In a 4/5/09 WSJ article, James Hagerty notes that Fannie Mae and Freddie Mac, the two formerly quasi-government mortgage giants that were effectively nationalized last fall, “expect to pay about $210M in retention bonuses to 7600 employees over 18 months.” The maximum bonus that will be paid is $1.5 million. $51M were already paid in 2008 and the remainder are due to be paid this year and next.
Of the 7600 employees receiving bonuses, 4057 are employed by Freddie Mac and constitute a whopping 80% of all the employees at that company. Fannie Mae is rewarding 61% of their employees, 3545 in total, or 61% of their total work force.
The regulator, James Lockhart, is responsible for initiating the retention bonus program. “It is not realistic,” he wrote, “to expect that experienced and highly skilled employees will indefinitely continue to work as hard as they have if we do not provide reasonable incentives to work.” As thousands of people in the financial industry line up at the employment office, why isn’t a paycheck enough “incentive” for most of these workers?
Since Congress has squashed or eliminated many bonuses for those banks receiving bailouts, it is mandatory that Congress follow the same principle with these institutions which have received far more taxpayer money than any of the private banks or investment firms.