Fannie, Freddie Budget $210 Million On Bonuses, Draw Lawmakers' Fire

Fannie Mae and Freddie Mac, the mortgage finance companies under federal control, are planning to pay $210 million in retention bonuses to 7,600 employees over 18 months, the firms' regulator said yesterday.

The Federal Housing Finance Agency said $51 million in payouts were given to employees in late 2008 and the remainder will come this and next year. The information was contained in a letter to Sen. Charles E. Grassley (R-Iowa.).

Fannie Mae and Freddie Mac's compensation plans drew scrutiny several weeks ago after American International Group paid $160 million in bonuses to members of the unit that brought the insurance giant down. The House passed legislation to significantly tax the AIG bonuses, though the measure has been stalled in the Senate.

Grassley and Rep. Barney Frank (D-Mass.) expressed concerns that Fannie Mae and Freddie Mac, which received over $50 billion in taxpayer dollars, would be paying bonuses. Frank called for bonuses to be withheld. In an earlier letter to Frank, the FHFA said about 3,500 employees at Fannie were getting an average payment of $32,000 and 4,000 employees at Freddie were getting an average of $24,000.

The maximum bonus for any employee will be $1.5 million, the regulator said. Freddie's bonuses are going to 80 percent of its employees, while Fannie's are going to 61 percent of its employees.

Ninety-two Freddie employees will receive $100,000 or more in 2009 and 121 Fannie employees will get bonuses of $100,000 or more. The FHFA declined to name the recipients, citing privacy concerns.

At Fannie Mae, chief operating officer Michael Williams is in line for a $1.3 million bonus, according to regulatory disclosures. Deputy chief financial officer David Hisey is slated for $1.1 million, while executive vice presidents Thomas Lund, responsible for the mortgage business, and Kenneth Bacon, responsible for housing and community development, are each in line for $1 million.

Grassley criticized the bonuses yesterday.

"It's hard to see any common sense in management decisions that award hundreds of millions in bonuses when their organizations lost more than $100 billion in a year. And, it's an insult that the bonuses were made with an infusion of cash from taxpayers," he said in a statement.

The regulator who approved the bonus payments defended them in the letter to Grassley.

"Keeping the Enterprises operating at full speed was best for the housing markets and best for the economy, which clearly also made it best for the taxpayer. And that would only be possible if we retained the Fannie Mae and Freddie Mac teams. They are an important part of the solution and not the problems of the past," wrote James B. Lockhart, director of the FHFA.

Lockhart said retention payments are key as Freddie Mac tries to recruit a chief executive, chief operating officer and chief financial officer. Fannie Mae is in search of a general counsel, chief risk officer and executive vice president for operations and technology.

The companies "have been leading efforts of the Administration to implement loan modification and refinancing programs designed to stop millions of foreclosures and stabilize the mortgage market. . . . Taking risks with the viability of Fannie Mae and Freddie Mac by not providing adequate compensation would be unwise," Lockhart wrote.