Fannie Mae CEO defends retention bonuses

WASHINGTON -- Mortgage giant Fannie Mae's chief executive warned Friday that canceling bonuses for workers at institutions receiving federal bailout money could undermine efforts to stabilize the U.S. housing market.

Herbert Allison, who was installed by government regulators as CEO of the company last fall, sent a companywide e-mail Friday defending Fannie Mae's bonus program.

"I am deeply concerned that eliminating our retention plan would jeopardize our ability to fulfill the mission the government has given us to address the housing crisis," he wrote, citing President Obama's plan to prevent up to 9 million foreclosures.

Allison, who is not receiving a salary as CEO, wrote that the bonuses — including more than $1 million each to four top executives — were needed to "ensure we maintain the skills and experience we need to help keep the mortgage market operating."

Employees, he wrote "deserve tremendous credit for staying here and demonstrating unswerving dedication to the public interest despite" uncertainty about the company's long-term future and the stock awards that have become worthless.

But Rep. Barney Frank, chairman of the House Financial Services Committee, urged the government to cancel retention bonuses for hundreds of employees at Fannie Mae and Freddie Mac.

The Massachusetts Democrat asked the Federal Housing Finance Agency, which regulates both firms, to eliminate the bonuses approved for this year and next. Frank also wants employees to repay bonuses from last fall, after the two companies were placed under government control.

The public "rightfully insists that large bonuses such as these awarded by institutions receiving public funds at a time of a serious economic downturn cannot continue," Frank wrote in the letter dated Thursday and released by his office Friday.