From The Journal:

Fannie Mae is due to pay retention bonuses of between $470,000 and $611,000 this year to some executives, despite enormous losses at the government-backed mortgage company. Fannie’s main rival, Freddie Mac, also plans to pay such bonuses but hasn’t yet provided details.

Fannie’s bonuses are smaller than ones paid by American International Group Inc. that have caused a political firestorm for that company. Seventy-three AIG executives received retention payments of $1 million or more recently, according to New York Attorney General Andrew Cuomo.

But the Fannie bonuses are still considerable and come at a time when Fannie and Freddie are receiving increasing amounts of funding from the Treasury. For 2008, Fannie and Freddie reported combined losses of about $108 billion, largely stemming from a surge in home-mortgage defaults. The Treasury has agreed to provide as much as $200 billion of capital apiece to Fannie and Freddie in exchange for preferred stock. The two companies have said they will need a combined $60 billion of that money to cover their losses so far.

So, lose more than $100 billion, and your company fights to keep you! This is beyond absurd. I haven’t seen any reporting on whether these Fannie and Freddie executives have contracts requiring those payments. Regardless, they should follow the lead of some AIG executives and give the money back. It’s hard to call it merit pay, by any stretch of the imagination.

Or let’s put them on the spot. Send those Fannie and Freddie high achievers to California’s Inland Empire, or Detroit, and have them explain, in person, to a gathering of former homeowners who lost their properties to forceclosure, exactly why they deserve their big rewards.

Via Naked Capitalism, the Financial Times reports that on the day before Thanksgiving, AIG revealed it will give millions of dollars in “retention bonuses” to 130 key executives. The timing gets even more peculiar: It came one day after AIG said that it would restrict salary and bonuses for top executives.

From the Financial Times:

An AIG spokesman said on Wednesday that retention bonuses were different from the annual bonuses included in Tuesday’s statement … The company said at the time that retention bonuses would be necessary to maintain continuity and value at various AIG units.

“Retention bonuses are a better alternative for the repricing of option awards so long as they are reasonable, fully disclosed and truly needed to retain talent,” said Richard Ferlauto, director of corporate governance and pension investment at the American Federation of State, County and Municipal Employees union.

“But in this market we don’t see much clamor for executives who made big bets, cannot make risk and were paid more than they are worth,” he added.

Yves Smith at Naked Capitalism agreed;

Do you really believe, with massive deleveraging and all sorts of big financial firms, including insurers, teetering, that AIG executives have great employment prospects these days? But the bigger issue, as far as I am concerned, is the misrepresentation, trying to claim that AIG was forgoing significant senior level comp, only to learn that they define terms a bit differently than the rest of the world does.

I suspect this little development isn’t going to go unnoticed. AIG may have a very Black Friday ahead.