Fannie, Freddie employee bonuses -- your tax dollars at work?

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Retention bonuses at Fannie and Freddie got some more ink in a Wall St. Journal article Saturday that offers more details on the controversial program:

In a compensation program that has drawn angry protests from lawmakers, Fannie Mae and Freddie Mac expect to pay about $210 million in retention bonuses to 7,600 employees over 18 months, according to a letter from the mortgage companies’ regulator.

The maximum retention bonus for any individual executive under the plan will total $1.5 million during the 18 months ending in early 2010, according to the letter to Iowa Republican Sen. Charles Grassley, which provides previously undisclosed details about the bonuses.

The regulator, James Lockhart, director of the Federal Housing Finance Agency, said in the letter that about $51 million of the payouts were made in late 2008 and the rest are to be made this year and early in 2010.

In the letter, a copy of which was reviewed by The Wall Street Journal, Mr. Lockhart defends the bonuses as vital to retaining talent at the two companies, the main providers of funding for U.S. home mortgages. Fannie and Freddie, which reported combined losses of about $108 billion for 2008, are being propped up by capital infusions from the U.S. Treasury.

How many other places are offering retention bonuses that involve 80% of employees (Freddie’s version) or even 61% (Fannie)?

In a statement Friday, Sen. Grassley said: ‘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.’

For the other side:

‘It is not realistic to expect that experienced and highly skilled employees will indefinitely continue to work as hard as they have if we do not provide reasonable incentives to perform,’ Mr. Lockhart wrote. He argued that the companies need ‘skilled and experienced staff’ to manage safely their more than $5 trillion in debt and guarantees of mortgage securities.

These bonuses seem totally out of touch with the economic realities of today and how things are going at Fannie/Freddie. Grassley had me at ‘cash from taxpayers.’

-- Lauren Beale

Thoughts? Comments?