U.S. mortgage giants Fannie Mae and Freddie Mac plan to pay retention bonuses to their executives while the government and Congress are seeking ways to strip American International Group executives of hefty bonuses.
The government-controlled Fannie Mae plans to pay bonuses of at least one million dollars to four key executives in an effort to keep hundreds of employees from leaving the company, according to news reports on Wednesday.
Freddie Mac was reported to be planning similar awards. Like Fannie Mae, Freddie Mac is a government-sponsored finance company created to encourage home ownership by lowering mortgage rates.
Together, the two companies own or guarantee more than half of the home loans in the United States.
Hobbled by skyrocketing loan defaults resulting from the worst financial crisis in decades, Fannie Mae recently requested 15 billion dollars in federal aid while Freddie Mac has sought a total of almost 45 billion dollars.
Fannie Mae disclosed its "broad-based" retention program in a recent regulatory filing with the Securities and Exchange Commission.
The company was only required to disclose the amounts for the top-paid executives, who will pocket at least 470,000 dollars on top of their base salaries.
The bonuses were authorized last year by the Federal Housing Finance Agency, which seized control of Fannie Mae and Freddie Macin September and ousted the companies' former CEOs.
"It was critical to retain their most important asset -- their employees -- who are being asked to play a vital role in the nation's economic recovery," the agency's director James Lockhart said in a statement.
"As the previous senior management teams left, it would have been catastrophic to lose the next layers down and other highly experienced employees," Lockhart said.
On Wednesday, U.S. President Barack Obama said he will ask Congress to pass legislation giving the administration greater regulatory authority over financial institutions like AIG.
He assailed AIG's business practices and the millions of dollars in executive bonuses it paid out even as it was 170 billion dollars in debt to government bailouts.
Charles Rangel, chairman of the House's the Ways and Means Committee, said Wednesday that the House plans to take up a bill Thursday that would impose a 90 percent tax on bonuses paid to top-earning employees at AIG and other companies receiving big government bailouts.
Under this bill, tax would hit employees who are making more than 250,000 dollars a year, the head of the tax-writing committee said.
The AIG, which is now 80-percent owned by the U.S. government, lost 61.7 billion dollars in the fourth quarter of 2008, marking the largest corporate loss in history.
However, the financial strapped company distributed 55 million dollars in December and 165 million dollars had to be paid this month.
Testifying under oath at a congressional hearing on Wednesday, Edward Liddy, chairman and chief executive officer of AIG, called on top-earning employees to voluntarily return at least half of the bonuses.
Some employees have already stepped forward to give money back, he said.