Home / News / Government / Fannie, Freddie Under Fire for Bonuses
Print This Post Print This Post

Fannie, Freddie Under Fire for Bonuses

As lawmakers grilled AIG's CEO on Capitol Hill Wednesday about executives receiving bonuses from taxpayer dollars, the _""Wall Street Journal"":http://www.wsjonline.com_ reported that ""Fannie Mae"":http://www.fanniemae.com and ""Freddie Mac"":http://www.freddiemac.com are also handing out sizable bonuses as ""retention payments"" to thousands of employees.
""Federal Housing Finance Agency"":http://www.fhfa.gov (FHFA) Director James Lockhart, the GSEs' conservator, defended Fannie's and Freddie's planned bonuses when he spoke to reporters at a housing symposium in Washington that same day. ""I think it's a reasonable and well-thought out plan,"" Lockhart said. ""The most important thing in those companies are the human assets. It was important to us - and we disclosed it at the time - to retain these people. It would have been catastrophic if people had walked out that first day.""
When Fannie and Freddie were seized by the government in September of last year, Lockhart dismissed some of the top executives, including the CEOs, and under the advice of a compensation consultant, put together an incentive plan designed to retain other second-tier executives and staff. Lockhart says the bonus payouts are ""critical"" to hold on to the type of talent needed to support the ailing mortgage market and the government's new foreclosure-prevention initiatives.
Both Fannie and Freddie have taken a hit because of the deteriorating housing market and have required Treasury assistance to bolster their heavily tarnished balance sheets after reporting a combined loss of $108 billion for FY 2008. By the end of this month, taxpayers will have funneled more than $60 billion into the GSEs. However, since the government aid provided to Fannie and Freddie wasn't pulled from the Troubled Asset Relief Program (TARP), they aren't laden by the new restrictions on executive pay that have been implemented by the Obama administration.
According to Fannie Mae's last securities filing, the company's COO is due to receive cash retention awards of $611,000 this year, atop a bonus of $260,000 in 2008, and a base salary of $676,000 a year, the _Journal _reported. The company also disclosed plans to pay retention awards this year to three EVPs, ranging from $517,000 to $470,000.
All in all, about 5,000 Fannie employees are slated to get retention awards, but the company disclosed only the largest of the bonuses in its financial filing. Freddie has not divulged the specifics of its planned payouts.
Lockhart argues that many of the companies' employees lost big when the value of Fannie and Freddie shares plummeted after the government stepped in and took control. He noted that many staff members have seen their pay slide, and he stressed that the companies' bonus plans have been pared back. ""The employees now are getting probably fifty percent of what they got in previous years. They're down dramatically,"" Lockhart said.
According to the _Journal_, there are no plans of a retention bonus for Fannie's CEO Herbert Allison, who worked without any salary or bonus in 2008.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
x

Check Also

Mandatory Flood Insurance Myths Debunked

A new intelligence report written by Scott Giberson, Principal of Product Compliance for CoreLogic, puts some common misconceptions about flood insurance under the microscope.