Big Bonuses at Fannie and Freddie Draw Fire
By Charles Duhigg
Fannie Mae and Freddie Mac, the two troubled companies at the heart of the nation’s mortgage market, are set to pay their employees “retention bonuses” totaling $210 million, despite calls from lawmakers to cancel the payments. The bonuses, which were made public on Friday, were defended by the companies’ federal regulator, James B. Lockhart, who said he intended to let them proceed. Mr. Lockhart’s defense of Fannie and Freddie’s bonuses has made him a lightning rod for legislative criticisms. It is also beginning to draw questions about why President Obama has not replaced the regulator, who was appointed by President Bush. The law creating Mr. Lockhart’s office, the Federal Housing Finance Agency, established him as the lead regulator until his successor is named by the president and confirmed by Congress. By failing to name a successor, say observers, the White House is implicitly backing Mr. Lockhart’s stance on the Fannie Mae and Freddie Mac bonuses, which stands in stark contrast to President Obama’s criticisms of the A.I.G. payments. “This is a de facto White House endorsement of these payments, which is a little odd considering that everyone spent days talking about how they were shocked by the bonuses given to A.I.G.,” said Karen Shaw Petrou, a managing partner at Federal Financial Analytics, a consulting firm in Washington and a longtime observer of the companies. “It’s also a tempest in a teapot. We should worry less about $210 million in bonuses, and more about the fact that these companies are sitting atop $5 trillion of risks, and if they stumble, the American economy could disappear.”