Frank Says Gov't Should Stop Fannie, Freddie Bonus
Rep. Barney Frank, D-Mass., asked the Federal Housing Finance Agency, which regulates Fannie and Freddie, to eliminate the bonuses approved for this year and next. Frank also wants employees to repay bonuses from last fall, after the two companies were placed under government control.
Initially the award programs at Fannie and Freddie ruffled few feathers. But now the generous paychecks are proving politically touchy as lawmakers and the public alike seethe over roughly $165 million in bonuses paid out last weekend by bailed-out insurance giant AIG.
The public "rightfully insists that large bonuses such as these awarded by institutions receiving public funds at a time of a serious economic downturn cannot continue," wrote Frank, chairman of the House Financial Services Committee. The letter dated Thursday was released by his office Friday. A spokesman for Fannie declined comment.
Over two years, Fannie Mae plans to pay retention bonuses totaling at least $1 million apiece to four key executives as part of a broad plan to keep employees from leaving. Rival mortgage finance company Freddie Mac is planning similar awards, but has yet to detail which executives will benefit.
The two companies have been hobbled by skyrocketing loan defaults. Fannie recently requested $15 billion in federal aid, while Freddie has sought a total of almost $45 billion.
The government seized control of Fannie and Freddie in September and installed new chief executives. After the takeover, regulators designed a bonus program designed to encourage workers to stay at their jobs.
"It was critical to retain their most important asset - their employees - who are being asked to play a vital role in the nation's economic recovery," James Lockhart, the agency's director, said in a statement earlier this week. "As the previous senior management teams left, it would have been catastrophic to lose the next layers down and other highly experienced employees."
Frank, however, cast doubt on that argument. "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."
On Thursday House lawmakers voted decisively to impose a 90 percent tax on millions of dollars in employee bonuses paid by troubled insurance giant AIG and other bailed-out companies. Similar legislation has been introduced in the Senate and President Barack Obama quickly signaled general support for the concept.