Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) have often been described as wards of the state. Amble southwest from D.C. and you'll find this term defined by the Texas Department of Assistive and Rehabilitative Services as "a child who, as determined by the State where the child resides, is a foster child, is a ward of the State, or is in the custody of a public child welfare agency."

The third option is probably the best way to describe the present-day Fannie and Freddie. The two mortgage agencies absolutely blundered through the housing bubble and financial crisis that followed, and as a result the government took these poor, misguided children under its wing. Unfortunately for shareholders, Uncle Sam is pretty much seeing to it that the blundering continues.

In a recently released SEC document, Fannie Mae outlined the goals that officers would have to meet to qualify for "long-term incentive awards." No. 1 on the list says it all:

[B]eing a recognized leader in the housing recovery by providing liquidity to the mortgage market and helping to prevent foreclosures (which includes objectives relating to volume of borrowers assisted, administration of the Making Home Affordable Program and market share)

In plain English that says that Fannie's officers will be rewarded based on whether the company continues to run itself like a charitable government organization rather than a profit-seeking private company. And don't worry, those officers will have plenty of taxpayer money to play around with to meet that goal. Earlier this week the Treasury lifted its cap on how much it will throw at Fannie and Freddie from $400 billion to ... um … infinity.

This is all great news for the heads of Fannie and Freddie, because losing money is typically much easier than making money. And while everyone rips their hair out over the compensation packages at Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), and Citigroup (NYSE:C), the Fannie and Freddie CEOs each received packages amounting to an annualized $6 million in 2009 for their companies' value-destroying performances.

And don't worry, those big pay packages aren't at risk from the companies' lousy stocks. Apparently, the Fannie and Freddie officers have realized the bleak future for the shares and have opted to take their pay in 100% cash.

So what does this all add up to? We've got two companies that are primarily owned by the government, being pushed to provide liquidity to the mortgage market whether or not it's in the companies' best interests, and top executives probably wouldn't blow their noses on the stock certificates. And there are people actually buying this stock?

I think Fannie and Freddie will probably be lousy investments; Morgan Housel tells us how to avoid becoming terrible investors.

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool. The Fool's disclosure policy knows how to spell trouble.