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Fannie & Freddie to Give Out $210 Million in Bonuses

Discussion in 'BBS Hangout: Debate & Discussion' started by Lil Pun, Apr 3, 2009.

  1. Lil Pun

    Lil Pun Contributing Member

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    http://news.yahoo.com/s/ap/20090403/ap_on_bi_ge/mortgage_giants_bonuses

    WASHINGTON – Mortgage finance giants Fannie Mae and Freddie Mac plan to pay more than $210 million in bonuses through next year to give workers the incentive to stay in their jobs at the government-controlled companies.

    The retention awards for more than 7,600 employees were disclosed in a letter from the companies' regulator released Friday by Sen. Charles Grassley of Iowa, the senior Republican on the Senate Finance Committee. The companies paid out nearly $51 million last year, are scheduled to make $146 million in payments this year and $13 million in 2010.

    "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," Grassley said in a statement. "It's an insult that the bonuses were made with an infusion of cash from taxpayers."

    Fannie and Freddie declined to comment on Friday. Fannie had disclosed that it plans to pay four top executives at least $1 million each in retention payments that run through February. Freddie has yet to report on which executives are in line for the awards.

    The two companies, hobbled by skyrocketing loan defaults, were seized by regulators last fall and operate under close federal oversight with new chief executives installed by the government. Since the takeover, Fannie Mae has received $15 billion in federal aid, while Freddie Mac has received nearly $45 billion.

    The companies' federal regulator, James Lockhart of the Federal Housing Finance Agency, defended the bonuses in a March 27 letter to Grassley, noting that the collapse of the company's stock prices "destroyed years of savings for many" workers. The companies' stocks now trade below $1, down from more than $60 in fall 2007.

    Lockhart denied a request Grassley made last month to release names of employees receiving at least $100,000 in bonuses, citing "personal privacy and safety reasons."

    More than 70 percent of new loans in recent months have been backed by Fannie and Freddie. They own or guarantee almost 31 million mortgages worth about $5.5 trillion, more than half of all U.S home loans.

    Keeping the companies "operating at full speed was best for the housing markets and best for the economy," Lockhart wrote. "That would only be possible is we retained the Fannie and Freddie teams."

    But many lawmakers have little sympathy for that argument amid a public outcry over roughly $165 million in bonuses paid out last month by bailed-out insurance giant American International Group.

    Earlier this week, the House passed a bill that aims to keep bailed-out financial institutions from paying their employees hefty bonuses after lawmakers had second thoughts about their vote two weeks ago to tax the bonuses away. The bill would allow the bonuses if the Treasury Department and financial regulators determine they are not "unreasonable or excessive."

    Initially after the AIG flap, President Barack Obama had said he would "do everything we can to get those bonuses back." But the White House later backed down as it worked to ensure any restrictions on bonuses didn't alienate the banks and investors needed to help clean up the financial mess.
     
  2. CrazyDave

    CrazyDave Contributing Member

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    I'm sure there's more to it than meets the eye, and obvious public opinion of this, but really... I find it disgusting.

    Retention? Really... in an economy where 1 in 12 is unemployed, many of them in this very sector, and you don't think you could fill spots created by people who would leave if you didn't give them a bonus for... well.. sucking to the tune of 100 Billion in losses in a year?

    Sickening. They should be put out to pasture for this. I'm sure it's like AIG and there's more to it than just how the media will portray this, and there's probably some people who weren't [as] responsible as others, but REALITY CHECK! If you lose 100 billion, no one should be getting a bonus, and if the people who contributed to this 100 billion loss leave, is this really a BAD thing?
     
  3. JuanValdez

    JuanValdez Contributing Member

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    Bonus outrage again? Just assume I argue everything I argued in the last thread about retention bonuses. What's the point in having the argument all over again?
     
  4. deepblue

    deepblue Member

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    Chuck Grassley is an idiot. :eek:
     
  5. uolj

    uolj Member

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    The AIG bonuses were outrageous in part because of how big they were... most (all?) were in the millions and many were in the 10s of millions. Here, the average bonus appears to be about $28,000.
     
  6. Refman

    Refman Contributing Member

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    This, of course, ignores the question of what % of the employees' total compensation package is comprised of this bonus. It matters.
     

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