Citi Gets Slammed By Congressional Oversight Panelist For Pay Hikes

Does anyone ever have a nice word to say about Citigroup?

Not today: the bank’s latest stunt of raising basic salaries has caused irritation in the ranks of the congressional panel overseeing TARP funds. Earlier on Bloomberg, panel member Elizabeth Warren slammed Citi for its pay hikes:

 
“I just have to say - these guys just don’t seem to get it,” said Warren.
 
“They’re taking taxpayer dollars in order to keep this business alive and yet they think that when Americans are out of work, when people are struggling, when this comes out of taxpayers pocket - that they can double salaries? I - this is more about - does anyone understand what’s really going on here?”

 Clusterstock’s John Carney joins in the whipping:

Let’s break this down in the simplest terms: this is a disaster. Without taxpayer guarantees and funding, Citigroup would be unable to give its employees higher base salaries. The best employees would leave for other firms. This market process would further diminish Citi and enhance its better managed competitors. Everyone, except Citi shareholders and some of its senior management, would be better off. Instead, taxpayer funds are being used to block this market process, trapping talent inside a failed firm and rewarding management’s worst mistakes.

All of these criticisms really miss the point, however. The problem that Citi faces is that while it needs to retain top talent in order to ensure swift repayment of the TARP funds, and to become more competitive, it is deadlocked into having to raise basic salaries because of bureaucratic aversion to traditional eat-what-you-kill style mega-bonus payments.

Congressional oversight panelists can hardly complain that Citi is raising basic salaries when they have effectively told bankers there that they can’t earn bonuses.