Bailed-out Citigroup Wants to Give Bonuses to It's Employees

Where is the outrage this time around. Another major tottering financial institution wants to spit in the faces of the American taxpayer and we expected to just stand for it. The question is whether the Wall St. dominated Obama administration cave in, again.

Citigroup Inc., soon to be one-third owned by the U.S. government, is asking the Treasury for permission to pay special bonuses to many key employees, according to people familiar with the matter.

The request comes as Citigroup is grappling with broad government pay restrictions that could break apart its legendary energy-trading unit. People at that unit, Phibro, are threatening to leave because of pay caps tied to the U.S. bailout of Citigroup. Phibro has been the source of hundreds of millions of dollars in profits for the bank, and has paid out hefty compensation, including a roughly $100 million windfall last year for the unit's leader, Andrew Hall.

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 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.

And this has been in the works for some time now:

AIG isn't the only bailed-out financial firm paying big bucks to managers who helped steer their company to near collapse. Citigroup has pledged millions of dollars in bonuses to senior executives for the next few years, despite lawmakers efforts to eliminate such payments.

It's not clear whether the bonuses, which Citigroup says are for 2008 but won't start paying out until 2010, will be allowed. Under compensation rules passed by Congress in mid-February, cash bonuses are barred for top executives at bailed-out banks.

But Citi finalized its bonus program shortly before the new rules were introduced. That might make the payments permissible, though they could be made almost worthless by new tax rules just passed by the House of Representatives and headed for consideration in the Senate. Even so, Citigroup's move in January to set in place bonus payments for years to come raises questions about whether it was trying to evade compensation rules it knew were coming.

Then there is Morgan Stanley which is trying to con Uncle Sucker:

Anticipating restrictions on bonuses, officials at Citigroup Inc and Morgan Stanley are exploring ways to sidestep tough new federal caps on compensation, the Wall Street Journal said.

Executives at these banks and other financial institutions that received government aid are discussing increasing base salaries for some executives and other top-producing employees, the paper said, citing people familiar with the situation.

The discussions are at an early stage, partly because the government has not yet issued specific rules on the bonus payments that will be allowed at companies that received aid under the government's Troubled Asset Relief Program, the paper said.