Fanni and Freddie Bonuses???? We should march on DC and demand the resignation of EVERY member of congress and start over from scratch!
http://online.wsj.com/article/SB123739512036672809.htmlFannie Is Handing Out Its Own Sizable Retention Payouts Article
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more in Politics »By JAMES R. HAGERTY and AARON LUCCHETTI
More financial companies that are being propped up with federal money are facing political heat over bonus payments to executives.
Fannie Mae is due to pay retention bonuses of between $470,000 and $611,000 this year to some executives, despite enormous losses at the government-backed mortgage company. Fannie's main rival, Freddie Mac, also plans to pay such bonuses but hasn't yet provided details.
Fannie's bonuses are smaller than ones paid by American International Group Inc. that have caused a political firestorm for that company. Seventy-three AIG executives received retention payments of $1 million or more recently, according to New York Attorney General Andrew Cuomo.
But the Fannie bonuses are still considerable and come at a time when Fannie and Freddie are receiving increasing amounts of funding from the Treasury. For 2008, Fannie and Freddie reported combined losses of about $108 billion, largely stemming from a surge in home-mortgage defaults. The Treasury has agreed to provide as much as $200 billion of capital apiece to Fannie and Freddie in exchange for preferred stock. The two companies have said they will need a combined $60 billion of that money to cover their losses so far.
Discuss
Should Fannie Mae and Freddie Mac employees accept their retention bonuses?
Bonuses for executives at companies that have received federal backing are "definitely wrong," said Rep. Edolphus Towns, a New York Democrat. "They are rewarding folks who have not done a good job." Rep. Towns also questioned whether executives would bolt if they didn't get retention bonuses. "Where are these people going?" he asked. "Everybody's laying off."
On Tuesday, Sen. Robert Menendez (D., N.J.) wrote to Treasury Secretary Timothy Geithner, asking him to "use every legal means available" to stop $3 billion in previously disclosed retention payments to brokers at the new joint venture being formed by Morgan Stanley and Citigroup Inc.'s Smith Barney unit.
"These payouts constitute misuse of taxpayer money and are an insult to hardworking families who are saving every penny," wrote Sen. Menendez.
Morgan responded in a statement that the payments aren't bonuses, but loans that won't start paying until 2010 and cannot be kept in full unless the broker stays at the firm for nine years. "The program is necessary because our financial advisers are being poached by competitors," the statement added.
The venture will be jointly owned by Morgan and Citigroup, both of which have taken an investment from the U.S. government after they ran into trouble during the credit crisis. But unlike some of the people who have received bonuses at AIG, the brokers getting extra money at the new Morgan Stanley Smith Barney haven't been directly involved with billions of dollars in write-downs at their parent companies.
James Lockhart, director of the Federal Housing Finance Agency, or FHFA, which regulates Fannie and Freddie, said the bonuses they are paying are "critical" to retain people needed to support the mortgage market and work on foreclosure-prevention efforts. After the companies' chief executives were ousted in September, "it would have been catastrophic to lose the next layers down and other highly experienced employees," he said. Mr. Lockhart added that compensation has declined for many employees because other types of bonuses weren't paid last year, and "past stock grants are virtually worthless."
A recent Fannie securities filing, providing details on a bonus plan announced last year, says that Michael Williams, the company's chief operating officer, is due to receive cash retention awards of $611,000 this year, atop a similar award of $260,000 in 2008. His base salary is $676,000 a year.
The company also disclosed plans to pay retention awards this year of $517,000 to David Hisey and $470,000 each to Thomas Lund and Kenneth Bacon. All three are executive vice presidents.
The bonuses this year are to be paid in two installments, one in April and the second in November. Those installments are to be paid only if the executives remain in their posts at the payment dates.
Hundreds of other Fannie employees also are eligible for retention awards, but the company disclosed only the largest of the bonuses. It said there are no plans for a retention bonus for CEO Herbert Allison, who elected to serve without any salary or bonus in 2008.
Write to James R. Hagerty at bob.hagerty@wsj.com and Aaron Lucchetti at aaron.lucchetti
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