Andrew J. Hall, the leader of Citigroup’s Phibro energy trading unit is going to push the administration’s limits on pay package tolerance. The original agreement for this top executive is a hefty $100 million compensation package that includes cash, stocks and other benefits.
Although Hall’s unit generates a substantial part of Citigroup’s profit, $100 million is a huge number and can spark another round of angers from the general public and ultimately require political intervention. Even Obama has blamed institutions for excessive bonuses to reward risk taking. So it will be interesting to see how Congress will react to this news.
Remember that a few months ago, the administration appointed Kenneth Feinberg as the government pay czar to oversee compensation packages for anyone who has received TARP. Therefore, Citigroup will need to convince him that the compensation is justified. In April, Citigroup asked for Mr. Hall to be excluded from the pay package restrictions but the government has yet to respond.
On one hand, Hall’s division is much needed for Citigroup to get back on its feet. On the other hand, $100 million is, well, $100 million out of the taxpayer’s pockets.
I’m sure Goldman Sachs and JPMorgan Chase is licking their chops right now, because having Hall and his team is an incredible asset to obtain. (Remember that the two companies already paid back TARP and isn’t subject to compensation oversight).
We will see what happens, but if everyone starts leaving Citigroup, it may wither away painfully slowly, wasting all our bailout money.