Bailout Bonus Brouhaha: Fannie Mae Edition
Another bonus battle flared up today as a key lawmaker and government-controlled mortgage giant, Fannie Mae, crossed swords over the controversial money awards.
Fannie Mae's chief executive sent employees an e-mail message defending the company's bonus program while Representative Barney Frank, Democrat of Massachusetts, countered with a demand that such bonuses be completely scrapped.
Only a few million dollars are involved in the Fannie Mae bonuses -- the highest single award is just over $600,000. That's a drop in the $165 million bonus bucket that insurance giant A.I.G. doled out to its employees.
Even so, widespread public fury that any bonuses are unjustified windfalls for failure, and the fact that taxpayer money has saved Fannie Mae and its sister company, Freddie Mac, has put most any executive retention bonus front and center for debate.
Herbert Allison -- who took over at Fannie Mae last fall and works without a salary -- proclaimed his view in an e-mail to employees, which was disclosed to the Associated Press. Fannie's spokesman, Brian Faith, did not return calls for comment.
"I am deeply concerned that eliminating our retention plan would jeopardize our ability to fulfill the mission the government has given us to address the housing crisis," he wrote employees.
Noting that Fannie is charged with preventing housing foreclosures, he said the bonuses were needed to "ensure we maintain the skills and experience we need to help keep the mortgage market operating."
Pshaw -- in a word -- said Frank, who chairs the House Financial Services Committee. He wrote Fannie's regulator, the Federal Housing Finance Agency, urging it to rescind the retention bonus programs, bar future bonuses, and recover any bonuses already paid.
"I remain very skeptical that retaining and rewarding people who made the mistakes that contributed to the unsatisfactory performance is a good idea," he wrote in a letter released today.
Plus -- given the troubled economy and 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," he said.
Even so, he may not find a sympathetic hearing from the regulatory agency's head, James Lockhart, who noted publicly this week that following the departure of Fannie's top layer of executives, "it would have been catastrophic to lose the next layers down and other highly experience employees."