Ann...A sane person might think twice about bonuses with tax payer money.
Fannie’s $1 Million Retention Bonuses ‘Reasonable’ (Update3)
By Dawn Kopecki
bloomberg.com
March 18 (Bloomberg) -- Fannie Mae and Freddie Mac’s federal regulator defended million-dollar bonuses for executives at the government-run mortgage finance companies as lawmakers prepared legislation that would recoup most of the money.
Fannie awarded a total of $4.4 million in retention bonuses to four of its top six executives in 2008, to be paid out through February, according to a company filing with regulators on Feb. 26.
“It’s a reasonable and well-thought-out plan,” James Lockhart, director of the Federal Housing Finance Agency, said today after a speech in Washington. Keeping personnel of Fannie and Freddie Mac was critical when the two mortgage-finance companies were taken over in September, he said. He said the extra money is necessary to protect taxpayers’ investment in the mortgage-finance companies.
The House will vote on legislation tomorrow that would impose a 90 percent tax on executive bonuses paid by companies getting more than $5 billion in U.S. bailout funds, House leaders said today. Lawmakers drafted more than a half-dozen bills this week aimed at curtailing executive bonuses at American International Group Inc. after that company paid more than $165 million in bonuses while taking $173 billion in aid.
By expanding the legislation, “we go far beyond AIG, Citibank, Freddie Mac, Fannie Mae and others,” said House Ways and Means Committee Chairman Charles Rangel, a New York Democrat. “This is not going to happen again, the light is flashing and letting them know that America won’t take it.”
House leaders said they expect the bill to pass with strong bipartisan support.
Retention Plans
FHFA put retention plans in place for thousands of workers at Washington-based Fannie and Freddie of McLean, Virginia, shortly after their takeover. Freddie lost more than $50.1 billion last year and has so far requested $44.6 in aid from Treasury. Fannie booked $58.7 billion in losses last year and said it needs $15.2 billion in federal aid to remain solvent.
Fannie granted Deputy Chief Financial Officer David Hisey a $1.1 million retention award as well as a $160,000 cash bonus for filing the company’s financial statements on time. Executive vice presidents Ken Bacon, who runs housing and community development, and Thomas Lund, who is in charge of Fannie’s single-family mortgage business, each received $1 million retention awards. Chief Operating Officer Michael Williams was awarded $1.3 million in retention pay.
The money is being paid to the executives in four installments through February 2010, contingent upon their performance and active employment.
Not All Disclosed
Fannie spokesman Brian Faith said the company didn’t disclose the total cost of the bonus plan for all employees. Freddie spokeswoman Sharon McHale said the payments to its top executives will be released in April.
Lockhart said employees are being paid about half their total compensation from a few years ago, and that a mass exodus of employees would have crippled the companies as well as government efforts to revive the housing market.
Fannie said FHFA established the retention program before the Treasury decided to restrict compensation at corporations that have taken federal aid. The awards were structured “in recognition of Fannie Mae’s unsatisfactory performance in 2008, coupled with our urgent need to retain people in the most critical positions,” Fannie said.
Both companies, which account for $5.2 trillion of the $12 trillion U.S. home loan market, said in recent securities filings that their combined $400 billion lifeline from Treasury may not be enough to keep them solvent this year.
Base Salaries
Fannie’s officers received 20 percent of their bonuses last year and are scheduled to receive another 20 percent if they stay through April. They will get 27 percent of the total award in November and 33 percent if they are still with the company next February. The bonuses are in addition to base salaries of $530,400 for Bacon, $385,017 for Hisey, $543,920 for Lund and $676,000 for Williams.
Chief Executive Officer Herb Allison, tapped by FHFA in September, decided to forgo all salary and bonuses and to reimburse the company for his company car and driver in 2008, the company said. His 2009 compensation plan hasn’t yet been established.
AIG Chairman Edward Liddy told a House subcommittee today that some of the New York-based company’s employees have agreed to return bonuses and he will ask others paid more than $100,000 to give back half.
“We are seeing a disturbing trend of taxpayer dollars being used as a conduit for bonuses to executives,” Kurt Bardella, a spokesman for Republicans on the House Committee on Oversight and Government Reform, said today. |
