UPDATE: FHFA Lockhart Defends Fannie, Freddie Retention Pay
18 März 2009 - 8:28PM
Dow Jones News
The regulator for Fannie Mae (FNM) and Freddie Mac (FRE)
defended the retention pay promised to thousands of employees after
the mortgage giants were seized by the U.S. government last
fall.
"These institutions are so important to the United States at
this point," Federal Housing Finance Agency Director James B.
Lockhart told reporters Wednesday. "We have to make sure that there
are people in there who are doing the job. The senior managers who
got them into trouble have left."
FHFA hired a compensation consultant to advise the agency on
retaining key employees shortly after the government took over the
mortgage firms, he said.
Under the program, retention pay is doled out over three periods
to employees who meet certain performance criteria. The payments
are "relatively small" and cover a broad swath of employees,
Lockhart said. In the case of Fannie, the retention program covers
about 5,000 people, he said.
"I think it's a reasonable and well thought-out plan," he
said.
The remarks come as outrage continues to boil over $165 million
in retention bonuses paid about by American International Group
(AIG) after it received about $170 billion in government aid.
When the government took control of Fannie and Freddie in
September 2008, it agreed to pump billions into the firms as needed
to keep them solvent. It also threw out their chief executives and
boards.
By the end of this month, taxpayers will have sunk $60 billion
into the firms. Since Fannie and Freddie aren't recipients of
federal aid under the Troubled Asset Relief Program, or TARP, they
aren't targeted by new restrictions on executive pay pushed by the
Obama administration.
Pay has still dropped sharply for many employees at the
companies, Lockhart said, with many employees earning half of what
they earned before the firms were put into conservatorship. "My
view is that we have to be careful and not give excessive
compensation," he said.
Several top executives left the firms in the weeks and months
after the government takeover.
David Moffett, who was installed by FHFA as chief executive of
Freddie after the takeover, stepped down in February after just a
few months in the job.
Lockhart offered praise for Moffett, saying he was a "very good,
very strong manager" with a hands-on approach. However, he
suggested Moffett grew frustrated with the challenges of running a
government-controlled company, and all the scrutiny from
politicians, regulators and the press that entails.
The next CEO of Freddie should have a strong bent toward public
service, in addition to financial expertise, Lockhart argued. "You
really have to have public service in your veins," he said.
-By Jessica Holzer, Dow Jones Newswires; 202-862-9228;
jessica.holzer@dowjones.com