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Fannie and Freddie Planned Bonuses: Report

Fannie Mae and Freddie Mac, the bailed-out mortgage giants, have planned to distribute $210 million in bonuses over an 18-month period, according to a news report.

Fannie Mae



Freddie Mac


have planned to distribute $210 million in bonuses over an 18-month period, according to a news report.

The news, which comes on the heels of a public firestorm over bonus payments at

American International Group


, is sure to spark new criticism of the government's handling of executive compensation at firms that are receiving major government aid.

Freddie and Fannie started distributing the bonuses to 7,600 employees late last year and plan to finish the payouts in early 2010, according to the

Wall Street Journal

. The paper cited a letter from James Lockhardt, head of the Federal Housing Finance Agency, which is the mortgage-finance companies' regulator, to Sen. Charles Grassley.

In the letter, Lockhardt defended the plan, explaining that the company needed to retain top talent with the payments, according to the


, the same argument that has been made by


executives and others. The maximum bonus for any one individual is $1.5 million.

The firms are currently in conservatorship and have received extensive government support due to massive losses that totaled $108 billion last year. Critics characterize bonus packages as exorbitant and unnecessary, arguing that companies posting huge losses and receiving extensive taxpayer support should not reward their employees.

The rescue of Fannie and Freddie is structured differently than that of other major financial institutions that received direct capital injections while remaining operationally independent. However, the Treasury and

Federal Reserve

have committed over $1 trillion to purchasing the two companies' debt and mortgage loans, while the FHFA has kept a tight watch on operations and used Fannie and Freddie as tools to help the housing market recover.