Fannie, Freddie Overseer Defends Big Bonus

 

Tuesday, Apr 07,2009, 3:26:18 PM   Click:

Copyright 2009 The Washington Times LLCAll Rights Reserved The Washington Times

Saturday 4 April 2009

SECTION: PAGE; A01

LENGTH: 692 words


TITLE: Fannie, Freddie overseer defends big bonuses

Signature: By Donald Lambro, Washington Times



The federal regulator of bailed-out mortgage giants Fannie Mae and Freddie Mac Friday defended plans to give $ 210 million in retention bonuses for employees he said had lost years of savings when the stock collapsed companies in 2008.

The bonuses, some as high as $ 1.5 million, will go to 7600 federal government employees in the two mortgage companies set up which has lost more than $ 100 billion last year. They are needed to keep the best talent to leave in the middle of the economic crisis has resulted in the housing bubble has burst, "said James B. Lockhart III of the Federal Housing Finance Agency, in a letter to Senator Charles E. Grassley of Iowa, the Senate Finance Committee's ranking Republican.

Mr. Lockhart has argued that companies already high prices, now worth less than $ 1, were used to attract talent and pay is now more necessary than ever.

Keep the two largest countries of the mortgage finance companies "operating at full speed is best for the housing markets and better for the economy, which has clearly been the better for the taxpayer. And it would be possible if we kept the Fannie Mae and Freddie Mac, "said Lockhart.


Mr. Grassley was not satisfied.

"It is difficult to see any common sense in management decisions that the prices of hundreds of millions of dollars in bonuses in their organizations, has lost more than $ 100 billion in one year. And that is an insult premiums were made with an injection of taxpayers' money, "Mr. Grassley said in a statement late Friday.

"The elite in Washington and New York need to realize that the bonuses and spending taxpayers to do much damage to public confidence and support for the economic recovery effort, has Grassley said.

Amidst the excitement of last month on the premiums paid to the insurance giant AIG, Republic Barney Frank of Massachusetts, chairman of the House Financial Services Committee, which oversees the two companies, called the premium Fannie and Freddie be withdrawn, but Mr. Lockhart refused.

As public anger mounted over 165 million dollars in bonuses paid to AIG executives, after the company received funds from federal bailout, the House passed a bill that would have imposed 90 per cent of payments in an effort to recover money.

But tax legislation died when the Obama administration showed little support for the measure, although the President has said that Obama "do everything possible to get the premiums back." The Treasury Department is studying ways to do so, but the problem is significantly cooled on Capitol Hill and in the administration since.

"Conservation of premiums are common when the company takes a turn on a bankrupt company because otherwise people leave," said David Wyss, chief economist at Standard and Poor's, the Wall Street view of research and equity business.

"But we must see if there are good reasons for this, which is paid and if the premiums are realistic or outside walls," he told the Washington Times.

In its defense bonus, Mr. Lockhart said: "The collapse of the value of companies' stock has destroyed years of savings, for many, and the future of the stock acquisition previous grants are no longer provided retention incentives. For executives, the wages provided only a tenth to a third of total revenues. "

Companies stock plunged below $ 1 - from over $ 60 in the fall of 2007 - since the government took control of companies in September.

Mr. Lockhart also argues that the government quickly decided when he prepares to take over the two mortgage Goliaths in August that "the retention of human capital [was] one of our biggest challenges."

"With $ 1.7 trillion in assets and over $ 5 trillion in outstanding mortgage debt and guarantees," he said, requires qualified and experienced personnel in a wide range of business activities. "



In four pages, single spaced letter outlining the financial details of the premium, he said Freddie Mac had paid $ 17.3 million in premiums in 2008, with maximum payments of $ 800,000, and Fannie Mae had paid 33.5 million in the same year, with a maximum of $ 300,000 person.

GRAPHIC: Democratic Rep. Barney Frank called for federal regulation to cancel bonuses for executives of Fannie Mae and Freddie Mac, but without success. [Photo by Peter Lockley / The Washington Times] Republican Senator Charles E. Grassley said the $ 210 million in retention bonuses for Fannie Mae and Freddie Mac employees are an "insult". [Photo by Barbara L. Salisbury / The Washington Times]

LOAD-DATE: April 5, 2009