A severe case of mortal denial came to light yesterday when Citigroup announced that it will raise the salaries of their staff with 50% "in order retain the best employees". Citigroup executives said that some workers have already left for small boutique banks or larger competitors that are not so beholden to the government.
Gutshpa, they call it, but it could also mean that Wall street did overhaul Obama instead of the other way around.
Moral of the story:
"We'll soon start to blow the next bubble with the assistance of the Treasury Department, this is the way we will get the economy going again. And when the gullible investor buys our derivative junk again we will be able to pay commissions as never before. Obama c.s. is in our pocket".The New York Times continues:
“But maybe it’s a little like the canary in the mine, and you say that things are getting better", said Alan Johnson of Johnson Associates, a compensation consulting firm. Mr Johnson is not the best man to ask as he must have seen his commissions in the banking industry take a dive with a minimum of 50%. He has a vested interest in spin. And to talk about Citigroup as if it is a canary in the mine is just the wrong remark to make to a gold bug.
Nevertheless, I wonder if somebody told Citigroup that they are bankrupt and being kept alive by taxpayer money? The denial is stupefying.
We quote Jesse: "The banks must be restrained, and the economy brought back into balance, before there can be any sustained recovery".
New York Times
Citigroup Has a Plan to Fatten Salaries
After all those losses and bailouts, rank-and-file employees of Citigroup are getting some good news: their salaries are going up.
The troubled banking giant, which to many symbolizes the troubles in the nation’s financial industry, intends to raise workers’ base salaries by as much as 50 percent this year to offset smaller annual bonuses, according to people with direct knowledge of the plan.
The shift means that most Citigroup employees will make as much money as they did in 2008, although some might earn more and others less. The company also plans to award millions of new stock options to employees in an effort to retain workers and neutralize a precipitous drop in the value of their stock holdings.
Like Citigroup, financial companies, like Bank of America and Morgan Stanley, are raising employees’ base salaries to try to shift attention away from bonuses and curb excessive risk-taking. So are banks like UBS and other European competitors.
The Citigroup proposals, discussed internally this week, present a crucial test for the Obama administration, which has vowed to rein in runaway compensation at companies that have received large taxpayer-financed bailouts. Citigroup has gotten not one but two rescues from Washington. Soon the government will assume a 34 percent stake in the company, whose share price has plunged nearly 84 percent in the last year.
Despite Washington’s new role at Citigroup, and public anger over big paydays on Wall Street, administration officials have little power to prevent the company and others in the industry from raising salaries for rank-and-file employees.
Kenneth R. Feinberg, the administration’s new “pay czar,” has the authority to set compensation for only the top 100 employees at troubled companies. The rest — which at Citigroup, means fewer than 300,000 people — can be paid as executives see fit, provided any increase does not rank them among the 100 most highly paid workers.
Outsize pay on Wall Street, particularly the industry’s bonus culture, is widely seen as having encouraged the risk-taking that led to the gravest financial crisis since the Depression. But industrywide, total compensation is expected to rise 20 to 30 percent this year, approximately to the levels of 2005, before the crisis, according to Johnson Associates, a compensation consulting firm. Total industry pay would still be below the record levels of 2007, but only a bit.
“You can say it is outrageous,” said Alan Johnson, the president of the firm. “But maybe it’s a little like the canary in the mine, and you say that things are getting better.”
Indeed, despite the simmering anger over Wall Street pay, some of the 10 big banks that repaid their federal aid this month — a big step toward disentangling themselves from the government — are gearing up to pay outsize bonuses. For many, profits are up, despite the troubled economy. On Monday, Goldman Sachs, which returned $10 billion of bailout funds, denied reports that it planned to pay out the highest bonuses in its 140-year history.
Mr. Feinberg, the special master for compensation, is the person who ensures that companies receiving federal bailout money are abiding by executive pay guidelines. This week, Mr. Feinberg, who oversaw the federal government’s compensation fund for victims of the Sept. 11, 2001, terrorist attacks, held introductory meetings with Citigroup executives and their counterparts at several other companies that have received two federal bailouts. He will start reviewing pay packages for the 25 highest-paid employees, as well as compensation formulas for the next 75, in the next two months. He declined to comment on Tuesday.
For months, Citigroup executives have sought guidance from the Treasury Department about how to alter compensation. But after reviewing the new rules, the bank determined it did not need Mr. Feinberg or other government officials to sign off on pay for the rank and file. While Mr. Feinberg can request information on the pay polices at financial companies that have received two federal bailouts, the companies can reject his guidance.
Citigroup executives are so eager to keep employees from fleeing, that in some cases, they are offering them guaranteed pay contracts. Managers began notifying bank employees of the proposed changes this week. They could take effect shortly.
For some Citigroup investment bankers and traders, the changes could mean salary increases of as much as 50 percent, depending on their position. Legal and risk management employees, as well as those in the credit card and consumer banking units, whose pay is typically skewed toward salary, rather than bonuses, are expected to receive smaller increases.
Citigroup executives said the changes were aimed at retaining employees. Some Citigroup workers have already left for small, boutique investment banks or large rivals that are not so beholden to the government.
Citigroup officials declined to discuss the issue on the record, given its sensitive nature. But they said that the changes would bring the bank’s compensation plan in line with the widespread view on Wall Street that bonuses were not one-time payouts, but rather a form of deferred salary. They said the new system would let them adjust bonuses more sharply to reflect employees’ performance.
Stephen Cohen, a Citigroup spokesman, said that any changes would be intended to adjust the balance between salaries, which are fixed, and bonuses, which vary from year to year.
Citigroup also plans to introduce a new stock option program later this year. Under the plan, it will award employees one stock option for every share of restricted stock they have accumulated. The program could open the floodgates for the release of tens of millions of stock options that could be cashed out over the next three years.It is unclear what the strike price will be. But the hope is that the options program will give employees another incentive to stay despite offers from rivals.