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Citi Wants Its Cake and to Eat It, Too

Posted by Larry Doyle on April 29, 2009 7:15 PM |

Hasn’t the public had enough of excessive compensation and abusive bonus practices for employees of organizations saved by Uncle Sam? Why and how is it that Citi Seeks Approval to Pay Out Bonuses.

Vikram Pandit, the CEO of Citigroup, and every other executive at Citi needs to know that as wards of the state, you earn a government wage. While Vikram and team may decry the dissolution of their franchise, they need to wake up and smell the coffee. There would be no franchise at Citi without the taxpayer having injected tens of billions of dollars.

Citi employees took the risk in choosing to work at the firm just as any employee takes company risk in any firm. If any Citi employee wants to leave, my advice is “don’t let the door hit you on the way out.”  Citi management may believe it is critical to the franchise to retain these employees in order to generate earnings and repay the government. My response is that with a Fed Funds rate at 0% and lending rates of between 5-20%, Citi will generate earnings without the risks embedded in proprietary trading.

If Citi can sell a division intact to generate income, why aren’t they already pursuing it? The WSJ offers further color:

Citigroup is trying to get U.S. approval for special bonuses for many of its employees. In a meeting earlier this month with Treasury Secretary Timothy Geithner, Citigroup CEO Vikram Pandit made the case for the stock-based bonuses. Executives are describing the bonuses as “retention” awards to perk up demoralized employees who the company worries are vulnerable to poaching by rival firms, people familiar with the matter said.

A person familiar with Mr. Geithner’s thinking said the Treasury hadn’t made a decision on whether to allow the bonuses. It is unclear how much Citigroup would pay out in bonuses if the government approved the move. A Citigroup spokesman declined to comment on details of the proposed compensation plans.

Citigroup’s request comes after Congress, the public and the president blasted pay practices on Wall Street. Bonuses at American International Group Inc. and Merrill Lynch & Co. ignited political infernos in Washington.

Citigroup has already gotten its own share of criticism for excessive spending, thanks in part to its aborted plans earlier this year to buy a new corporate jet. The company has received $50 billion in taxpayer aid, and the U.S. government is protecting Citigroup against most losses on $301 billion of its assets. The Treasury is poised next month to become Citigroup’s largest shareholder, owning as much as 36% of its common stock.

Why is this issue even being aired? Why hasn’t Turbo-Tim told Vikram and team, the answer is “NO.” Two letters, “N” and “O”. Which one of those don’t they understand?


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