FORTUNE — Occupy Wall Streeters might have suffered a few setbacks this week, but the demonstrators decrying income inequality might feel some vindication knowing that Congress is taking steps to reel in compensation at the nation’s largest mortgage finance companies.
On Tuesday, the House Financial Services Committee approved legislation that would end Fannie Mae and Freddie Mac executive compensation packages worth tens of millions of dollars. It would also suspend future bonuses and align their salaries with other federal employees who make much less. The Senate is expected to take up similar measures limiting pay at the bailed-out firms and legislation is expected to be ready for the President’s signature by the end of this year.
Coincidentally, the panel’s vote (52-4) came the same day a judge ruled against OWS demonstrators, upholding a move by New York City to clear tents from the privately-owned Zucotti Park and keep protesters from bringing equipment back in. Surely this has left a big void in the movement, driven by an array of seemingly unfocused causes but with the overarching argument that Wall Street gets paid too much while the rest of America languishes behind.
Just take a look at the hefty bonuses at Freddie and Fannie, which taxpayers are expected to pay billions to rescue from financial abyss. In 2008, the federal government took over the companies after the mortgage giants saw huge losses largely from soured mortgage loans following the bust of the housing market.
The government estimates the bailout could reach up to $220 billion through 2014. Earlier this month, Fannie asked for $7.8 billion more and Freddie requested $6 billion in extra aid to cover large quarterly losses mostly driven by low mortgage rates.
But given the lofty bonuses awarded to the companies’ CEOs, it’s hard to tell that Freddie and Fannie are strapped for cash. Ten executives at the firms received roughly $61 million in total salary and bonuses in 2009 and 2010. Fannie’s CEO Michael J. Williams received $5.6 million last year while Freddie’s CEO Edward Halderman received $5.4 million, according to the Federal Housing Finance Agency. Under the proposed bill, the top executives of Fannie and Freddie would only be allowed to earn $218,978 this year, according to the House Financial Services Committee.
It’s a big drop, but don’t expect much sympathy from most Americans. At $49,909, the nation’s median household income is far from the salaries at the troubled financial institutions and it’s easy to see how Congress’ efforts might do little to appease an increasingly frustrated public.
Efforts to reel in Freddie and Fannie bonuses come as Wall Street’s bonus pool this year is expected to shrink due to the tepid recovery combined with financial regulations and uncertainty in global markets. The average Wall Street bonus is expected to decline 20% to 30%, according to projections by New York-based compensation consulting firm Johnson Associates.
Of course, this comes after two years of record payouts as markets staged a comeback from the depths of the financial crisis. Traders, bankers and top executives typically receive base salaries of $100,000 to $1 million, but most of their compensation comes from bonuses paid after the end of the year.
The steepest pay cuts this year are expected to impact employees in the bond-trading business, with bonuses falling 35% to 45% from a year earlier. Johnson Associates also projects that investment banker bonuses will drop up to 20%, while equity traders and senior executives will see bonus cuts of up to 30%.
This should probably comes as little surprise, given that the big banks have been reporting increasingly soft earnings and have begun shedding thousands of employees. Just last month, Goldman Sachs (GS) reported the second quarterly loss in its history as a public company. And on Wednesday, several news outlets reported that Citigroup (C) might cut slightly more than 3,000 jobs, becoming the latest U.S. bank to cut positions.
Indeed, tough times are ahead for Wall Street. And as OWS demonstrators today try to figure out where the movement could go, it’s hard not to wonder if it might expand to include those who used to fall in the top 1%.