President — Treasury & Liability Management, a position in which he was responsible for managing the company’s debt and equity funding, as well as its Liquidity & Contingency Portfolio of non-mortgage investments. From March 2006 to December 2008, Mr. Federico served as Senior Vice President — Asset & Liability Management, managing the interest rate risks associated with the company’s mortgage investment and guarantee businesses. In that position, he also was responsible for the management of Freddie Mac’s Liquidity and Contingency Portfolio. He was named Vice President, Asset & Liability Management, in 2000.

 

Timothy F. Kenny was appointed Senior Vice President — General Auditor in July 2008. Prior to this appointment, Mr. Kenny served as Vice President and Interim General Auditor starting in May 2008. Before that, he served as our Vice President, Assistant General Auditor from September 2007 to May 2008. From 2001 to 2007, Mr. Kenny was a Managing Director with BearingPoint, Inc. (formerly KPMG Consulting, Inc.) where he directed a large team of financial professionals on a variety of financial risk management consulting projects with Ginnie Mae, the Federal Housing Administration, private sector mortgage bankers and other federal credit agencies. He was appointed a member of the BearingPoint, Inc. 401(k) Plan Committee in 2004 and served as a member until his resignation in 2007. He joined KPMG LLP, the predecessor organization to KPMG Consulting, in 1986, was promoted to a KPMG Audit Partner in 1997, and served in that position until the separation of KPMG Consulting from KPMG LLP in February 2001.

 

Michael C. May was appointed Senior Vice President — Multifamily in August 2005. Prior to this appointment, Mr. May served as our Senior Vice President, Operations starting in February 2005. He also served as Senior Vice President, Mortgage Sourcing, Operations & Funding from November 2003 to February 2005. Prior to that, Mr. May held the positions of Senior Vice President, Single Family Operations from July 2002 through October 2003 and Senior Vice President, Project Enterprise from January 2001 to July 2002. Mr. May also held various positions at our company since joining us in 1983.

 

Hollis S. McLoughlin was appointed Senior Vice President — External Relations in September 2008. Prior to that he served as Senior Vice President — External Relations and Chief of Staff from April 2008 until September 2008. Prior to this appointment, Mr. McLoughlin served as our Senior Vice President, External Relations starting in January 2006. He also served as Senior Vice President and Chief of Staff from April 2004 to January 2006. During the period from 1998 until 2004, Mr. McLoughlin was Chief Operating Officer of two private equity-backed operating companies. Before that, he was one of the founding partners of Darby Overseas, a private equity partnership based in Washington, D.C. He also has been a senior executive at Purolator Courier, an overnight delivery company, and a privately held transportation company. Mr. McLoughlin served from 1989 through 1992 as assistant secretary of the Treasury under President George Bush, where he was responsible for the coordination of all policy and management of several key internal functions. He served as chief of staff to Sen. Nicholas Brady, R-N.J., in 1982 and to Rep. Millicent Fenwick, R-N.J., from 1975 to 1979.

 

Paul E. Mullings was appointed Senior Vice President — Single Family Sourcing in July 2005. Before joining us, Mr. Mullings was Senior Vice President of JPMorgan Chase and Mortgage Finance Manager and Fair Lending Executive at Chase Home Finance. Prior to joining Chase Home Finance in 1997, Mr. Mullings was President and Chief Executive Officer of Mortgage Electronic Registration Systems, Inc. Mr. Mullings was also President and Chief Executive Officer of the residential mortgage division of First Interstate Bank, Los Angeles. Prior to First Interstate, he held a series of senior management positions with increasing responsibilities at Glendale Federal Bank, Glendale, California.

 

Jerry Weiss was appointed Senior Vice President — Compliance, Regulatory Affairs and Mission, and Chief Compliance Officer in April 2009. More recently, he has also become responsible for overseeing both

 

the company’s affordable housing mission and activities related to the President’s Making Home Affordable Program. Mr. Weiss served as Senior Vice President — Compliance and Regulatory Affairs and Chief Compliance Officer from April 2008 until April 2009. Prior to this appointment, Mr. Weiss served as our Senior Vice President and Chief Compliance Officer since joining us in October 2003. Prior to joining us, Mr. Weiss worked from 1990 at Merrill Lynch Investment Managers, most recently as First Vice President and Global Head of Compliance. From 1982 to 1990, Mr. Weiss was with a national law practice in Washington, D.C., where he specialized in securities regulation and corporate finance matters.

 

Paige H. Wisdom was appointed Senior Vice President — Chief Enterprise Risk Officer in April 2010. Prior to this appointment, she served as the Senior Vice President — Business Unit Chief Financial Officer from January 2008 through March 2010. From August 2004 until December 2007, Ms. Wisdom served as a Business Unit Chief Financial Officer at Bank of America for key businesses including Global Business and Financial Services; Business, Lending, and Global Technology; and Service and Fulfillment. Prior to joining Bank of America, Ms. Wisdom served at Bank One Corporation/JP Morgan from June 2000 until July 2004, most recently as the Chief Financial Officer, Corporate Bank. Prior to that she served in leadership positions with increasing responsibilities at UBS/Warburg Dillon Read, Citibank Salomon Smith Barney, and Swiss Bank Corporation/SBC Warburg Dillon Read.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires the directors and executive officers of a reporting company and persons who own more than 10% of a registered class of such company’s equity securities to file reports of ownership and changes in ownership with the SEC and the exchange on which such company’s securities trade, and to furnish the company with copies of the reports. Based solely on a review of such reports, we believe that during 2009 our directors and executive officers complied with such reporting obligations.

 

Codes of Conduct

 

We have separate codes of conduct applicable to employees and to Board members that outline the principles, policies and laws governing their activities. Upon joining Freddie Mac or its Board, all employees and directors, respectively, are required to sign acknowledgements that they have read the applicable code and agree to abide by it. In addition, all employees and directors must respond to an annual questionnaire concerning code compliance. The employee code also serves as the code of ethics for senior executives and financial officers required by the Sarbanes-Oxley Act and SEC regulations. Copies of our employee and director codes of conduct are available, and any amendments or waivers that would be required to be disclosed are posted, on our website at www.freddiemac.com.

 

Indemnification Agreements

 

Freddie Mac has entered into an indemnification agreement with each of its current directors and executive officers (except for Ms. Wisdom) (each, an “indemnitee”). A copy of the form of indemnification agreement is filed as Exhibit 10.2 to our Form 8-K filed on December 23, 2008 and is incorporated herein by reference.

 

The indemnification agreements provide that Freddie Mac will indemnify the indemnitee to the fullest extent permitted by Freddie Mac’s Bylaws and Virginia law. This obligation includes, subject to certain terms and conditions, indemnification against all liabilities and expenses (including attorneys’ fees) actually and reasonably incurred by the indemnitee in connection with any threatened or pending action, suit or proceeding, except such liabilities and expenses as are incurred because of the indemnitee’s willful misconduct or knowing violation of criminal law. The indemnification agreements provide that if requested by the indemnitee, Freddie Mac will advance expenses, subject to repayment by the indemnitee of any funds advanced if it is ultimately determined that the indemnitee is not entitled to indemnification. The rights to indemnification under the indemnification agreements are not exclusive of any other right the indemnitee may have under any statute, agreement or otherwise. Freddie Mac’s obligations under the indemnification agreements will continue after the indemnitee is no longer a director or officer of the company with respect to any possible claims based on the fact that the indemnitee was a director or officer, and the indemnification agreements will remain in effect

 

in the event the conservatorship is terminated. The indemnification agreements also provide that indemnification for actions instituted by FHFA will be governed by the standards set forth in FHFA’s Notice of Proposed Rulemaking published in the Federal Register on November 14, 2008, proposing an amendment to FHFA’s interim final golden parachute payments regulation to address prohibited and permissible indemnification payments. In January 2009, FHFA issued final regulations relating to golden parachute payments. Under those final regulations, FHFA may limit golden parachute payments, and the regulations set forth factors to be considered by the Director of FHFA in acting upon his authority to limit these payments. A new proposed rule was published by FHFA in June 2009 that has not yet been adopted in final form. In general, this proposal would give FHFA the authority to prohibit indemnification payments in cases involving administrative proceedings before FHFA or civil actions initiated by FHFA.

 

Audit Committee Financial Expert

 

We have a standing Audit Committee that satisfies the “audit committee” definition under Section 3(a)(58)(A) of the Exchange Act, the requirements of Rule 10A-3 under the Exchange Act and Sections 303A.06 and 303A.07 of the New York Stock Exchange, or NYSE, Listed Company Manual. The current members of the Audit Committee are Carolyn H. Byrd, Robert R. Glauber, Christopher S. Lynch and Anthony A. Williams, all of whom the Board determined in March 2010 are independent within the meaning of Rule 10A-3 under the Exchange Act and Section 303A.02 of the NYSE Listed Company Manual.

 

Mr. Lynch has been a member of the Audit Committee since December 18, 2008 and currently is its chairman. The Board determined in March 2010 that Mr. Lynch meets the definition of an “audit committee financial expert” under SEC regulations.

 

 

Our Compensation Discussion and Analysis addresses the following items:

 

 

Under conservatorship, we have a variety of different, and potentially competing, objectives, including:

 

 

Working toward these various objectives requires us to hire, retain and motivate executives to implement our business strategies effectively and respond to changing market conditions. Our executive compensation policies and practices are intended to support our ability to achieve these goals.

 

The importance of achieving these goals was recognized by FHFA Acting Director DeMarco in his February 2, 2010 letter to Congressional leaders on the status of the conservatorship of Freddie Mac and Fannie Mae:

 

The senior executives [of the Enterprises] are essential to the Enterprises fulfilling the important goals of the conservatorships. It is critical to retain existing staff, including many senior managers, and critical to attract new executive management to fill the vacancies. The challenge of meeting this goal with companies in conservatorship is immense. The Enterprises operate with an uncertain future that will be the source of much public debate. As conservator, I believe it is critical to protect the taxpayer interests in the Enterprises by ensuring that each company has experienced, qualified people managing the day-to-day business operations in the midst of this uncertainty.

 

Statutory and Regulatory Framework for Oversight of Compensation Programs

 

Federal statutes have provided for regulatory oversight of our executive compensation for many years. Regulatory authorities with respect to compensation were expanded in July 2008 with the enactment of the Reform Act and further expanded when we entered conservatorship in September 2008. Set forth below is a summary of the sources of FHFA’s authority with respect to our compensation programs:

 

 

 

 

Under conservatorship, the incentives available for our executive officers have been significantly limited, as previously awarded equity compensation has lost almost all of its value, and no performance-based cash bonuses or equity awards were made for 2008. Given the uncertainties regarding the company’s future status to which the conservatorship and related developments gave rise, FHFA in September 2008 structured and Freddie Mac subsequently adopted a retention program to encourage the remaining executive officers and other key employees to stay with the company. The awards made in 2008 under the Retention Program to named executive officers provided for cash payments in three installments during 2008 and 2009, with a fourth, performance-based installment payable in March 2010 if the executive achieved certain performance objectives. See “— Executive Management Compensation Program — Determination of 2009 Performance Year Compensation for Named Executive Officers.”

 

In addition, in order to provide a comprehensive program for executive compensation that balances the interest of the government and the public in efficient management of the company against the need to attract and retain managers with the skills required to lead the company in this challenging environment, the Board of Directors, with the approval of FHFA after consulting with Treasury, adopted the Executive Management Compensation Program and made compensation decisions with respect to 2009 and 2010. These actions and the reasons they were taken are discussed below under “— Executive Management Compensation Program.”

 

Role of the Compensation Committee

 

As described above, FHFA has reconstituted our Board and appointed a Compensation Committee. Although the Compensation Committee (which we sometimes refer to as the Committee) takes the lead role in considering and recommending executive compensation, the following circumstances will affect the Committee’s exercise of its authority:

 

 

 

 

Named Executive Officers for 2009

 

The following eight individuals were determined to be the named executive officers of Freddie Mac for the year ended December 31, 2009:

 

Charles E. Haldeman, Jr., Chief Executive Officer
David M. Moffett, former Chief Executive Officer
John A. Koskinen, former Interim Chief Executive Officer
  (also performed function of principal financial officer on interim basis)
Ross J. Kari, Executive Vice President — Chief Financial Officer
David B. Kellermann, former Acting Chief Financial Officer
Robert E. Bostrom, Executive Vice President — General Counsel & Corporate Secretary
Peter J. Federico, Senior Vice President — Investments & Capital Markets and Treasurer
Michael Perlman, Executive Vice President — Operations & Technology

 

Information about the types and amounts of compensation paid to these individuals during 2009 is set forth below under “Compensation Tables.”

 

Executive Management Compensation Program

 

Overview of Program Structure and Objectives

 

Our senior management, Compensation Committee and Board of Directors worked closely with FHFA over the course of several months to develop and refine the overall structure of our executive management compensation program for named executive officers. On December 24, 2009, Freddie Mac announced that it had adopted, with the approval of FHFA and in consultation with Treasury, an Executive Management Compensation Program (the “Executive Compensation Program”) covering the compensation of Freddie Mac executives in the following positions: chief executive officer (CEO), chief operating officer (COO), chief financial officer (CFO), executive vice presidents (EVPs), and senior vice presidents (SVPs) (each, a “Covered Officer”). All of the named executive officers for 2009 (except for Messrs. Moffett, Koskinen and Kellermann) are Covered Officers under the Executive Compensation Program.

 

Copies of the Executive Management Compensation Program, the Executive Management Compensation Recapture Policy and certain other documents setting forth the terms of the Executive Compensation Program were filed as Exhibits 10.1 through 10.4 to the Form 8-K announcing the adoption of the Executive Compensation Program (the “Compensation Program Form 8-K”).

 

The Executive Compensation Program reflects the principles established by Treasury’s executive compensation guidelines for companies receiving federal assistance, as well as several key principles that are specific to Freddie Mac. First, the Executive Compensation Program was designed to closely align executive pay with corporate performance, to be measured primarily by the company’s achievements in its important mission of providing liquidity, stability and affordability to a troubled mortgage market, together with consideration of certain financial, infrastructure development and other objectives. These objectives reflect the company’s responsibilities under its charter and in conservatorship, as well as guidance from the Conservator

 

and the requirements of the Purchase Agreement with Treasury. Second, the Executive Compensation Program establishes strict recapture provisions that protect the interests of the company and taxpayers. Third, the Executive Compensation Program was designed to position Freddie Mac to retain critical executives and attract new executive talent as we continue to support the nation’s housing recovery, especially given the uncertainties regarding the company’s future status resulting from the conservatorship and related developments. As FHFA’s Acting Director stated in testimony before the House Financial Services Committee on February 25, 2010, the Executive Compensation Program is “designed to align pay with taxpayer interests . . . [and] adopt or expand on compensation reforms advanced by the Special Master for firms receiving exceptional TARP assistance.”

 

One key difference in the Executive Compensation Program as compared with programs of many other companies receiving federal assistance is that Freddie Mac cannot provide equity-based compensation to its employees under the terms of the company’s Purchase Agreement with Treasury, unless such grants are approved by Treasury. In his February 25, 2010 testimony to the House Financial Services Committee, the Acting Director of FHFA described stock compensation as “ineffective” for an enterprise in conservatorship because of the depressed value of the enterprise’s stock, and also cautioned that “large grants of low-priced stock could provide substantial incentives for executives to seek and take large risks.” Therefore, compensation under the Executive Compensation Program will be delivered entirely in cash.

 

The Executive Compensation Program is effective for calendar years 2009, 2010, and thereafter as long as Freddie Mac remains in conservatorship. The specific parameters of the Executive Compensation Program may be amended from time to time by the Compensation Committee, if approved by FHFA after consulting with Treasury.

 

Participation by a Covered Officer in the Executive Compensation Program is contingent upon the Covered Officer agreeing to be bound by the terms of a recapture arrangement that has been approved by both the Compensation Committee and FHFA. In the case of the current CEO and CFO, this recapture arrangement is set forth in the recapture agreements signed by the respective executives at the time of their hiring. In the case of all other Covered Officers, the recapture arrangement is set forth in the Executive Management Compensation Recapture Policy, or the “Recapture Policy,” discussed below.

 

A summary of the Executive Compensation Program is set forth below.

 

Total Direct Compensation

 

For purposes of the Executive Compensation Program, a Covered Officer’s target total direct compensation, or “Target TDC,” consists of the sum of Semi-Monthly Base Salary and Deferred Base Salary (which we refer to collectively as “Base Salary”), and Target Incentive Opportunity. Under the Executive Compensation Program, two-thirds of a Covered Officer’s Target TDC will consist of Base Salary and one-third will consist of Target Incentive Opportunity. These components of the Target TDC are explained below. The Target TDC is established for each annual performance cycle. The amount of TDC actually received that is attributable to that performance cycle is referred to as “Actual TDC.”

 

As described below, the Executive Compensation Program provides for a significant amount of compensation that is performance-based and/or subject to mandatory deferral, including the entire Incentive Opportunity and, beginning in 2010, 50% of Deferred Base Salary. The objectives of this compensation structure are to link executive compensation to corporate and individual performance and to provide executives with incentives to remain with the company. As a result, for 2009 the amount of the Incentive Opportunity that is actually paid to a Covered Officer is determined by corporate and individual performance and may be more or less than the target. Other factors may also influence the amount of total Target Incentive Opportunity paid, such as exercises of discretion by the Chief Executive Officer, the Compensation Committee and the Board of Directors, considering such factors as they may deem appropriate in the compensation assessment process, subject to the approval of FHFA. However, the aggregate amount paid to all Covered Officers as a group cannot exceed the amount of the approved pool of funds for the group. Similarly, the performance-based portion of Deferred Base Salary earned in 2010 and subsequent years will be based on corporate performance

 

and other discretionary factors that may result in the actual amount paid being more or less than the target for Deferred Base Salary.

 

Base Salary.  A Covered Officer’s Base Salary for each year will consist of the following two components:

 

Semi-Monthly Base Salary.  This portion of Base Salary is paid in cash on a semi-monthly basis during each calendar year and cannot exceed $500,000 per year, except for the CEO, COO, and CFO, or other exceptions as approved from time to time by FHFA. For any Covered Officer other than the CEO, COO and CFO whose Semi-Monthly Base Salary was greater than $500,000 immediately prior to the adoption of the Executive Compensation Program, that Covered Officer’s Semi-Monthly Base Salary was reduced to $500,000 effective January 1, 2010.

 

Deferred Base Salary.  This portion of Base Salary is earned during one year but not paid until the following year. Deferred Base Salary earned in 2009 will be paid in a fixed amount in quarterly installments on the last business day of the corresponding quarter of 2010, provided the Covered Officer is actively employed by the company on such payment date (subject to certain exceptions, including the Covered Officer’s death, long-term disability or retirement during 2010).

 

Fifty percent of the Deferred Base Salary for 2010 and later years will be earned during each calendar quarter and paid in a fixed amount on the last business day of the corresponding quarter of the following calendar year, provided the Covered Officer is actively employed by the company on such payment date (subject to certain exceptions, including the Covered Officer’s death, long-term disability or retirement). The remaining 50% of Deferred Base Salary will be performance-based and will be paid based on the Compensation Committee’s approved funding level for the short-term incentive (STI) plan (i.e., the plan applicable to employees at the level of Vice President and below) for the performance year in which the performance-based portion of the Deferred Base Salary is earned. The amount of performance-based Deferred Base Salary actually paid may also be influenced by other factors, such as exercises of discretion by the Chief Executive Officer, the Compensation Committee and the Board of Directors, considering such factors as they may deem appropriate in the compensation assessment process, subject to the approval of FHFA.

 

The approved funding level for the STI plan is based on the Compensation Committee’s assessment of Freddie Mac’s performance against corporate objectives as well as the Compensation Committee’s assessment of other factors it determines are appropriate. The approved funding level for the STI plan, expressed as a percentage, will be equal to the amount of STI funds approved for distribution to employees at the level of Vice President and below divided by the aggregate STI target for those same employees.

 

The provisions of the Executive Compensation Program relating to Deferred Base Salary will be administered in accordance with the Freddie Mac Mandatory Executive Deferred Base Salary Plan, which was filed as Exhibit 10.2 to the Compensation Program Form 8-K.

 

Target Incentive Opportunity.  For each performance year, every Covered Officer will be provided an annual Target Incentive Opportunity, which will be equal to one-third of the Covered Officer’s annual Target TDC. Fifty percent of the Target Incentive Opportunity is scheduled to be paid no later than March 15 of the first calendar year immediately following the year of grant and is subject to performance conditions with respect to the year of grant (the first Incentive Opportunity Payment). The other 50% is scheduled to be paid no later than March 15 of the second calendar year following the year of grant and is subject to performance conditions with respect to the year following the year of grant (the second Incentive Opportunity Payment). Both Incentive Opportunity Payments are subject to the condition that the Covered Officer is actively employed by the company on the relevant payment date (subject to certain exceptions, including the Covered Officer’s death, long-term disability or retirement).

 

The aggregate amount of the Target Incentive Opportunity actually paid will be based on the Compensation Committee’s approved funding level for the long-term incentive (LTI) plan (i.e., the plan applicable to employees at the level of Vice President and below) for the LTI grant made in the calendar year

 

that corresponds to the Covered Officers’ Target Incentive Opportunity. The amount actually paid may also be influenced by other factors, such as exercises of discretion by the Chief Executive Officer, the Compensation Committee and the Board of Directors, considering such factors as they may deem appropriate in the compensation assessment process, subject to the approval of FHFA.

 

The approved funding level for the LTI plan is based on the Compensation Committee’s assessment of Freddie Mac’s performance against specific performance measures as well as the Compensation Committee’s assessment of other factors it deems appropriate. The approved funding level for the LTI plan, expressed as a percentage, will be equal to the amount of LTI funds approved for distribution to employees at the level of Vice President and below divided by the aggregate LTI targets for those same employees.

 

Performance Measures for 2009 Target Incentive Opportunity

 

The following summarizes the performance measures used by the Compensation Committee for the LTI grant made in 2009 and in the process of determining the amount of the first Incentive Opportunity Payment paid to Covered Officers in March 2010, and to be used by the Committee in the process of determining the amount of the second Incentive Opportunity Payment to be paid to Covered Officers in 2011. These performance measures were approved by FHFA.

 

First Incentive Opportunity Payment:

 

 

 

Remediation of a specific MRA is generally deemed to be complete when appropriate remediation actions have been completed by the business unit responsible for the MRA, validated by the Internal Audit division as appropriate, and communicated to FHFA. These steps were completed for all 93 MRAs for 2009.

 

Second Incentive Opportunity Payment:

 

 

For Covered Officers who are members of the Freddie Mac Management Committee on the date the Compensation Committee approves the LTI funding level, the amount of the Target Incentive Opportunity that is paid, if any, is also subject to an assessment of division and/or individual performance as determined by the Chief Executive Officer or, in the case of the Chief Executive Officer, the Board of Directors. This assessment can result in an increase or decrease of up to 25% to the amount of the related award for any individual officer. The amount of the Target Incentive Opportunity that is paid is also subject to exercises of discretion

 

by the Chief Executive Officer, the Compensation Committee and the Board of Directors, which can affect the amount of the Target Incentive Opportunity actually paid to any Covered Officer, subject to FHFA approval. In the aggregate, the amount paid to all Covered Officers as a group cannot exceed the amount of the approved pool of funds for the group. Each of our named executive officers (except for Messrs. Moffett, Koskinen and Kellermann) was a member of the Freddie Mac Management Committee on the date the Compensation Committee approved the 2009 LTI funding level.

 

Determination of 2009 and 2010 Target TDC for Named Executive Officers

 

Step 1: Gathering Comparative Market Compensation Data.  As part of its process to establish each named executive officer’s Target TDC under the Executive Compensation Program, the Compensation Committee reviewed the compensation of executives in comparable positions at companies that are either in a similar line of business or are otherwise comparable for purposes of recruiting and retaining individuals with the requisite skills and capabilities. We refer to this group of companies as the Comparator Group. In 2009, the Committee reviewed and discussed the composition of the Comparator Group with its compensation consultant, Steven Hall & Partners, and determined that the following companies should be included:

 

Allstate Corporation		MetLife, Inc.
American Express Company		Northern Trust Corporation
Bank of America Corporation*		PNC Financial Services Group, Inc.
Bank of New York Mellon Corporation		Prudential Financial, Inc.
BlackRock, Inc.		State Street Corporation
Citigroup Inc.*		SunTrust Banks, Inc.
Fannie Mae		U.S. Bancorp
Hartford Financial Services Group		Visa Inc.
JPMorgan Chase & Co.*		Wells Fargo & Company*
MasterCard

 

In the event there is insufficient data from the Comparator Group for any of the named executive officer positions, or if Steven Hall & Partners believes that additional data sources would strengthen the analysis of competitive market compensation levels, the Committee can approve the use of alternative survey sources to make these assessments. The assessment for each position begins with the Comparator Group data. If a review of the Comparator Group information indicates that there is no reasonable match or insufficient data in the Comparator Group for a particular position, the Committee uses alternative survey sources. The alternative survey sources used by the Compensation Committee were compensation surveys published by human resources consulting firms Hewitt Associates, Towers Watson and McLagan, an Aon consulting company. These consulting firms do not attribute the data in their surveys to the companies that participate in their surveys, to preserve confidentiality and encourage continuing participation.

 

The Committee believes that the financial services companies covered by these alternative survey sources represent the company’s relevant labor market and that the use of these sources strengthens the Committee’s analysis of market compensation levels. For example, while a chief financial officer position might have data matches for named executive officers in most or all of the 19 Comparator Group companies, a general counsel might have a smaller number of matches, making the use of one or more alternative survey sources a useful supplement to the Comparator Group data.

 

In establishing the named executive officers’ 2009 and 2010 Target TDC, the Committee reviewed 2009 data from the Comparator Group and alternative survey sources. The Committee also took into consideration 2008 data in establishing target TDC. Specifically, for the positions of Chief Executive Officer, Chief Financial Officer, and Executive Vice President — General Counsel and Corporate Secretary, the Committee, at the recommendation of Steven Hall & Partners, reviewed competitive market compensation data from the Comparator Group and surveys published by Hewitt Associates and Towers Watson. For the position of Executive Vice President — Operations and Technology, the Committee reviewed competitive market data from the Comparator Group, as well as surveys published by McLagan and Towers Watson. For the position of Senior Vice President — Investments & Capital Markets and Treasurer, the Committee reviewed

 

competitive market data from a survey published by McLagan, because no reasonable match was available in the Comparator Group.

 

For additional information on the role of Steven Hall & Partners in the Compensation Committee’s determination of the compensation of named executive officers, see “— Other Executive Compensation Considerations — Role of Compensation Consultants.”

 

Step 2: Establishing Target Total Direct Compensation.  With respect to the Target TDC for the named executive officers, the Compensation Committee, working with Steven Hall & Partners, either developed recommendations or reviewed recommendations presented by senior management and its compensation consultant (Hewitt Associates). The recommendations considered the compensation of executives in comparable positions in the Comparator Group and alternative survey sources. See “— Determination of 2009 and 2010 Target TDC for Named Executive Officers — Step 1: Gathering Comparative Market Compensation Data.”

 

In setting Target TDC levels for our named executive officers, the Compensation Committee used as a guideline the market median, or 50th percentile of the total direct compensation, consisting of base salary, annual bonus and annual long-term equity awards, paid to comparable positions at Comparator Group companies, or in the alternative survey sources described above. While the market median was used as the guideline for total direct compensation, the Committee had the authority to establish Target TDC which was higher or lower, as it deemed appropriate for each named executive officer. Additional factors considered by the Committee were the executive officer’s performance and the criticality of the executive officer’s role and that the TDC of our named executive officers must be consistent with our charter, which requires that compensation of our executives be reasonable and comparable with the compensation of executives performing similar duties in similar businesses. In December 2009, the Committee applied the compensation criteria described above to set 2009 and 2010 Target TDC for the named executive officers.

 

FHFA reviewed the recommendations for both the Executive Compensation Program and the Target TDC for the named executive officers and, in consultation with management, the Board of Directors and Treasury over the course of several months, developed and refined the overall structure of our 2009 executive compensation program and the Target TDC for the named executive officers. The Committee then reviewed and approved the Executive Compensation Program and Target TDCs, subject to FHFA’s approval. FHFA, in consultation with Treasury, then approved our new executive compensation structure and the Target TDC for our named executive officers in December 2009.

 

The table below sets forth the approved 2009 annualized Semi-Monthly Base Salary, Deferred Base Salary, Target Incentive Opportunity and Target TDC for Freddie Mac’s named executive officers who are currently employed by Freddie Mac, as established by the Compensation Committee and approved by FHFA. These amounts represent targets for compensation, not the actual amount of compensation paid for 2009. Information about the amounts actually paid during or with respect to 2009 to these executives is set forth in the table under “2009 Target TDC (Non-Annualized/Pro-Rata) Compared to 2009 Actual TDC” below and in the Summary Compensation Table on page 30.

 

 

The Committee also approved Target TDC for each named executive officer for 2010. For the named executive officers, the only difference versus the 2009 TDC amounts is a reduction of Mr. Bostrom’s Semi-Monthly Base Salary to $500,000 and a corresponding increase in his Deferred Base Salary. This adjustment was made to conform with the requirements of the Executive Compensation Program.

 

2009 Target TDC (Non-Annualized/Pro Rata) Compared to 2009 Actual TDC

 

For each of the named executive officers who are Covered Officers under the Executive Compensation Program, the table below shows 2009 Target TDC (non-annualized/pro rata) compared to the approved 2009 Actual TDC. For purposes of this chart, the amounts displayed in both the “2009 TDC — Target (Non-Annualized/Pro Rata)” and “2009 TDC — Actual” columns include only the appropriate amount associated with the first 2009 Incentive Opportunity payment. For Messrs. Haldeman and Kari, the 2009 Target TDC is pro-rated based on their hire dates. Mr. Federico’s 2009 Target TDC is also pro-rated and reflects an increase that became effective on May 14, 2009 in recognition of his new role as Senior Vice President — Investments & Capital Markets and Treasurer.

 

 

 

Determination of 2009 Performance Year Compensation for Named Executive Officers

 

While there are a maximum of six elements of 2009 performance year compensation, only three are variable and require the subsequent approval of the Compensation Committee. These three elements are:

 

1. The performance-based portion of the awards made in 2008 under the Retention Program;

 

2. The portion of the 2009 Target Incentive Opportunity that is determined by reference to the LTI funding level for 2009 applicable to employees at the level of Vice President and below; and

 

3. For members of Freddie Mac’s Management Committee, the portion of the 2009 Target Incentive Opportunity that is subject to adjustment in the discretion of the Chief Executive Officer or the Board, as described above.

 

The remaining elements of 2009 performance year compensation were either fixed and paid or fixed and scheduled to be paid, based on the terms of either the Executive Compensation Program or the Retention Program. These remaining elements are:

 

4. The Semi-Monthly Base Salary;

 

5. The 2009 Deferred Base Salary; and

 

6. The non-performance based portions of the awards made in 2008 under the Retention Program.

 

The following describes the factors considered by the Compensation Committee and FHFA in approving the actual amount of compensation for 2009 for each of the named executive officers:

 

Determination of Performance-Based Portion of 2008 Retention Award for Named Executive Officers

 

In February 2010, the Committee determined that Messrs. Bostrom, Federico, and Perlman were entitled to receive the full performance-based portions of their 2008 retention awards, which represented 35% of the aggregate amount of the awards. In determining the amount to be paid for the final, performance-based, installment, the Compensation Committee reviewed and discussed information regarding such executive officer’s level of achievement against his individual performance goal. The Compensation Committee determined that such executive officer achieved his individual performance goal and should otherwise receive a satisfactory performance rating, and therefore should receive his full performance-based portion of the retention award, subject to FHFA approval.

 

FHFA concurred with the Compensation Committee’s recommendation and approved the payment to each of Messrs. Bostrom, Federico and Perlman of the full performance-based portion of the retention award. The payment was made on March 15, 2010.

 

Mr. Kellermann’s performance-based portion and the unpaid service-based portions were paid out following his death in 2009 pursuant to the terms of the Retention Program. The other named executive officers were not employees at the time retention awards were granted and did not receive any payments under this program.

 

The following chart summarizes the achievement of the performance-based portion of the retention awards for the named executive officers who received them.

 

 

During 2009, Messrs. Bostrom, Federico and Perlman were each paid the two remaining “service-based” installments of their 2008 retention awards. The initial “service-based” installment was paid in December 2008. Mr. Kellermann also received the initial “service-based” installment of $170,000 in December 2008. Pursuant to the terms of the award, the remaining payments of $680,000 became payable upon his death.

 

The following chart summarizes the amount of these named executive officers’ retention awards by payment date and the total amount paid to each named executive officer.

 

 

Determination of Actual 2009 Target Incentive Opportunity for Named Executive Officers

 

In determining the pool of funds available for distribution to Covered Officers for the 2009 Target Incentive Opportunity, the Compensation Committee reviewed and discussed information provided by senior management on the company’s achievement level against the performance measures applicable to the first payment of the 2009 Target Incentive Opportunity, which were previously approved by FHFA to be used by the Compensation Committee as a basis to determine the amount of the Target Incentive Opportunity paid to Covered Officers in the Executive Compensation Program. In February 2010, the Committee reviewed and agreed with management’s recommendation that the company had fully achieved all of the performance measures applicable to 2009 under the LTI grant made in 2009 to Vice Presidents and non-officers. Under the Executive Compensation Program, 50% of the 2009 Target Incentive Opportunity is determined based on consideration of 2009 corporate performance; the remaining 50% is determined based on consideration of 2010 corporate performance.

 

Specifically, with respect to 2009 performance, the Committee determined that the company had completed the necessary steps with respect to 100% of the MRAs (consisting of specific action items relating to internal control, accounting, and operational deficiencies and other safety and soundness concerns) that were scheduled to be remediated prior to January 1, 2010. Based on this assessment, the Committee determined that the pool of funds available for distribution to Covered Officers for the 2009 Target Incentive Opportunity should be funded based on the approximate market median of long-term incentive payments in Freddie Mac’s Comparator Group and an alternative survey source from Towers Watson that strengthened the analysis.

 

In reviewing this determination, FHFA requested that the Committee consider additional factors and also consider reducing the funding level to 90% of the aggregate target amount. In response, the Committee took the following additional factors into consideration:

 

 

Based on this review, the Committee determined that the pool of funds should be reduced to 90% of the approximate market median, subject to FHFA approval.

 

Under the terms of the Executive Compensation Program, the amount of the Incentive Opportunity that is paid to Covered Officers who are members of Freddie Mac’s Management Committee is subject to an assessment by the Chief Executive Officer of division and/or individual performance. This assessment can result in an increase or decrease to the amount payable to each Covered Officer of up to 25% of the Covered Officer’s Target Incentive Opportunity.

 

However, in conjunction with the determination of the reduced funding level, the Chief Executive Officer determined that some additional flexibility was appropriate in allocating the approved funds among the

 

Covered Officers. Specifically, he determined that he should take into account factors in addition to division and individual performance in his assessment and distribute the available funds in a manner that would result in an increase or decrease in the amount payable to certain Covered Officers exceeding 25% of their Target Incentive Opportunity. After consultation with FHFA, he then presented to the Compensation Committee for its review and approval his proposal regarding how the aggregate approved funds for the first Incentive Opportunity Payment for 2009 should be distributed to Covered Officers. Mr. Haldeman considered several factors in allocating the available funds among the Covered Officers (including our named executive officers), including:

 

 

Based on these factors, the Chief Executive Officer exercised his discretion and recommended that the Compensation Committee vary the amount of Incentive Opportunity actually paid for certain Covered Officers, including Messrs. Federico, Bostrom and Perlman, as described below.

 

The Chief Executive Officer’s assessment resulted in his recommendation that the amount of Mr. Federico’s first Incentive Opportunity Payment should be increased to $523,438 from the target of $419,078, taking into account Mr. Federico’s expanded role and his performance of significant special projects in addition to his normal responsibilities, as well as the fact that his 2009 TDC was below the 50th percentile of the total direct compensation paid to comparable positions at companies included in the alternative surveys.

 

The Chief Executive Officer considered the same factors for Messrs. Bostrom and Perlman. TDC for both officers was above the 50th percentile of the total direct compensation paid to comparable positions at Comparator Group companies and companies included in the alternative surveys. Given that fact, the limited pool of funds and the increased allocations to Mr. Federico and other Covered Officers, the CEO recommended that the amount of Mr. Bostrom’s first Incentive Opportunity Payment should be reduced to $348,750 from the target of $465,000, and that the amount of Mr. Perlman’s first Incentive Opportunity Payment paid should be reduced to $125,000 from the target of $487,500.

 

For Mr. Kari, the Chief Executive Officer considered each of the factors above, as well his short tenure with the company, and recommended that the amount of his Incentive Opportunity actually paid should be equal to his target, although this resulted in 2009 TDC that was less than the 50th percentile of the total direct compensation paid to comparable positions at Comparator Group companies and companies included in the alternative surveys.

 

The Committee reviewed and approved all of the Chief Executive Officer’s recommendations. After consultation with the other non-management members of the Board and consideration of Mr. Haldeman’s satisfaction of his performance objectives and his short tenure with the company, the Compensation Committee also approved compensation for Mr. Haldeman in accordance with his targets. Mr. Haldeman’s performance objectives were based primarily on mission-related initiatives that support foreclosure prevention, affordable housing and other similar activities; continued progress in executing the company’s plan for improving its business infrastructure; and continued improvement in accounting controls and other internal controls. His objectives also included, and he achieved notable success in, recruiting and hiring a new Chief Operating Officer and Chief Financial Officer within three months after his arrival and leading the senior management team in building a strong relationship with FHFA.

 

FHFA then approved the aggregate funding level as well as the recommended payment to each named executive officer.

 

The following chart summarizes the 2009 Target Incentive Opportunity for each of the named executive officers under the Executive Compensation Program and the amount of the Incentive Opportunity that was approved by the Compensation Committee and FHFA and actually paid.

 

 

The 2009 Target Incentive Opportunity for Messrs. Haldeman and Kari reflects a pro-ration of their annual Target Incentive Opportunity based on their respective dates of hire in 2009.

 

Determination of Other Components of Compensation for Named Executive Officers

 

The 2009 Semi-Monthly Base Salary. The amount of each named executive officer’s 2009 Semi-Monthly Base Salary was not changed from the amounts previously approved by the Committee and FHFA in December 2009.

 

The 2009 Deferred Base Salary. The amount of each named executive officer’s 2009 Deferred Base Salary was previously approved by the Committee and FHFA. The following chart summarizes the actual amount of Deferred Base Salary that each named executive officer earned during each calendar quarter of 2009, which is scheduled to be paid in a fixed amount on the last business day of the corresponding quarter of 2010.

 

 

In order to be paid the Deferred Base Salary that was earned during 2009, the Covered Officer must be employed by the company on the 2010 payment date (subject to certain exceptions for the Covered Officer’s death, long-term disability or retirement). If a Covered Officer is involuntarily terminated, any unpaid Deferred Base Salary will be forfeited unless the Committee recommends that the Covered Officer receive either all or a portion of the unpaid Deferred Base Salary and the Committee’s recommendation is approved by FHFA after consulting with Treasury, as appropriate. Further, if a Covered Officer voluntarily terminates employment, any unpaid Deferred Base Salary will be forfeited.

 

The Service-Based Portions of the 2008 Retention Award. For the discussion of this element of compensation and the amounts paid to each named executive officer, refer to the discussion under “Determination of Performance-Based Portion of the 2008 Retention Award for Named Executive Officers.”

 

Impact on Freddie Mac’s Supplemental Executive Retirement Plan

 

Our named executive officers (other than Mr. Koskinen) were eligible to participate in Freddie Mac’s Supplemental Executive Retirement Plan, or “SERP.” In approving the Executive Compensation Program, FHFA also took actions that limit or eliminate certain compensation advantages previously available to some executive officers. FHFA directed Freddie Mac to amend the SERP effective January 1, 2010 to provide that the maximum covered compensation for purposes of the SERP, relative to a Covered Officer only, may not exceed two times the Covered Officer’s Semi-Monthly Base Salary. It is the intent of Freddie Mac and FHFA that, upon the conclusion of conservatorship, the definition of “compensation” for purposes of accruals under the SERP will revert to the definition of “compensation” in place prior to the amendment to the SERP made

 

to conform its terms to the Executive Compensation Program. A copy of the amendment to the SERP is filed as Exhibit 10.3 to the Compensation Program Form 8-K.

 

Treatment of Amounts Upon Termination of Employment or Violation of Non-Competition Covenant

 

The treatment of Deferred Base Salary and Target Incentive Opportunity amounts upon the death, disability, retirement or termination of a Covered Officer is described in the Compensation Program Form 8-K and is described below with respect to named executive officers under “— Potential Payments Upon Termination of Employment or Change-in-Control.” The treatment of Target Incentive Opportunity amounts if a current or former Covered Officer violates provisions of the non-competition agreement entered into with Freddie Mac is also discussed in the Compensation Program Form 8-K.

 

Recapture Policy

 

The Recapture Policy provides that certain compensation under the Executive Compensation Program will be subject to “clawback” if any of the following events occurs subsequent to the date that the named executive officer agreed to the terms of the Recapture Policy.

 

 

If any of these events occurs, the Board of Directors will determine whether more compensation was paid than would otherwise have been paid had Freddie Mac been aware of the event or events. If such a determination is made, the following elements of compensation will be subject to recapture: (1) Deferred Base Salary; (2) Target Incentive Opportunity; (3) any equity awards that vest after the adoption of the Executive Compensation Program; and (4) any severance benefits paid. Only compensation paid up to two years prior to the triggering event or the date of the executive’s termination or compensation paid at the time of termination, as applicable, will be subject to recapture. Payments to named executive officers under the Retention Program are not subject to clawback.

 

The amount of compensation recaptured will be determined by the Board, subject to the guidelines described above. Additional details are included in the Recapture Policy, which was filed as Exhibit 10.4 to the Compensation Program Form 8-K.

 

Written Agreements Relating to Employment of CEO and CFO

 

Freddie Mac has entered into (i) a Memorandum Agreement, (ii) a Recapture Agreement and (iii) an Indemnification Agreement with each of Messrs. Haldeman and Kari in connection with their employment as executive officers of Freddie Mac. Copies of the Memorandum Agreement and the Recapture Agreement regarding Messrs. Haldeman and Kari were filed as Exhibits 10.1 and 10.2, respectively, to the Current Reports on Form 8-K filed by the company on July 21 and September 24, 2009 with respect to each executive’s employment by the company. A copy of the form of indemnification agreement on which each executive’s Indemnification Agreement was based was filed as Exhibit 10.2 to the Form 8-K filed by the company on December 23, 2008. The provisions of these indemnification agreements are described above under “Directors, Executive Officers and Corporate Governance — Indemnification Agreements.”

 

The compensation provisions of each executive’s Memorandum Agreement, in combination with provisions of the Executive Compensation Program, are summarized separately below.

 

Mr. Haldeman will receive the following compensation:

 

 

Mr. Kari will receive the following compensation:

 

 

Under their Memorandum Agreements, Messrs. Haldeman and Kari will receive the following additional forms of compensation during their employment at Freddie Mac:

 

 

Messrs. Haldeman and Kari are subject to non-competition and non-solicitation of employees restrictions for a period of two years and one year, respectively, following any termination of their employment, and they are also subject to certain restrictions with respect to confidential information obtained during the course of their employment.

 

Freddie Mac also has entered into a Recapture Agreement with each of the executives, previously filed (as noted above) as exhibits to the Current Report on Form 8-K regarding each executive’s employment at Freddie Mac. The recapture requirements included in these agreements, and the similar recapture requirements applicable to all other Covered Officers under the Recapture Policy, are described above under “— Executive Management Compensation Program — Recapture Policy.”

 

Other Executive Compensation Considerations

 

Perquisites

 

The company provides limited perquisites to its named executive officers, as follows:

 

 

None of the perquisites offered during 2009 to the currently employed named executive officers included a gross-up for taxes due on the perquisite itself. Beginning in 2010, total annual perquisites for any named executive officer cannot exceed $25,000 without FHFA approval.

 

Stock Ownership and Hedging Policies

 

In November 2008, FHFA approved the suspension of our stock ownership guidelines because of the difficulty of meeting the requirements at current market prices and because we had ceased paying our executives stock-based compensation. Also, the Purchase Agreement prohibits us from issuing any shares of Freddie Mac equity securities without the prior written consent of Treasury. The suspension of stock ownership requirements is expected to continue through the conservatorship and until Freddie Mac resumes granting stock-based compensation.

 

All employees, including our named executive officers, are prohibited from purchasing and selling derivative securities related to our equity securities, including warrants, puts and calls, or from dealing in any derivative securities other than pursuant to our stock-based benefit plans.

 

Role of Compensation Consultants

 

Through August 2009, the Compensation Committee retained and was assisted by Hewitt Associates in carrying out its responsibilities. Hewitt Associates’ role during the period from January 2009 through August 2009 was to assist the Compensation Committee’s oversight of compensation and benefits. During this period, Hewitt Associates also provided consulting services to the company’s management regarding various compensation and benefit matters.

 

Through August 2009, the Compensation Committee directly engaged Hewitt Associates and required management to disclose annually to the Compensation Committee the work performed by, and the fees paid to, Hewitt Associates, including any work Hewitt Associates performed for management. The Compensation Committee annually reviewed and pre-approved any services that Hewitt Associates provided to management so that the Compensation Committee could determine whether Hewitt Associates’ acceptance of engagements and remuneration from management could impair the firm’s ability to provide independent advice regarding management compensation to the Compensation Committee. Fees for Hewitt Associates’ consulting advice to the Compensation Committee for January 2009 through August 2009 were $140,496, including travel expenses for attendance at committee meetings. Hewitt Associates did not provide any services to the Compensation Committee after August 2009. Fees for Hewitt Associates’ services to management for the period from January 2009, through August 2009, were $37,582, including travel expenses for attendance at meetings.

 

In an effort to eliminate any perception that the advice received from its outside compensation consultant is not objective, in August 2009, the Compensation Committee concluded its relationship with Hewitt Associates and retained Steven Hall & Partners to exclusively advise the Compensation Committee. In its role as independent compensation consultant, Steven Hall & Partners provides information and guidance to the

 

Compensation Committee on executive compensation matters. In addition, the Compensation Committee or the full Board can engage Steven Hall & Partners for special projects, as needed. The decision to engage Steven Hall & Partners was made solely by the Compensation Committee without any recommendation from management. Steven Hall & Partners has not provided the Compensation Committee with any non-executive compensation consulting services, nor has it provided any services to management. Fees for Steven Hall & Partners’ services to the Compensation Committee through December 2009 were $228,827, including travel expenses for attendance at meetings.

 

Management continued to engage Hewitt Associates as one of management’s consultants on human resources, compensation and benefits matters from September 2009 through December 2009. Fees for Hewitt Associates’ services to management for the period from September 2009 through December 2009 were $153,694, including travel expenses for attendance at Compensation Committee meetings on behalf of management.

 

Section 162(m) Limits on the Tax Deductibility of Our Compensation Expenses

 

Section 162(m) of the Internal Revenue Code imposes a $1 million limit on the amount that a company may annually deduct for compensation to its CEO and certain other named executive officers, unless, among other things, the compensation is “performance-based,” as defined in section 162(m). Given the conservatorship and the desire to maintain flexibility to promote our corporate goals, awards of retention and deferred pay, and long-term incentive awards for 2009 performance are not structured to qualify as performance-based compensation under section 162(m).

 

None of the members of the Board of Directors who served on the Compensation Committee during fiscal year 2009 were officers or employees of Freddie Mac or had any relationship with Freddie Mac that would be required to be disclosed by Freddie Mac under Item 407(e)(4) of Regulation S-K.

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on such review and discussion, has recommended that the Compensation Discussion and Analysis be included in this Amendment No. 2 to our Annual Report on Form 10-K.

 

This report is respectfully submitted by the members of the Compensation Committee of the Board.

 

Eugene B. Shanks, Jr., Chairman

Linda B. Bammann

Christopher S. Lynch

 

In the conduct of its oversight of executive and employee compensation matters, the Compensation Committee reviewed and discussed two separate reports to determine if Freddie Mac’s compensation policies and practices create incentives for officers and employees to take on inappropriate business risks. One review was conducted for management by Hewitt Associates, management’s compensation consultant. In addition, senior personnel in Freddie Mac’s Enterprise Risk Management Division conducted a review. Based on these reviews and this process, Freddie Mac believes that its compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the company.

 

 

The following tables set forth compensation information for all individuals who served as our Chief Executive Officer during 2009, all individuals who served as our Chief Financial Officer during 2009 and our three other most highly compensated executive officers who were serving as executive officers as of December 31, 2009 (collectively, our “named executive officers”).

 

Summary Compensation Table — 2009

 

 

The following table provides a comparison of 2009 total compensation as reported in the Summary Compensation Table with a recalculated amount that excludes the Deferred Base Salary earned, but not paid, during 2009, which is subject to forfeiture if the executive does not remain actively employed with the company during 2010.

 

										As Adjusted
										Excluding
						Deferred Base				Deferred Base
						Salary Earned				Salary Earned
Name		As Reported				in 2009				in 2009
Mr. Haldeman		$	2,076,011			$	1,277,083			$	798,928
Mr. Kari			1,199,149				370,999				828,150
Mr. Moffett			512,864				—				512,864
Mr. Koskinen			550,713				—				550,713
Mr. Kellermann			845,902				—				845,902
Mr. Bostrom			3,197,387				1,260,000				1,937,387
Mr. Federico			3,126,799				1,294,685				1,832,114
Mr. Perlman			3,461,483				1,450,000				2,011,483

 

 

 

Grants of RSUs include the right to receive dividend equivalents. The value of these dividend equivalents is included in the calculation of the grant date fair value of the RSU awards. Stock options granted prior to January 1, 2006 also include dividend equivalent rights on each share underlying the option equal to the dividend per share declared and paid on our outstanding common stock.

 

Although dividends on common stock have been suspended during the conservatorship by order of the Conservator, payment of accrued dividend equivalents on stock options vested as of December 31, 2004 will occur as those options expire unexercised. Of the named executives, only Messrs. Federico and Kellermann received cash payments during 2009 (equal to $13,274 and $3,699, respectively) for dividend equivalents associated with options that expired unexercised.

 

 

With the exception of Messrs. Kellermann and Federico, the values reported include amounts that the named executive officers are not currently entitled to receive because such amounts are not yet vested. The amounts reported do not include values associated with retiree medical benefits, which are generally available on the same terms to all employees.

 

Deferred Base Salary under the Mandatory Executive Deferred Base Salary Plan is not considered compensation eligible for deferral in accordance with the Executive Deferred Compensation Plan, or EDCP. The Mandatory Executive Deferred Base Salary Plan does not provide for interest on Deferred Base Salary.

 

The amounts reported in this column for Messrs. Federico and Kellermann include above-market earnings on their respective accumulated balances in the EDCP as of December 31, 2009 for Mr. Federico and as of April 22, 2009 for Mr, Kellermann (the date of his death). The amounts of the above-market earnings for these individuals are as follows: Mr. Federico: $126; and Mr. Kellermann: $35. Deferrals under the EDCP are credited with interest compounded daily at the rate of 1% per annum in excess of the prime rate as reported by the Wall Street Journal on the first business day of each calendar year during the deferral period. In 2009, interest was credited at a rate of 4.25% based on the prime rate on January 2, 2009 of 3.25% plus 1%. Nonqualified deferred compensation earnings included for Messrs. Federico and Kellermann consist of the above-market portion of interest paid in 2009, which was 0.04%, equal to the 4.25% credited minus 120% of the applicable federal long-term rate, or 4.21%.

 

 

		Thrift/401(k)
		Savings Plan				Thrift/401(k)				Flex								Tax
		Contributions				SERP Accruals				Dollars				Perquisites				Gross-Ups				Other
Mr. Haldeman		$	—			$	—			$	290			$	46,555			$	—			$	—
Mr. Kari			—				—				302				58,836				—				—
Mr. Moffett			—				—				3,914				194,628				126,822				—
Mr. Koskinen			—				—				—				—				—				10,028
Mr. Kellermann			13,660				39,177				4,697				—				—				—
Mr. Bostrom			17,435				92,500				14,168				—				—				—
Mr. Federico			21,860				77,880				21,782				—				—				—
Mr. Perlman			14,431				48,508				12,748				—				—				—

 

 

For additional information regarding the Thrift/401(k) SERP Benefit, see “Non-qualified Deferred Compensation” below. Amounts for the Thrift/401(k) Savings Plan Contributions and Thrift/401(k) SERP Accruals are presented without regard to vesting status.

 

FlexDollars are provided under our Flexible Benefits Plan and are generally available to all employees to offset costs related to medical, dental and vision coverage, group term life insurance, accidental death and personal loss insurance, and vacation purchase. FlexDollars can be used to offset the cost of other benefits and any unused FlexDollars are payable as taxable income.

 

Perquisites include relocation services, financial planning services and annual physical examinations. Perquisites are valued at their aggregate incremental cost to Freddie Mac. During the years reported, the aggregate value of perquisites received by all named executive officers other than Messrs. Haldeman, Kari and Moffett was less than $10,000. In accordance with SEC rules, amounts shown under “All Other Compensation” do not include perquisites or personal benefits for a named executive officer that, in the aggregate, amount to less than $10,000.

 

The amounts shown in the “Perquisites” column for Messrs. Haldeman and Kari consist entirely of relocation expenses paid as part of the relocation benefit we agreed to provide when we hired them.

 

The amount shown in the “Perquisites” column for Mr. Moffett consists of (a) relocation expenses of $180,662 paid to Mr. Moffett as part of the relocation benefit we agreed to provide to him in connection with his hire; (b) financial planning services; and (c) personal use of car and driver for commuting in the Washington, D.C. metro area.

 

We calculated the incremental cost to us of providing each of Mr. Haldeman’s, Mr. Kari’s and Mr. Moffett’s relocation expenses based on actual cost; that is, the total amount of expenses incurred by us in providing the benefit.

 

Since the time Mr. Moffett received the tax gross-up shown above, FHFA has determined that no executive officers will be provided with tax gross-ups.

 

The amounts shown in the “Other” column for Mr. Koskinen consist of a match by the Freddie Mac Foundation of charitable contributions made by non-employee directors and the attributed value of Business Travel Accident Insurance provided to non-employee directors. See notes 6 and 7 to the 2009 Director Compensation Table for more information.

 

No amounts were paid or accrued during 2009 to any named executive officer pursuant to any termination or severance.

 

 

The amounts reported for Mr. Koskinen represent his fees earned or paid in cash for services as the Non-Executive Chairman ($290,000); compensation paid for service from March 2009 through August 2009 as Interim Chief Executive Officer ($250,685); a charitable match of up to $10,000 ($10,000; see Note 6 to the 2009 Director Compensation Table); and the cost of Business Travel Accident Insurance ($28; see Note 7 to the 2009 Director Compensation Table).

 

 

Grants of Plan-Based Awards — 2009

 

The following table contains information concerning grants of plan-based awards to each of the named executive officers during 2009. The company is prohibited from issuing equity securities, without Treasury’s consent, under the terms of the Purchase Agreement. Accordingly, no stock awards were granted during 2009.

 

 

 

Outstanding Equity Awards at Fiscal Year-End — 2009

 

The following table shows outstanding equity awards held by the named executive officers as of December 31, 2009.

 

 

 

 

Pursuant to his grant agreements, Mr. Kellermann’s stock options vested upon his death on April 22, 2009 and remain exercisable for 36 months, unless they expire earlier pursuant to their terms. All of Mr. Kellermann’s unvested RSUs vested upon his death and became nonforfeitable immediately.

 

For information on alternative settlement provisions of RSU and stock option grants in the event of certain terminations, see “Potential Payments Upon Termination of Employment or Change-in-Control” below.

 

Option Exercises and Stock Vested — 2009

 

The following table sets forth information concerning value realized upon the vesting of RSUs during 2009 by each of the named executive officers. No named executive officer exercised options in 2009.