Beleaguered mortgage-finance giants Fannie Mae and Freddie Mac are dealing with their own bonus scandal after a top legislator blasted the companies’ plans to parcel out a whopping $210 million in retention bonuses.
“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,” Sen. Charles Grassley (R-Iowa) said in a statement. “It’s an insult that the bonuses were made with an infusion of cash from taxpayers.”
Fannie and Freddie were among the first firms to get billions in federal rescue cash last September after both companies nearly collapsed under the weight of souring mortgages. Fannie and Freddie own or guarantee more than half of the nation’s home loans and are considered a critical cog in the US mortgage market.
The planned payouts, which were approved by the companies’ federal regulator, include retention bonuses being given to more than 7,600 employees at both companies, which the firms argue are necessary to keep employees on hand to manage the mortgage mess.
The fallen companies collectively shelled out nearly $51 million in bonuses in 2008, and are scheduled to make $146 million in payments this year plus another $13 million next year, according to compensation information released yesterday by Grassley, who is the ranking Republican on the Senate Finance Committee.
Fannie and Freddie were at the epicenter of the economic crisis, as spiking defaults on home loans made to borrowers with spotty credit ratings nearly sank the two firms.
The government stepped in by plunging $15 billion into Fannie and nearly $45 billion into Freddie in early September.
The latest flap follows the public outcry that hobbled insurance giant American International Group got after it paid $165 million in bonuses, some of which went to executives who were responsible for the company’s collapse. The government has sunk more than $180 billion into AIG to keep it afloat.
The AIG bonus flap eventually led lawmakers on Capitol Hill to pass a bill that aims to prevent companies rescued by taxpayers from doling out fat paychecks. mark.decambre@nypost.com