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Fannie Mae, Freddie Mac employees to receive bonuses
Topic Started: Apr 4 2009, 09:29 PM (436 Views)
Dark Founder
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Lt. Commander
http://online.wsj.com/article/SB123876318076986497.html

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By JAMES R. HAGERTY

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.

The retention-bonus plan has stirred controversy in Washington since it was highlighted in a March 18 Wall Street Journal article.

Freddie's retention-bonus program involves 4,057 employees, or about 80% of the total head count, while Fannie is making the payments to 3,545 employees, or 61%.

During 2009, 92 Freddie employees are due to receive retention bonuses of $100,000 or more and one, who wasn't identified, will receive more than $675,000, the letter said. At Fannie, 121 employees will get bonuses of $100,000 or more this year and the maximum payout will be $705,000.

Freddie hasn't yet made disclosures about bonus payments to its highest-paid executives. Fannie has disclosed that retention bonuses over the 18 months are expected to total $1.3 million for Michael Williams, the company's chief operating officer; $1.1 million for David Hisey; and $1 million apiece for Thomas Lund and Kenneth Bacon. Messrs. Hisey, Lund and Bacon are executive vice presidents. The final level of those payments is contingent on the executives' remaining in their posts and on attaining certain performance goals.

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."

Congress is considering legislation that would deter bonuses paid by firms that are major recipients of federal bailout money, including Fannie and Freddie.

Their regulator initiated the retention program last year in an effort to avoid departures of people considered critical to the companies, whose stock prices have collapsed, rendering stock options worthless, and whose regular bonus plans have been canceled.

"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.

"For personal privacy and safety reasons," Mr. Lockhart said, it wouldn't be appropriate to release the names of all those receiving bonuses of $100,000 or more.

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Almighty
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Give that Roo a beer

As i understand it these businesses are going out the door backwards and they hand out retention bonuses?

That makes no sense

Let them go if they think they can get more money elsewhere and save the company money to use on working out how operate more efficiently
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CaptDennyCrane
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and is it that the bail out money is really only being used to bail out the fat cats in giving them retention bonuses so they stay?

I mean of course they are going to stay - is not like there's another job out there right now willing to pay them $200K a year, and give them 5-6 figure bonuses when their track record accomplishments include just about the dumbest business sense ever devised and personally having assisted in the demise of the company
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You cant expect 110% from others, when most times, they don't expect even 90% from themselves. -- Me.
No matter how hard your day, no matter how tough your choices, how complex your ethical decisions, you always get to choose what you have for lunch.
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wissaboo
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is it really surprising? we already knew this was happening at other companies.


my question is who the hell is writing these contracts up where executives get huge bonuses that are not tied to the performance of the company? Isn't a bonus usually tied to the profits of a company?
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Almighty
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Give that Roo a beer

Well my performance based bonus is but i think a CEO is slightly different to working slobs in middle management like me

They report to shareholders so if they manage to do what they say they can to the shareholders then its ok :waiting:

Thats simplistic but not far from the truth
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wissaboo
Apr 5 2009, 11:43 AM
is it really surprising? we already knew this was happening at other companies.


my question is who the hell is writing these contracts up where executives get huge bonuses that are not tied to the performance of the company? Isn't a bonus usually tied to the profits of a company?
Keep in mind that Freddie and Fannie aren't like private companies. They are technically corporations but they have always been sponsored by the federal government. They have also been under the conservatorship of the Federal Housing Finance Agency for the last seven months.

In other words, our politicians won't be able to pretend that they didn't know about these bonuses.

Quote:
 
Isn't a bonus usually tied to the profits of a company?


Performance bonuses, yes. Other bonuses such as retention bonuses are tied to other conditions.
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wissaboo
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I need a job where I can get 100 k just for not looking for another job. :waiting:
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CaptDennyCrane
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wissaboo
Apr 5 2009, 06:58 PM
I need a job where I can get 100 k just for not looking for another job. :waiting:
Also all while not really doing any sort of job, and having nothing to really show for your efforts and your productivity (or lack thereof) is in part, responsible for the deprecated state your corporation is in.
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You cant expect 110% from others, when most times, they don't expect even 90% from themselves. -- Me.
No matter how hard your day, no matter how tough your choices, how complex your ethical decisions, you always get to choose what you have for lunch.
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Dark Founder
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Lt. Commander
Not to mention being responsible for the condition of today's economy.
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Heather
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This just doesn't make any sense to me :dunno:
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