Workers Hit Hardest by Fannie-Freddie Crisis

In the ongoing saga of Fannie Mae and Freddie Mac one thing is certain; the workers have the most to lose. Employees at Fannie Mae held $116 million in company stock at this time last year, the worth of those shares has fallen to just $17.5 million so far this year, according to The New York Times.

Company executives have been hit hard by the financial catastrophe. Richard F. Syron, CEO of Freddie Mac, and Daniel H. Mudd, CEO of Fannie Mae, each made millions in salary compensation last year. However, much of that compensation came in the form of company stock, which is now virtually worthless. Top executive salaries are in the millions, so one can assume they will manage to get by with or without the extra cushion of highly valued stock options. Mid-level workers on the other hand, are in a very different state.

Both Fannie Mae and Freddie Mac regularly offered stock options as part of their salary and incentives packages for employees, long making them a preferred destination for many looking to build for the future. Unfortunately, employees who once held hundreds or perhaps thousands of company stock options in their nest-egg have seen the value of their shares plummet over 90 percent in the past year alone.

After a vigorous rebound during the past week, shares of Freddie Mac stood at $4.85, down nearly 92 percent from its 52-week high of $65.88 set October 4, 2007. The numbers are similarly sobering for Fannie Mae, shares were valued at just $7.30, down over 88 percent from its 52-week high of $68.60 set on the same day last October.

For employees who regularly bought into the stock option payment plan offered by the two companies, the assets which they may have taken for granted all these years have been completely wiped out. It is possible that a multi-billion dollar government takeover of the two firms would completely wipe out shareholders, forcing them to start over from scratch.

The collapse of the mortgage and finance industry has been an economic catastrophe of epic proportions, but the human tragedy is all too easily overlooked. These insolvent firms employ mothers and fathers. Entire families rely on their stability for their existence. The government may takeover and restructure the two companies, or it may choose to do away with them completely. Meanwhile, the negligent top executives would walk away with millions, while the average worker could be left with nothing at all.

Source The New York Times:

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