Citigroup to cap cash bonuses, report says

The government still has a significant stake in the bank, which likely added to the pressure to keep bonuses in check.

By Kim Peterson Jan 15, 2010 3:40PM
Of all the big banks, Citigroup (C) should be the one with the most-controversial bonuses. After all, the bank is more than a quarter-owned by the U.S. government since its huge losses in the financial meltdown required a dramatic rescue by taxpayers.

Does this bank deserve to dole out the mega-bonuses that its Wall Street counterparts are distributing? Even Citigroup is saying no to that question, it appears.

The bank plans to cap cash bonuses at $100,000, sources tell The Financial Times. That would keep the bonus pool at relatively low 2008 levels.

The rest of Wall Street is riding a bonus wave that could even exceed the obscene amounts given in 2007.

Just to be clear: Citigroup is reportedly capping only the cash part of its bonuses. It's still open season on the stock part, if the Financial Times report is true. The stock would likely not be available to be sold for a number of years.

Citigroup's cash cap, if true, could test a theory that Wall Street banks love to spout when it comes to bonus cuts. If the compensation drops significantly, they say, employees will leave.

We'll see if that happens. Employees at Citigroup were already expecting bad news on the bonus front, seeing as how the government is a major shareholder and how the company still shares a remarkable resemblance to the Titanic.

Citigroup insiders tell the FT that the bank has had no problem finding people to hire during this financial crisis but that some of the best employees have left for greener pastures.

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