The furor that began with AIG's bonuses has trickled into the realm of the Federal Housing Finance Agency (FHFA), Freddie Mac and Fannie Mae's regulator.
Shortly after the House passed a 90% surtax on executive bonuses at companies that receive bailout money, House Financial Services Committee Chairman Barney Frank, D-Mass., sent a letter to FHFA Director James B. Lockhart that urges him to rescind retention bonus programs at the government-sponsored enterprises (GSEs).
Frank has called on Lockhart to use his authority as director of the GSEs' conservator to cease any further retention payments and recover previous payments made under retention programs.
"Fannie Mae and Freddie Mac have said that their retention program awards were structured in a way that would recognize the "unsatisfactory performance' of the companies, coupled with the "urgent need to retain people in the most critical positions,'" Frank wrote to Lockhart. "I remain very skeptical that retaining and rewarding people who made the mistakes that contributed to the unsatisfactory performance is a good idea. Further, in this troubled economy, and in this job market, it is difficult to imagine that the companies would not be able to find competent and talented replacements for anyone who chooses to leave."
Lockhart's response to Frank notes that unlike other companies that have received federal funds, Fannie Mae and Freddie Mac do not pay severance to departing CEOs. The FHFA director's letter further stresses that GSE employees must be provided incentives to stay with the companies, especially given the GSEs' heavyweight roles in President Obama's Making Home Affordable plan.
"Indeed, I can attest that many employees at all levels at each company have been working far more hours, with far less compensation than they did prior to conservatorship," the letter says. "The success of the administration's recently announced Making Home Affordable program, aimed at preventing foreclosures and stabilizing housing markets, depends on the continued efforts of these employees, both executives and staff. But I can also say that we run a great risk of these same employees deciding this is the last straw and walking away."
SOURCES: House Committee on Financial Services, FHFA