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MORTGAGE FINANCE

4 Fannie Executives Quit; Pay Revamped

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By Zachary A. Goldfarb
Washington Post Staff Writer
Saturday, September 20, 2008

Fannie Mae yesterday shuffled its senior executive ranks and revamped its compensation practices as its government-appointed chief executive, Herbert Allison, began to put his imprint on the company.

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The District-based company said Chief Business Officer Peter Niculescu, General Counsel Beth Wilkinson, Chief Information Officer Rahul Merchant and the chief lobbyist, Duane Duncan, resigned.

"Fannie Mae is building out a new management structure and team as we take the company in a new direction to serve a dramatically changing market," Allison said in a statement.

Fannie Mae also said it was ending performance-based cash bonuses, which had rewarded employees when the company met certain financial targets. The company said it would introduce new cash rewards designed to retain employees as it tries to recover.

In total, 75 percent of what was available for bonuses will be available for the new retention rewards, the company said. Salaries and benefits remain unchanged. Fannie Mae did not provide information on how much it planned to spend on bonuses.

Niculescu was appointed to his job just weeks ago as part of a management shake-up before the government's decision to seize control of Fannie Mae and its rival Freddie Mac. Wilkinson, a prominent former federal prosecutor, was hired by Fannie Mae as the company recovered from an accounting scandal and clashes with regulators. The government has said Fannie Mae and Freddie Mac will stop all lobbying.

The moves come as the government plans to rely on Fannie Mae and Freddie Mac to play even bigger roles in the mortgage market. The new retention awards are important because the companies' regulator, the Federal Housing Finance Agency, has said it does not want an exodus of employees familiar with the intricacies of the mortgage market.

Freddie Mac has yet to elaborate on any changes to its compensation plan.

Fannie Mae said the plan's goal was to provide "meaningful financial incentives to remain at the company while recognizing that other companies in the mortgage business that survive this housing crisis are likely to be paying far less this year in non-salary compensation than in prior years."

In a regulatory filing, Fannie Mae said executive officers this year would not be paid bonuses or long-term incentive awards. But the executive officers are eligible for cash retention payments to be paid out in installments through early 2010. Rank-and-file employees are also eligible for the cash retention payments.

The company said employees' retention awards could range from nothing to 50 percent more than the bonuses they ordinarily would have received. The company said compensation decisions would take into account several factors: individual and corporate performance and the importance of the employee's position.

Last weekend, the Federal Housing Finance Agency killed severance payments for Fannie Mae and Freddie Mac's departing chief executives. Fannie Mae said it was still working out a compensation plan for Allison, its new chief executive.

The company announced that three members of its board had departed: Leslie Rahl, founder of a New York financial advisory firm; Greg C. Smith, a principal with a Colorado consulting firm; and John Wulff, the head of the board of a Vermont manufacturing concern.


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