US Rep Frank Demands Cancellation Of Fannie, Freddie Bonuses
March 20 2009 - 10:53AM
Dow Jones News
U.S. House Rep. Barney Frank, D-Mass., on Friday called on the
regulator for Fannie Mae (FNM) and Freddie Mac (FRE) to cancel
bonuses paid to employees at the companies under a retention
program.
In a letter, Frank urged Federal Housing Finance Agency Director
James B. Lockhart to rescind any bonuses already paid under the
program and to prohibit any further payments.
"The public, having provided significant support for the purpose
of restoring trust and confidence in our country's financial
system, rightfully insists that large bonuses such as these awarded
by institutions receiving public funds at a time of a serious
economic downturn cannot continue," Frank wrote in the letter.
The move comes after $165 million in bonuses paid to employees
at American International Group Inc.'s (AIG) financial products
division set off a political firestorm this week.
The House on Thursday approved legislation to tax at 90% any
bonuses earned by employees earning more than $250,000 at firms
that have received at least $5 billion in aid from the government's
financial rescue program. Fannie and Freddie, which together have
received $60 billion in taxpayer funds under a separate government
program, are covered under the legislation. A similar bill is
gathering momentum in the Senate.
Fannie's and Freddie's regulator established a retention program
when the companies were taken over by the government last fall.
Under the program, a broad swath of employees at each firm were
promised bonuses, to be delivered over three periods. Lockhart
defended the bonuses this week, saying the program ensured the
companies wouldn't lose key employees just as they play a central
role in stabilizing the U.S. housing market.
"As the previous senior management teams left, it would have
been catastrophic to lose the next layers down and other highly
experienced employees," Lockhart said in a statement earlier this
week. "This retention program is pay for specific efforts underway
now to meet national goals."
-By Jessica Holzer, Dow Jones Newswires; 202-862-9228;
jessica.holzer@dowjones.com