Updated at 12:25 p.m.
Just a few weeks after retention bonuses at American International Group became a national scandal, Fannie Mae and Freddie Mac, the two mortgage-financing giants that the government rescued last fall, have outlined plans to pay an additional $159 million in bonuses to retain employees in 2009 and 2010, on top of the nearly $51 million already paid out last year.
James B. Lockhart of the Office of Federal Housing Enterprise Oversight, which now oversees the two companies, disclosed the bonus programs in a letter to Sen. Charles Grassley, the ranking member of the Senate Finance Committee.
In the letter, Mr. Lockhart defended the payouts as a way to “keep key staff without rewarding poor performance.” (Download the full letter below.)
Lawmakers have harshly criticized some bailed-out companies that later offered bonuses to workers, and the House passed legislation this week that would seek to limit compensation and bonuses at such firms.
Last month, Mr. Grassley called on Fannie and Freddie to justify their bonus retention programs, and demanded they release the names and titles of any employee who received, or was set to receive, a retention bonus of more than $100,000.
Mr. Lockhart did not provide the names in his letter, citing “personal privacy and safety reasons.”
A spokesman for Fannie Mae declined to comment on the letter. Representatives for Freddie Mac weren’t immediately available for comment.
Fannie and Freddie lost a total of nearly $110 billion in 2008. Last month, the Treasury Department agreed to provide the two companies with up to $200 billion in additional capital, on top of the $200 billion in government funds already pledged to them.
Speaking about Fannie and Freddie on Friday, Sen. Grassley said in a statement provided to DealBook that “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.”
“It’s an insult that the bonuses were made with an infusion of cash from taxpayers,” he said. “Poor performance and at taxpayer expense do a lot of damage to public confidence and support for the economic recovery effort.”
Mr. Lockhart, in his letter, defended the bonuses as necessary for protecting the taxpayers’ investment.
“Keeping the enterprises operating at full speed was best for the housing markets and best for the economy, which clearly also made it best for the taxpayer,” he said. “And that would only be possible if we retained the Fannie Mae and Freddie Mac teams.”
Part of the retention packages were already paid out in 2008, the letter said. They consisted of $17.3 million to Freddie employees, with 19 employees receiving more than $100,000, and $33.5 million to Fannie employees, with 20 receiving more than $100,000.
The total bonuses at both companies is expected to be about $146 million in 2009, and $13 million in 2010, for a total of about $210 million.
The retention plans cover 4,057 employees at Freddie Mac and 3,545 employees at Fannie Mae, the letter said.
The government seized Fannie and Freddie last fall, to make sure that neither company would collapse because of the plunging values of mortgages that they owned or guaranteed.
– Cyrus Sanati and Peter Edmonston
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