IMPEACH BUSH

Fannie Mae and Freddie Mac are rapidly stripping out management costs and acting more like government agencies than the shareholder-driven financial companies they used to be.

Three weeks after the mortgage companies' regulator seized control of them, Freddie Mac announced Friday the departure of three senior executives: Patricia Cook, chief business officer; Buddy Piszel, chief financial officer; and Timothy J. McBride, a senior lobbyist.

Ms. Cook's post was eliminated as part of a reorganization under which the heads of business lines will report directly to David Moffett, the chief executive officer installed three weeks ago by the regulator, the Federal Housing Finance Agency, or FHFA. Mr. McBride's job vanished because the regulator has told Fannie and Freddie to cease all lobbying. Freddie said it will search for a new CFO to succeed Mr. Piszel.

The shakeup comes a week after similar moves were announced at Fannie as part of what its new CEO, Herbert Allison, described as a shift to a "flatter" management structure.

Employees and managers of Fannie and Freddie are waiting nervously to hear within the next couple of weeks which of them will be awarded cash "retention" payments. The amounts paid will vary based on employees' performance and "criticality to the company," Fannie disclosed in a recent securities filing. Some employees will receive no retention award while others will get as much as 150% of the amount that had been targeted for their annual bonuses under the former pay system, Fannie said.

Fannie and Freddie are the main providers of funding for U.S. home mortgages. The regulator grabbed control of them under a legal process known as conservatorship, citing the risk that losses stemming from mortgage defaults would gobble up their capital and prevent them from raising new money. The Treasury has acquired preferred stock in Fannie and Freddie and promised to provide capital if needed.

The regulator is deeply involved in decision-making at the companies, including how much they should spend to purchase mortgages and related securities in their efforts to push down interest rates on home loans, according to people familiar with the situation. As a result, these people say, the chief executives are effectively serving as chief operating officers, carrying out policies set by the regulator.

Morale is low or even "funereal," according to some people who speak regularly with employees of the companies. Working for a federal agency, with tight constraints on pay and policy-making, "is not the gig they signed up for," says an employee who resigned recently. Among those most likely to bolt are accountants and computer experts whose services are in high demand outside the depressed mortgage business.

The regulator and senior executives are trying to determine within a few weeks to what extent Fannie and Freddie can reduce fees they added over the past year to protect against the growing risks of lending at a time when house prices are falling swiftly in much of the country.

In a congressional hearing Thursday, Fannie's Mr. Allison said: "The taxpayers are, in effect, indirectly equity holders, and we have to keep their interests in mind." The desire to boost the housing market has to be weighed against the risks of heavier default losses that might be paid by taxpayers if the Treasury is forced to pump in large amounts of capital.

Fannie and Freddie may be operated by the regulator for years. Eventually, though, Congress will have to decide whether to transform them into true government agencies or adopt some other structure. In the past, they were often described as "quasi-government entities," with private shareholders but a public mission of supporting housing. That left ambiguity over the extent to which the government would have to bail them out in a crisis.

Rep. Maxine Waters, a California Democrat who was long a supporter of Fannie and Freddie, said during a House Financial Services Committee hearing Thursday that Congress will have to think carefully about how to structure them in the future. "Clearly, the word 'quasi' is an adjective that should probably not be applicable to the new structure," she added.

Write to James R. Hagerty at bob.hagerty@wsj.com