Federally run "big gorilla" mortgage companies Fannie Mae and Freddie Mac will pay out $210 million in retention bonuses over the next 18 months, reports Times Online. Between them, the two companies reported $108 billion in losses last year, and Congress is allocating $200 billion of taxpayer money to bail them out of the hole they dug for themselves.

Fannie Mae's disclosure last month that it planned to pay almost $5 million in bonuses to its top four executives riled lawmakers, who were already furious over $165 million windfalls for about 400 workers at AIG's troubled financial products business.
...

In a letter to Senator Charles Grassley, James Lockhart, director of the FHFA, spelt out the bonuses being paid to 7,600 employees at the lenders over 18 months to early 2010.

Mr Lockhart said that about $51 million of payments were made to workers late last year, according to The Wall Street Journal, which has seen the letter. The rest of the cash would be distributed this year and early next year.

At Freddie Mac, 4,057 workers would be eligible for payouts, of which 92 would receive $100,000 or more. One Freddie worker would be paid more than $675,000 to retain his or her services.

The letter said that 3,545 Fannie employees would be eligible for retention bonuses, of which 121 will get $100,000 or more. The maximum payout at Fannie will be $705,000.

Is it just me or are these companies paying people to stick around who are (1) responsible for the bad decisions resulting in their billions in losses, and (2) replaceable? I keep thinking about Barney Frank's statement when AIG pulled this same stunt (I'm paraphrasing here): "They might be entitled to their bonuses, but they're not entitled to their jobs."

Why are companies handing out millions of tax-payer dollars to retain people when millions of people are out of work? Does this make sense? If employees are arrogant enough to threaten to quit if they don't get their bonuses, let them quit.

The U.S. jobless rate, 8.5 percent, is at its highest level in 25 years, reports Bloomberg.com, with 663,000 jobs cut in March, "bringing total losses since the recession began to 5 million."

Evaporating jobs and declining pay mean President Barack Obama's pledge to create or save 3.5 million jobs through tax cuts and government spending may fall short of what's needed to revive the world's largest economy. Federal Reserve Chairman Ben S. Bernanke has conceded joblessness could top 10 percent under a worst-case scenario.

"The unemployment rate is not done rising and the gain in March won't be the last," said Stuart Hoffman, chief U.S. economist at PNC Financial Services Group Inc. in Pittsburgh. "With jobs still declining and incomes being squeezed, consumer spending still looks quite weak."

With the declines in March, the U.S. now reports 13.2 million American are unemployed, and that's not counting those that have dropped from the unemployment roles, unable to find jobs before their benefits ran out.

Worldwide, the numbers are staggering. In January, the U.N. International Labour Agency estimated unemployment numbers will hit 230 million this year, with nearly half of those people under the poverty line.

A February story in The New York Times says that job losses threaten global stability, a nice way of saying that people are desperate and angry.

High unemployment rates, especially among young workers, have led to protests in countries as varied as Latvia, Chile, Greece, Bulgaria and Iceland and contributed to strikes in Britain and France.

Last month, the government of Iceland, whose economy is expected to contract 10 percent this year, collapsed and the prime minister moved up national elections after weeks of protests by Icelanders angered by soaring unemployment and rising prices.

Just last week, the new United States director of national intelligence, Dennis C. Blair, told Congress that instability caused by the global economic crisis had become the biggest security threat facing the United States, outpacing terrorism.

Business in this country needs to take its collective head out of its collective, um, dark places. Like I said, if people threaten to quit because they're not getting their bonuses, call their bluff. Let them quit. Wish them well on their search for new jobs.

Previous Comments

ID

145547

Comment

"Business in this country needs to take its collective head out of its collective, um, dark places. Like I said, if people threaten to quit because they're not getting their bonuses, call their bluff. Let them quit. Wish them well on their search for new jobs." To the point, I agree totally.

Author

Jeffery R

Date

2009-04-04T10:26:40-06:00

ID

145572

Comment

The point of the current puppet democracy is to make the citizens become completly reliable on federal government which is directly making people controlled by private banks (federal reserve). We will be a a new EU. Look at the pathetic decisions at g20. IMF will rule. Global bank reliance. No conspiracy it is everywhere.

Author

....

Date

2009-04-05T21:38:12-06:00

ID

145575

Comment

Author

WMartin

Date

2009-04-06T06:52:51-06:00

ID

145577

Comment

[quote]Federally run "big gorilla" mortgage companies Fannie Mae and Freddie Mac will pay out $210 million in retention bonuses over the next 18 months...[/quote] Where's all the outrage on Capitol Hill at FM/FM like there was with AIG? Why aren't they proposing bills to tax that bonus at 90%?

Author

Jeff Lucas

Date

2009-04-06T08:21:34-06:00

ID

145578

Comment

There have been efforts to reign in FM/FM (frank melton? Nah...) since 2000 with no luck. Why start now?

Author

Ironghost

Date

2009-04-06T08:58:59-06:00

ID

145584

Comment

The AIG bonus congressional outrage was all smoke and mirrors anyway. Sadly, I think we will see U.S. unemployment hit 12% before things start to turn around.

Author

Jeff Lucas

Date

2009-04-06T11:27:53-06:00

ID

145587

Comment

Why start now, Iron? Because there's never a better time than "now" to start anything. Jeff, Congress' outrage isn't quite played out. There are a few folks, like Barney Frank, who continue to beat the drum loudly. The House passed another bill (authored by Frank) limiting bonuses and compensation last Wednesday. Republicans are against it, for the most part; we'll see if Congress can make something happen on this front.

Author

Ronni_Mott

Date

2009-04-06T11:40:32-06:00

ID

145589

Comment

If Barney had allowed it, we could have stopped Fannie and Freddie from getting into this mess. Oh well.

Author

Ironghost

Date

2009-04-06T12:14:59-06:00

ID

145600

Comment

[quote]The House passed another bill (authored by Frank) limiting bonuses and compensation last Wednesday. Republicans are against it, for the most part; we'll see if Congress can make something happen on this front. [/quote] This legislation regulates companies that have received TARP funds according to the article. And yet Congress is silent on the Fannie and Freddy retention bonuses: [quote]At Freddie Mac, 4,057 workers would be eligible for payouts, of which 92 would receive $100,000 or more. One Freddie worker would be paid more than $675,000 to retain his or her services. The letter said that 3,545 Fannie employees would be eligible for retention bonuses, of which 121 will get $100,000 or more. The maximum payout at Fannie will be $705,000.[/quote]

Author

Jeff Lucas

Date

2009-04-06T14:02:57-06:00

ID

145602

Comment

Ironghost, There's PLENTY of blame to go around in this mess, and partisanship of any kind is just more of the problem, not the solution. We can point fingers all day long and never get to a solution, making it the ultimate waste of time. Is Franks culpable? Yes. Singlehandedly? No. Is he more culpable than others? Debatable. He certainly wasn't the author of those flaky sub-prime mortgages, nor did he cause lenders to be predatory or invent the avalanche of questionable Wall Street vehicles for bad debt that are so convoluted not even the people who designed them can make sense of them. He's also not responsible for holding down wages, exporting jobs or giving tax breaks to the wealthiest people in America, all of which are contributing factors to the mess we're in. Given the average citizen's access to what goes on behind closed doors in the halls of power, I doubt we'll ever know beyond a shadow of a doubt all the guilty parties and the extent of their roles. Lots of people are being thrown under the bus on this one. I didn't post this to start yet another finger-pointing session about who did what to whom, when. I'm much more interested in who's doing what, right now, to fix the problems.

Author

Ronni_Mott

Date

2009-04-06T15:04:45-06:00

ID

145604

Comment

Why are companies handing out millions of tax-payer dollars to retain people when millions of people are out of work? *Really* good question bit like the emporer's new clothes people aren't catching up to reality, the new reality

Author

Izzy

Date

2009-04-06T15:36:55-06:00

ID

145608

Comment

This legislation regulates companies that have received TARP funds according to the article. And yet Congress is silent on the Fannie and Freddy retention bonuses. You're right, Jeff. The Fannie and Freddie funds are in addition to TARP and the economic stimulus funds. And, my bad, they've been allocated $200 billion EACH, for a total of $400 billion. From the San Antonio Business Journal in February: In addition, the Treasury Department will continue purchasing Fannie and Freddie mortgage-backed securities. It also will increase the allowable size of their retained mortgage portfolios by $50 billion to $900 billion, along with a corresponding increase in allowable debt outstanding. Geithner said that the increase in government backing isn't indicative of future loss estimates. Rather it is meant to assure the market that the government is firmly behind efforts to support housing finance. The funding for the increased backing is provided by the Housing and Economic Recovery Act, the measure signed into law July 30 that made explicit the government backing of Fannie and Freddie. The extra funding does not use any of the money from the October financial bailout, called the Emergency Economic Stabilization Act, or the recently revamped financial bailout, called the Financial Stability Plan, Geithner said.

Author

Ronni_Mott

Date

2009-04-06T16:42:52-06:00

ID

145610

Comment

I have to agree a little bit with Iron. Aren't we saying by bailing them out we want to keep them around? We like what they do? We want them to keep doing it? Why start now with the outrage? Isn't our saving them an approval of their practices? They couldn't pay bonuses if they were bankrupt, which we ensured they wouldn't be. Isn't the Bailout one big retention bonus?

Author

WMartin

Date

2009-04-06T16:48:46-06:00

ID

145613

Comment

Ronni, correct me if I'm wrong, but I think you're one of the first liberals who'd admit that Democrats might, just might, have something to do with our current mess. :)

Author

Ironghost

Date

2009-04-06T20:44:07-06:00

ID

145630

Comment

WMartin, you've made an excellent point. Rather than saying we "like" the institutions we're bailing out, though, I think most would say we "need" them to do what they're intended to do, not necessarily to continue to do what they've been doing. Whether or not we need them is debatable, from where I'm sitting. I sure don't "like" big public companies that make profit their only reason for existence (at the expense of people and the planet), as you well know. I am dead set against rewearding the very people who allowed their companies to run off the rails. Ironghost, I'm not a big fan of labels because they tend to put iron bars around ones thinking. If I must choose one label, though, I'll go with "progressive independent" over "liberal" or "Democrat." I am a fan of calling it the way I see it, and have a healthy suspicion for politicians, corporate CEOs, Wall Street (in general) and any other number of bit shots, rainmakers and people in charge. This mess wasn't created overnight by any one person, party or ideology. Anyone who thinks it was is fooling themselves.

Author

Ronni_Mott

Date

2009-04-07T10:25:25-06:00

ID

145632

Comment

Where you been, Ironghost. The JFP is run by and attracts people who aren't apologists for any party. It is painfully obvious that many Democrats in Washington either contributed to, or did not do enough to stop, the financial disaster that swept the nation. You almost don't need to say that out loud, it's so obvious to most. However. You cannot divide this mess into neat little equal piles. The regulation-is-bad-no-matter-what philosophy (not to mention the call-the-media-liberal-strategy-if-they-care-criticize scam that Haley Barbour inflicted on the nation as head of the RNC) did not originate with Democrats, even though way too many went along with it, and should be bull-whipped for it. Ronald Reagan brought a philosophy of non-regulation to Washington and sold it. The inevitable chickens have come to roost. So, yes, it could both parties to build this house, and it's going to take both of them to rebuild it into something sustainable. And defending one or the other party no matter what it, or individual members, does is plain ignorant. But the opposite of that is not blind revisionism.

Author

DonnaLadd

Date

2009-04-07T10:34:22-06:00

ID

145669

Comment

It's the reason I hate reading the news, blame one side (usually Republican, these days) regardless of facts. As for Fannie and Freddie, I don't see what the bonuses are for considering how the market has collapsed. Any sane CEO would cut his losses.

Author

Ironghost

Date

2009-04-07T16:09:23-06:00

ID

145678

Comment

[quote]If Barney had allowed it, we could have stopped Fannie and Freddie from getting into this mess. Oh well. [/quote] There's some truth to that. But the root cause is more complex than just Fwanks' lack of due diligence, and has the stench of opportunism by both parties.

Author

Jeff Lucas

Date

2009-04-08T07:08:23-06:00

ID

145683

Comment

Both parties, predatory lenders and Wall Street, Jeff. Let's not forget all the funny money the Street generated with risky mortgages. Traders walked away filthy rich on commissions by subverting bad debt into all kinds of interesting "opportunities." There's a whole host of greedy s.o.b.s on that gravy train.

Author

Ronni_Mott

Date

2009-04-08T08:50:17-06:00

ID

145688

Comment

Ronni, I'm not excluding them either. I blame Washington, the Fed, Wall Street, mortgage companies, real estate agents, developers, and even greedy, overextended homebuyers who wanted to believe they could afford houses they damn well knew they couldn't. It was a perfect storm of greed and opportunism that blew up in their faces.

Author

Jeff Lucas

Date

2009-04-08T10:07:05-06:00

ID

145690

Comment

There was a cool "South Park" episode (like there is one that's not cool) that was made after Katrina in which Cartman and Stan wreck the world's largest beaver dam and flood the nearby town of Beaverton Colorado. Much finger pointing and sensationalized journalism ensues. Every time Stan asks if somebody is going to help those people, the answer he gets is that it's more important to figure out who is to blame than to do anything about the problem. I think we are heading down that road, again. We are letting our outrage at CEO's over bonuses and whomever we may believe to be to blame become the issue when all we did was slap a band aid on the real problem. We can't believe that these people would make seemingly nonsensical business decisions like this? Why? They just destroyed their respective companies and just about took down the global economy. Why do we have faith that now they are somehow business geniuses? Why should anyone have any kind of confidence that our financial markets are sound? The same people are still running them. The Market objectively pointed out the culprits and laid them low. We chose not to make them pay for their mistakes. And now we decide to be shocked that they are going about business as usual? If we failed to write a law punishing murder would murder still be wrong? Is it the legislature's fault when someone gets murdered with no rules against it? The murderer is still the one to blame for the killing. It's easy to say now that the government should have done a better job regulating the financial industry. No one can really argue with that. But you want to know who is to blame? All you have to do is look down the list of companies having to be bailed out or on the verge of bankruptcy and call out their management. Those are the one's who made the decisions that have led us to where we are now. Those are the ones the market singled out for some industrial darwinism. The mistake everyone else made, in my opinion, was not letting nature take it's course.

Author

WMartin

Date

2009-04-08T10:34:17-06:00

ID

145691

Comment

The Market objectively pointed out the culprits and laid them low. Really? Where? Examples, please! I'm not asking about a mere drop in stock price. That, to me, isn't laying anyone "low." If the Street really wanted to get responsible about the damage they've inflicted, they should be giving walking papers to a lot of traders who got rich, or telling them they have to repay all those commissions on questionable (at best) trades. The mistake everyone else made, in my opinion, was not letting nature take it's course. But the Market exists for only one purpose, WMartin, and that is make more money for those who already have money. So should we (the government, etc.) have just let the entire thing blow up? Some very smart people say we should dump the entire stock market system and start over, including David Korten, whose book, "Agenda for a New Economy," I reviewed a few weeks ago. Here's factcheck.org's list of who's responsible: * The Federal Reserve, which slashed interest rates after the dot-com bubble burst, making credit cheap. * Home buyers, who took advantage of easy credit to bid up the prices of homes excessively. * Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses. * Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes. * The Clinton administration, which pushed for less stringent credit and downpayment requirements for working- and middle-class families. * Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates. * Former Federal Reserve chairman Alan Greenspan, who in 2004, near the peak of the housing bubble, encouraged Americans to take out adjustable rate mortgages. * Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral. * The Bush administration, which failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market. * An obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic. * Collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up.

Author

Ronni_Mott

Date

2009-04-08T11:25:31-06:00

ID

145692

Comment

Agreed but I would put more focus on the federal reserve. We let this non-federal bank be a central unit for the banking system. That is unconstitutional. We need to do away with this system, and punish these bankers to the fullest extent.

Author

....

Date

2009-04-08T11:41:01-06:00

ID

145694

Comment

We let this non-federal bank be a central unit for the banking system. That is unconstitutional. That's an argument that goes back to Jefferson and Hamilton in 1791, JOKeefe. One would think that if it were so, it might have been challenged in the Supreme Court at some time over the past 200+ years.

Author

Ronni_Mott

Date

2009-04-08T12:17:16-06:00

ID

145696

Comment

Well my last post didn't post so I'll summarize it. With all of these federal reserve act protest, and many Libertarians speaking to abolish the fed. Maybe with the g20 and IMF's decision of a global currency we will do something about it and go back to our original document. Sadly, I just see us falling into global taxation enslavement. Just coming from a Constitutionalist Libertarian. Haha. Also, sorry for the lack of substance. I'm on my phone and in class.

Author

....

Date

2009-04-08T12:47:35-06:00

ID

145704

Comment

I am sorry I was not clear enough. It happens when I try to write a post while I am working on another project. By the "market" I don't mean the stock market or wall street. I mean the market forces that came together to drive these companies almost into bankruptcy. The laying low is evidenced by the hat in hand begging for rescue by the Federal Government. If the Street really wanted to get responsible about the damage they've inflicted, they should be giving walking papers to a lot of traders who got rich, or telling them they have to repay all those commissions on questionable (at best) trades. Had we not bailed them out that would have been the effect. They would have all gotten the walking papers they deserve. So should we (the government, etc.) have just let the entire thing blow up? Some very smart people say we should dump the entire stock market system and start over, including David Korten, whose book, "Agenda for a New Economy," I reviewed a few weeks ago. That's a good question. I keep thinking that maybe it would be good if we had that adversity to overcome like the generation that made it through the great depression. That is what taught that generation to value the things they did and do. But thinking of the pain that would cause so many people who aren't really to blame for this mess keeps the lid on that idea. I read your review and I want to read the book now. But I haven't yet so I really can't say whether I think what the author proposes is a good idea. I do believe that companies who are so horribly mismanaged should fail. And those that ran them into the ground should be feeling the full effect of their actions not reaping the rewards of bonuses for simply being retained.

Author

WMartin

Date

2009-04-08T14:21:46-06:00

ID

145706

Comment

JOkeefe, I'm no fan of the Federal Reserve, per se, but I don't follow the unconstitutional claim exactly. Of course, I am only constitutionalist with a small c. ;-) Also, I think everyone who posts here is a constitutionalist with a small C, meaning in favor of the Constitution, so you can stipulate that. Groups that put a capital C on it, though, tend to scare me and are far too extremist, and unrealistic, for my tastes.

Author

DonnaLadd

Date

2009-04-08T14:59:22-06:00

ID

145710

Comment

Well, according to the Missouri militia police reports, I am an extremist and terrorist for supporting the constitution. I do agree with you even though I guess I am more of am extremist then most. With all that aside, I still think they need to be gone. What scares me is what just happen and what is happening with IMF and g20. When America realizes what is going on with global currency and global government, I don't think we will give as easy as they hope. That's my fear.

Author

....

Date

2009-04-08T15:39:36-06:00

ID

145711

Comment

Obviously, "supporting the Constitution" is not extreme. The extremism comes in when certain groups are extremist about the Constitution, often making up stuff that isn't actually there (or ignoring whole sections of it because they don't want it to be). Or, even engaging in violence, or encouraging it. I know a great deal about militia groups and their connections; just as in other nations that we fear, they try to prey off young people's fears for nefarious reasons. You have to be careful. There is being willing to question, and there is cultism. There are serious issues around globalization; I encourage you, however, to stay above the fray of conspiracy theories because that won't get you anywhere. Or, at least be skeptical.

Author

DonnaLadd

Date

2009-04-08T15:54:38-06:00

ID

145712

Comment

I understand, but if you are refering to the new world order, I completly believe in that theory. It is no longer a theory, it is in action. Look at the most recent example of Brown saying a long the lines of, "new world order is emerging. I, for example, talked about a global currency when I was in high school and got called crazy by my teachers, and look where we are now. I am always skeptical of theories regarding the federal government. That is why read the bills I can. It's something I, oddly, enjoy.

Author

....

Date

2009-04-08T16:12:55-06:00

ID

145713

Comment

You've got to be careful about parsing language like that, looking for evidence of conspiracies. Personally, I'm more worried about the old world order. Skepticism is good, but you've also got to apply it to people like Ron Paul and all the government-haters and anybody trying to twist the Constition into their own purposes. You start parsing their language, things get real scary. That kind of fear rhetoric is how we ended up with the Oklahoma City bombing tragedy. I covered the militia movement, and all its attendant groups after that from Colorado, and it was really sad to find how people let irrational fears cloud their better judgment. And then be used by people driven by bigotry, fear of the other, and plain ole greed. It's the same with extremism around the world. That was a very tragic period in our history.

Author

DonnaLadd

Date

2009-04-08T16:24:46-06:00

ID

145716

Comment

Well, I don't know if you would list these as irrational fears, but I basically am afraid of: a global central banking unit, for the simple reason of not having an alternative, North America becoming an EU, this bill:http://cdt.org/security/CYBERSEC4.pdf and the current main stream media. I put skepticism into Ron Paul, but with the past administration completely loosing my trust, and current administration losing it more and more everyday, I focus more on investigating them. This was the Brown quote I was talking about: http://www.youtube.com/watch?v=T-f9jcX9ao4' I honestly believe that we need to revolt against this banking system. I really love seeing what is going on with the April 15th national tea parties. I believe the first focus needs to be on the income tax, since you know, it is not a law. :)

Author

....

Date

2009-04-08T16:45:13-06:00

ID

145718

Comment

[quote]I believe the first focus needs to be on the income tax, since you know, it is not a law. :) [/quote] Don't EVEN start on that. :D

Author

Ironghost

Date

2009-04-08T19:00:26-06:00

ID

145719

Comment

Well, it isn't haha.

Author

....

Date

2009-04-08T19:11:48-06:00