White House Won’t Decide if $100 Million for Citi Trader is OK
EmailFrom Jake Tapper and Matthew Jaffe:
The White House will leave decisions about a Citigroup trader’s potentially $100 million bonus in the hands of Special Master Kenneth Feinberg, the Treasury Department official in charge of compensation for executives who work for companies that received tens of billions in government aid.
Andrew Hall, the director of Citigroup’s energy-trading division Phibro LLC, has a pay package that could be worth more than $100 million with Citigroup, which has received more than $45 billion in taxpayer bailout funds.
A Treasury official says that “Mr. Feinberg was appointed to review and approve executive compensation for top executives at the 7 firms receiving exceptional assistance to help ensure that companies strike the right balance around their need to retain talent, reward performance, and protect the taxpayers' investment. Obviously, we all have a shared interest in ensuring that those companies can return to profitability as soon as possible so that taxpayers can recoup their investment."
Asked about the pay package today, White House spokesman Robert Gibbs said that “the top 100 salaries of the seven firms that received extraordinary assistance under the TARP program fall, obviously, within the bailiwick of Mr. Feinberg's review. And I know there's an upcoming deadline on that, and I don't want to prejudge that deadline.”
AIG, Bank of America Corp., Chrysler Corp., Chrysler Financial, Citigroup Inc., General Motors Co., and GMAC Financial Services Inc. all have to submit their compensation packages for approval by Feinberg by Aug. 13
"Companies will need to convince Mr. Feinberg that they have struck the right balance to discourage excessive risk taking and reward performance for their top executives," said the Treasury Department official. "That process is just beginning now, and Mr. Feinberg has begun consulting with those firms about their compensation plans. We are not going to provide a running commentary on that process, but it's clear that Mr. Feinberg has broad authority to make sure that compensation at those firms strikes an appropriate balance.”
Gibbs did allow that “one could easily come to the conclusion that that's probably a bit out of whack on any pay scale.” Asked about Wall Street pushback that government limits might chase away those executives needed to strengthen Wall Street, Gibbs said, “the justification of setting outsized salaries is this notion of simply a series of unique skills or traits that can't be replicated by anybody on the planet, I don't know that the president would necessarily buy that notion.”
The Treasury Department spokesman noted that “Mr. Feinberg can't force companies to break a contractual obligation that is grandfathered in the statute. If the contract is not grandfathered by the statute (i.e. entered after the Feb 12 date), and is inconsistent with the limitations in the statute, then it is the statute that would require the contract not be followed, not Mr. Feinberg.”
-Jake Tapper and Matt Jaffe
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Posted by: $ | July 27, 2009, 5:23 pm 5:23 pm
the fat cats just don’t get it……… or do they??
Posted by: Shame | July 27, 2009, 5:29 pm 5:29 pm
the fat cats just don’t get it……… or do they??
They’re getting it all right. Obama 2012! Shame, I’m going to urge you to get a 2nd job like I told “Ripper” to in the previous thread. I’m looking for a bonus next year too! Goldman Sachs Rules!
Posted by: Money Bags | July 27, 2009, 5:33 pm 5:33 pm
White Collar Crime apprently Pays!
Thanks for NOTHING President & Congress.
YOu are showing us NOTHING RIGHT, and Everything Wrong.
Posted by: Ron | July 27, 2009, 5:35 pm 5:35 pm
Business as usual.
Posted by: Ted | July 27, 2009, 5:38 pm 5:38 pm
“The White House will leave decisions… in the hands of Special Master Kenneth Feinberg, the Treasury Department official in charge of compensation for executives”
Uh, this is news? That nothing has been decided except at this time they are leaving the guy put in charge of this, in charge?
Hard hitting reporting there, Lou.
Posted by: jhw539 | July 27, 2009, 5:40 pm 5:40 pm
Yep, we shouldn’t have bailed out anyone. If the economy grinded to a snails pace so be it. The economy is still based on phony borrowing and spending. The only problem is that it is the fat cat bankers that get to spend our money now.
Posted by: Huh | July 27, 2009, 5:46 pm 5:46 pm
We’ve had these chucks on the payroll for some time. I’ll tell ya, they stay bought. For cheap too.
Posted by: Money Bags | July 27, 2009, 6:07 pm 6:07 pm
There all crooks………….
Posted by: joey | July 27, 2009, 6:09 pm 6:09 pm
Business as usual for executives in the USA. Filling their pockets each year with more money than most people could spend in a lifetime. Life for executives in “Corporate America” is more about scratching each other’s backs while abandoning ethics, their company shareholders, and the consumer in general.
Posted by: Jack | July 27, 2009, 6:16 pm 6:16 pm
“Business as usual for executives in the USA. Filling their pockets each year with more money than most people could spend in a lifetime. Life for executives in “Corporate America” is more about scratching each other’s backs while abandoning ethics, their company shareholders, and the consumer in general.”
All under the watchful eye of our President. By Mammon, I love that man!
Posted by: Money Bags | July 27, 2009, 6:17 pm 6:17 pm
Yep, Here we go again!!!!!! Just give away our hard earned dollars while we just continue to barely survive!!!!!
Posted by: countrygirl_74 | July 27, 2009, 6:39 pm 6:39 pm
Time to sharpen those pitchforks and put them to use
Posted by: Orson | July 27, 2009, 7:00 pm 7:00 pm
Yeh, Everyone who voted for Obama voted for this stupidity! Why did Obama give such money and not have any control over it and when they do control it, they make bad decisions. Impeach Obama!
Posted by: Mick | July 27, 2009, 7:13 pm 7:13 pm
“Yeh, Everyone who voted for Obama voted for this stupidity! Why did Obama give such money . . .”
_____________________________________
The Citigroup monies were TARP funds with funding and administration of same put in place under the BUSH administration and dealt out to Citigroup by November of 2008.
Posted by: danita | July 27, 2009, 7:35 pm 7:35 pm
Business as usual…they will continue this trend expect to be continuously bailed out because they believe they have the too big to fail mentality…they need to be disseminated as such and broken down so this fiasco should not happen again…
Posted by: phallon | July 27, 2009, 7:49 pm 7:49 pm
Do not buy insurance from AIG, do not buy a GM or Chrysler vehicle. Do not get a loan or keep your money in Citigroup. It’s that simple.
Posted by: Nick | July 27, 2009, 8:07 pm 8:07 pm
This is sinful!!! Rolling the dice on Wall Street put us in this mess to begin with. The morons in DC have not learned their lesson and we are going to put out more rewards! The only mistake we are making is “not starting over with a new government”.
Posted by: wickedblackjack | July 27, 2009, 8:08 pm 8:08 pm
Only if it’s Citi profit, and not bailout money. If you can even tell the difference at this point. But from what I’ve heard so far about Citi, they’re not into the black that far, so NO!
Posted by: LongT | July 27, 2009, 8:45 pm 8:45 pm
Mr. Hall seems to be suggesting a run the bank. What gall!
Posted by: Common Sense | July 27, 2009, 8:45 pm 8:45 pm
Fire whoever hired Hall on those terms.
Posted by: Common Sense | July 27, 2009, 8:49 pm 8:49 pm
Obviously he brings a talent to the table that can’t be duplicated. If truly no one else is able to produce $300m to $500m as he has than it seems to me that $100mil should be honored as the contract calls for… Maybe CITI can guarantee the $$ but pay it out as they also pay back the American taxpayers. Bottom line… if he and his team are really that much more talented than any possible replacement the american public should want him to remain at CITI and produce as much as possible so that CITI can re-pay tarp ASAP.
Posted by: K.Adams | July 27, 2009, 9:26 pm 9:26 pm
What we going to see in ten years is 1 percent of the people are going to own the 99 percent of anything and the soles of rest of the people. We are taking the risk away from the company that are too big to fall we will be slaves of the greedy in less than ten years.
Posted by: kevin | July 27, 2009, 11:13 pm 11:13 pm
kevin . ..
“The wealthiest 1 percent have never had it so good.
“According to government figures, 1-percenters’ share of America’s total income is the highest it’s been since 1929, and their tax rates are the lowest they’ve faced in two decades. Through bonuses, many 1-percenters will profit from the $23 trillion in bailout largesse the Treasury Department now says could be headed to financial firms. And most of them benefit from IRS decisions to reduce millionaire audits and collect zero taxes from the majority of major corporations.”
Posted by: danita | July 28, 2009, 12:16 am 12:16 am
“Do not buy insurance from AIG…”
Wait, then how do we help pay for Chris Dodd’s mortagage on his vacation home?
Posted by: $ | July 28, 2009, 10:14 am 10:14 am
Posted by: danita | Jul 28, 2009 12:16:29 AM
Thankfully, Obama put a stop to Bush’s policy of bailouts and got rid of tax cheats in Treasury. The power that Goldman Sachs had was broken…
Posted by: Relieved | July 28, 2009, 10:16 am 10:16 am
Nobody in Citi deserves compensation like this, especially since the stock is worthless, as are the “options” offered to employees over the years! There wouldn’t be a Citi were it not for the TARP funds. Massive layoffs, stock falling, = no raises or bonuses!
Posted by: Citi Can't Sleep | July 28, 2009, 10:53 am 10:53 am
Citi Can’t Sleep,
You forget who is in office: Barack O’Bankster.
Posted by: Moar | July 28, 2009, 10:59 am 10:59 am
@Moar
Please don’t start that blame Obama crap with me. This started way before he was in office. Citi laid off 50,000 people! Divide $100 million by 50,000, and give the money to them, the now unemployed!
Posted by: Citi Can't Sleep | July 28, 2009, 12:15 pm 12:15 pm
–Please don’t start that blame Obama crap with me. This started way before he was in office. Citi laid off 50,000 people! Divide $100 million by 50,000, and give the money to them, the now unemployed!–
No doubt it didn’t start with Obama. But is sure is continuing with him. He’s placed a tax cheat in Treasury and Goldman keeps getting paid. It’s like Bush is still in office.
Posted by: Moar | July 28, 2009, 12:49 pm 12:49 pm
Mr. Hall’s compensation is ludicrous for the following reasons:
1. “Phibro’s contribution was especially important. In 2007, Phibro contributed $686 million to Citigroup, and $487 million in 2006, according to the annual report.” These are not earnings but revenues of which between 30-35% went for bonuses and another 15-25% went for operations, salaries, premises and brokerage commissions.
2. Given that existing Citigroup shareholders have been diluted 35% prior to the preferred shares for common exchange and another 75% after the exchange paying the increment bonus has been an extremely costly exercise to shareholders.
3. Morgan Stanley and Goldman Sachs have been making in excess of $2 billion dollars a year in commodities for the past five years. While best year for Citigroup was around $700 million in 2006. The former only pay around 15% of their revenues as bonuses to their trading teams. Also they have promoted growth and expansion while Phibro has stuck with an archaic and inflated pay scale and has no incentive for growth.
4. If Mr. Hall were to leave to form his own hedge fund he probably could raise billions of dollars, but he would only get 20% of the upside and be subject to high water marks. At Citi he has received upward of 35% with no downside clawbacks. Plus, he would have to devote a substantial amount of his time to investor concerns and fund the new operations and compensation and benefits. Mr. Hall’s cost of capital at Citi is zero because they don’t charge him for his use of this expensive and risky capital. In the outside world, investors would be extremely wary. At best it would take him six months to raise the capital, set new guidelines and build the infrastructure to setup a hedge fund. If traders left Citi all their non-vest shares and options would and should be voided because they are tied to being employed by Citi. This could represent millions for many.
5. Mr. Hall’s is not always right. After the planes flew of the aircraft carriers on the way to their first strikes in the first Gulf War of the 1990s Mr. Hall lost a purported $200 million that day and subsequently lost much more. Adjusted for inflation and the higher volumes and volatility that would be upwards of a billion dollars today.
6. Commodities trading is not without risk. In fact it is zero sum where participants over time will have an expected value of zero and is extremely risky. Mr. Hall’s style of being an uber-bull will eventually come up and bite him. Ask the investors an Amaranth, SemGroup, MgAg, Enron, Mitsui (copper), Ospraie, and MotherRock.
7. Mr. Hall made money this year I oil trading. But, I suspect much of it came from the shape of the oil curve. The curve was in steep contango and Hall was able to buy physical oil in the front end of the curve and store it tankers and sell it into the higher forward market and reap returns in excess of 40%. This doesn’t take extraordinary ability and it only takes a balance sheet and cheap funding to execute the strategy. Why should Citi pay 30% for these types of transactions?
8. Lastly, why should the government subsidize a business that is against the interests of the American public. Mr. Hall has made a fortune by driving oil prices up in 2005-2009. Congress is looking to place limits on energy trading and it should start with Mr. Hall.
There is no doubt Mr. Hall has had some successes, but it is as much due Citi’s ignorance on capital allocation, lax risk management or Citi’s blind eye towards the risks involved as long it creates revenues. Isn’t that how Citi into it current mess? But, I guess a so-called trader and a failed hedge fund manager like Vikram Pandit can’t see the obvious.
Posted by: cc | July 28, 2009, 2:55 pm 2:55 pm
I don’t know how people even remotely involved in any of this mess can look themselves in the mirror. Let’s just hope that what goes around, comes around.
Posted by: LagunaTriMom | July 28, 2009, 9:44 pm 9:44 pm
yes he will get it
Posted by: John | July 29, 2009, 12:38 am 12:38 am
people are sitting on mortgages from Citi, facing foreclosure, and this guy gets 100 million of taxpayer money? Can someone explain to me how this works? Maybe we should all just quit paying taxes period!!
Posted by: dk | July 29, 2009, 1:27 am 1:27 am
“Yeh, Everyone who voted for Obama voted for this stupidity! Why did Obama give such money and not have any control over it and when they do control it, they make bad decisions. Impeach Obama!
Posted by: Mick | Jul 27, 2009 7:13:25 PM”
_______________________________________
how about the stupidity that doesn’t even realize the bank bailout occurred during the Bush Adminstration………DUH!!!!
Posted by: skippy | July 29, 2009, 4:34 am 4:34 am
Mr Obama they need to start drill oil and put end getting iol in Arab country we have oil here in usa.Stop blem Bush or Obama
Posted by: Regina Mclean | July 29, 2009, 5:51 am 5:51 am
I for one feel that when ANY company receives a bailout from the government (US) then not one single person should get a raise or bonus until the money is repaid and the company is doing better. As for them getting their bonus so they keep the top talent, what kind of talent do they have that they went broke and had to ask for a bailout. Is THAT top talent?! Top talent is someone who can keep a company up and running and not turn to the government (US AGAIN) for a bailout. Can I ask for a bailout for my home budget?!
Posted by: Tami | August 3, 2009, 2:15 pm 2:15 pm
If it is my tax dollar, why can’t I get a certain percent of that bonus????????????
Posted by: Noreen Connelly | August 17, 2009, 3:59 pm 3:59 pm
We can complain till were blue in the face..it’s time to protest..Greed is running our lives..Wake up America!! There always will be something in the news, Were getting screwed left and right..We have no say anymore..Pres. Obama should have bailed out the american people.. not corporations. God help us all from the stressful lives were living.
Posted by: christina mcguinness | August 17, 2009, 9:21 pm 9:21 pm
Has anyone on this planet produced enough revenue to deserve $100 million in bonuses? Get real.
Posted by: Lee Jones | August 17, 2009, 11:00 pm 11:00 pm