Fannie Mae and Freddie Mac: More Bonuses for Failure

It is almost like the movie Jaws, once you think you can go back in the water the Great White Shark appears again. We are experiencing virtually the same situation in bonuses paid out for ineptitude. It seemed very clear there was a backlash…an outrage at the bonuses given to AIG employees who single handly destroyed a major company and almost the the US economy. Now Fannie Mae (FNM) is giving bonuses as well. The difference is the linguistics. They are calling them “Retention Payouts”. Unfortunately, failure is being rewarded again. I forgot the shares of Fannie Mae only went from $35.50 down to Wednesday's .80 cents. That is a great reason to retain these employees.

Fannie Mae is due to pay “retention bonuses” of between $470,000 and $611,000 this year to some executives. Fannie disclosed plans to pay retention awards this year of $517,000 to David Hisey and $470,000 each to Thomas Lund and Kenneth Bacon. Depends on how you look at it…these bonuses are not as outrageous as the bonuses paid by AIG, but still, any way you look at it close to half a million dollars is still a lot of money. And worse, it is for terrible performance.

The icing on the cake is that the FED has agreed to provide as much as $200 billion of capital a piece to Fannie and Freddie (FRE) in exchange for preferred.

Comments

[Insiderman:]

The really funny part about all this is that Sen. Chris Dodd thought he was allowing FNMA and FHLMC bonuses (to keep Rep. Barney Frank happy) when they inserted language into the stimulus bill that was so vague it also allowed the AIG bonuses.

When can we get rid of those two again?

Mar 19 09:23 AM

[whocouldshebe:]

Last time I checked, these companies didn't lose any stock value until the government murdered them by stepping in and prevented their employees from being able to do their job the same way it has been done for years, by expanding & lobbying, exactly how they grew to become the world's largest mortgage companies. It wasn't until bonuses were paid out, that any of the stocks you mentioned made a recovery. It is simple, if you don't pay your employees then they don't work. Could you say things any more backwards than the really are? Nope, you can't!

Mar 19 11:38 AM

[Responsibility:]

Un-justifiable executive awards have been known for a long time before this big financial crisis, just like un-justifiable excessive consumer spending. To make change, we need to voice out against these un-justifiable behaviors in the same manner as we voice out against crimes towards children or injustice towards minorities. When we have demonstrations on the street and preachings in sunday schools and church services against these behaviors by the general public, real change may come then.

We have put too little priority on financial responsibilities in comparison to priority on having a luxurious life style, by "expanding & lobbying" until things fall apart.

Mar 19 12:07 PM

[tshk1221:]

No bureaucrats' outrage for bonuses for the employees of defunct mortgage giant, Fannie Mae?

Mar 19 12:12 PM

[henarl:]

Actually the "employees" of Fannie and Freddie are just bureaucrats. Since when were inept bureaucrats paid according to ability or performance.? Not making waves is the best way to assure job longevity and financial reward in the bureaucracy.

Mar 19 01:32 PM

[carola:]

Caught a rerun of a Henry Gates interview with Franklin Raines, the former fanniemae CEO, who is africanamerican, and who stated in the interview that his goal was to lower the bar for home financing so blacks could get onto the bandwagon of wealth via home ownership. Well, they're all in the stew with all the whites now who fell for this shortcut to acquiring wealth. Raines achieved his own success thru diligent effort and solid goals, graduating from Harvard. Instead of fanniemae handouts, he should give his people a sense of respect for academic achievement, and quash the futile hero worship of athletes and rap stars and thug-life. And the idea of having your wealth in your home is misleading, cause if you sell your home for half a mil, you still have to put that back into another high-priced home, unless you plan to LIVE IN A VAN DOWN BY THE RIVER.

Mar 19 03:06 PM

[User 388865:]

The most amazing quote from this story is in the AP's release written by Alan Zibel. In defense of the bonuses, James Lockart, the companies' federal regulator, "...defended the bonuses in a letter to Sen Charles Grassley, noting that the collapse of the company's stock prices 'destroyed years of savings for many' workers at FNMA and FHLMC.

Think about that. They're actually going to use TARP funds (taxpayers' money) to help reinflate the retirement accounts of the guys who were in a position to, if not stop the madness, at least blow the whistle on it.

Apr 04 10:22 PM