Official defends Fannie bonuses
By VICTORIA MCGRANE
3/24/09
politico.com
Fannie and Freddie are paying out those bonuses anyway — regardless of Rep. Barney Frank’s demands and the populist furor over AIG’s bonus spree.
Frank, the chairman of the Financial Services Committee, sent a letter Friday to James Lockhart, the federal regulator overseeing Fannie Mae and Freddie Mac, asking him to rescind the retention bonuses of at least $1 million that have been planned for four top executives over the next two years.
But in a letter obtained by POLITICO, Lockhart tells Frank there’s a “great risk” of key employees walking away if they don’t pay out the promised bonuses. These Fannie and Freddie employee retention programs were established because federal officials believed top executives will play a critical role in ensuring the successful turnaround of the companies.
The federal government took over Fannie and Freddie last September, placing them in a “conservatorship” overseen by the Federal Housing Finance Agency, giving the federal government a tight hand on the mortgage giants.
“In September, when the conservatorships were established, I made clear to Congress that we had developed, with the new CEOs and with an outside pay consultant, employee retention programs” in consultation with Treasury, Lockhart wrote. “I stated then my view that it was very important to work with the current management teams and employees to encourage them to stay and to continue to make important improvements to the enterprises.”
So far, most employees have stayed and “have been working far more hours, with far less compensation than they did prior to conservatorship,” Lockhart said. The senior managers responsible for the bad decisions have departed, he added.
Lockhart also argues that the Obama administration has given Fannie and Freddie a key role in its plan to stabilize the housing market and prevent foreclosures — and the success of the effort depends on keeping the expert staff on hand.
“But I can also say that we run a great risk of these same employees deciding this is the last straw and walking away,” he wrote. “The loss of key personnel would be devastating to the companies and to the government’s efforts to stabilize the housing system.” |
