In the midst of the storm surrounding AIG execs getting huge bonuses after receiving billions of federal bailout dollars, it is being reported that both Fannie Mae and Freddie Mac executives will also be receiving their fair share of "retention awards."
The US Treasury has dolled out hundreds of billions of dollars under the Troubled Asset Relief Program (TARP). The
Wall Street Journal is reporting that the US Treasury has made agreements with the two government sponsored enterprises (GSE's) Fannie Mae and Freddie Mac to provide each entity with up to $200 billion of government dollars as capital to keep them afloat.
In recent days, the term "bonus" is mutating and taking on all kinds of new definitions. The latest I've heard is "retention awards", meaning that just for sticking around and being paid on a weekly or bi-weekly basis by the federally taken over companies, they'll give you a cash award.
A recent securities filing by Fannie Mae disclosed cash retention awards to their senior most executives. Their COO, Michael Williams (whose base salary is $676,000) is scheduled to receive a $611,000 "award" in 2009. Last year, he received $260,000. Three executive VP's, David Hisey and Thomas Lund and Kenneth Bacon, will receive $517,000, $470,000 and $470,000, respectively.
The report also says that hundreds of other Fannie Mae's employees are eligible for "retention awards" but the filing only disclosed bonus amounts for their top executives.
According to Freddie Mac's annual report, they too have a generous "retention awards" bonus program. In part, Exhibit 10-4 on page 414-5 reads as follows:
Objective To retain as many people as possible for 18 months (through March, 2010) in order to:
Maintain maximum operational stability
Allow time to evaluate the fundamental business model
Fulfill Freddie Mac’s goal of re-establishing stability and liquidity to the mortgage market
Retention Period Retention Period runs from September 2008 through March 2010.
General Eligibility All Senior Vice Presidents and Executive Vice Presidents who are employees of Freddie Mac on or after September 1, 2008 are eligible to participate in the program.
It goes on to outline the payments, which are to be paid out in four installments: the first, 20% of the total payout on December 15, 2008; the second, 20% on August 1, 2009; the third, 25% payout on December 15, 2009; and lastly, the fourth, 35% on March 15, 2010. The first three are exclusively "retention" awards and the fourth is a conditional performance based that was to be determined during Freddie Mac's business planning process.
Both Freddie Mac and Fannie Mae had control of the management seized by the Federal regulator, the Federal Housing Finance Agency (FHFA). The Wall Street Journal reports that FHFA approved the retention bonuses last year.
