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Fannie, Freddie Proceed with Bonuses

""Fannie Mae"":http://www.fanniemae.com and ""Freddie Mac"":http://www.freddiemac.com are planning to follow through with the payout of retention bonuses to more than 7,500 employees. The two companies plan to award $159 million to executives and key staff members over the next 18 months, on top of the nearly $51 million already paid out in 2008.
The GSEs came under heavy fire two weeks ago, at the time of the AIG bonus scandal, when it was reported that they too had multi-million dollar employee incentive programs in place.
In a letter sent to Sen. Charles E. Grassley (R-Iowa) last week, James Lockhart, director of the GSE's conservator, the ""Federal Housing Finance Agency"":http://www.fhfa.gov (FHFA), said the bonus programs are ""critical"" to hold on to talented workers and protect the taxpayers' investment.
But Grassley told _""The New York Times"":http://dealbook.blogs.nytimes.com/2009/04/03/fannie-and-freddie-detail-retention-bonuses/xhp_ on Friday that it was ""hard to see any common sense in management decisions that award hundreds of millions in bonuses when their organizations lost more than $100 billion in a year.""
""It’s an insult that the bonuses were made with an infusion of cash from taxpayers,"" Grassley continued. ""Poor performance and at taxpayer expense do a lot of damage to public confidence and support for the economic recovery effort.""
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.
According to Lockhart's letter, the retention plans cover 4,057 employees at Freddie Mac and 3,545 employees at Fannie Mae.
The two GSEs reported a combined loss of $108 billion for FY 2008. Together they have taken $60 billion of their $400 billion line of credit with the Treasury to bolster their deteriorating balance sheets.
Rep. Barney Frank (D-Massachusetts) has demanded that Lockhart scrap the GSEs' bonus payouts. _""The Wall Street Journal"":http://online.wsj.com/article_email/SB123876318076986497-lMyQjAxMDI5MzA4MzcwNjMzWj.html_ reported that in a letter to the enterprises' regulator, Frank said he was ""very skeptical that retaining and rewarding people who made the mistakes that contributed to the unsatisfactory performance is a good idea. ... In this troubled economy, and in this job market, it is difficult to imagine that the companies would not be able to find competent and talented replacements for anyone who chooses to leave.""
Congress is currently considering legislation that would impose hefty taxes on bonuses paid by companies receiving federal bailout money - and that would include both Fannie and Freddie.

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.

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