Chairman of the US House Financial Services Committee Rep. Barney Frank (D-Massachusetts) hopes to halt executive bonuses from being paid at Fannie Mae and Freddie Mac. (Photo: Getty Images)
As Congress races to claw back bonus payments at firms taking government bailout cash, Rep. Barney Frank (D-Massachusetts) on Friday called on Fannie Mae and Freddie Mac to cancel payments at the mortgage giants now under government control.
Fannie Mae is set to pay retention bonuses, with some top executives at the mortgage giant planning to receive more than $1 million. Freddie Mac has yet to release bonus figures.
Frank wrote a letter on Friday to James Lockhart, head of the Federal Housing Finance Agency, the government agency overseeing the mortgage firms, urging the agency to use its authority to rescind the bonuses.
"I urge you to use that authority now to reconsider the retention programs at Fannie Mae and Freddie Mac, cease any further payments and recover previous payments under those programs," Frank said.
Amid the public outcry over insurance firm AIG paying $165 million in retention bonuses, the House on Thursday passed a bill to tax bonuses at 90 percent for anyone working at a firm receiving at least $5 billion in bailout aid under the government's $700 billion financial rescue package. The tax would apply to any individual or household with income exceeding $250,000.
The bill would also apply to Fannie Mae and Freddie Mac, and legislation considered by Sens. Max Baucus (D-Mont.) and Chuck Grassley (R-Iowa) would also affect the mortgage firms.
The two companies had put in retention plans before the government took them over, but Frank said he was not swayed by their plans.
"I remain very skeptical that retaining and rewarding people who made the mistakes that contributed to the unsatisfactory performance is a good idea," Frank said in the letter. "Further, in this troubled economy, and in this job market, it is difficult to imagine that the companies would not be able to find competent and talented replacements for anyone who chooses to leave."
Grassley sent a letter to the two mortgage firms on Thursday criticizing the retention bonuses.
"Just as with extravagant bonus pay at American International Group, it is important to ensure that taxpayer support is not enabling unreasonably generous compensation arrangements that would have never have been possible but for taxpayer assistance," Grassley wrote.
Grassley is seeking the names of any of the firms' employees receiving a bonus of at least $100,000 and wants an explanation of why the companies felt it necessary to retain those specific employees.