Let Citi workers eat their own dog food
Poor Citigroup (C)! The U.S. government has given it $351 billion -- including a $306 billion loan loss guarantee and $45 billion in Troubled Asset Relief Program (TARP) cash -- but after losing $28 billion in 2008, it's not enough. That's because Citi thinks its 309,000 employees, who lost an average of $90,615 each, deserve nice big bonuses. But as a condition of that $45 billion in TARP money, Citi can't pay them as much as it would like.
So what does Citi propose? Giving its workers sales commissions. This is wrong on so many levels that it is hard to know where to begin. I'll start here: If Citi pays a banker or broker to close lots of big deals, then its customers had better watch out. That's because Citi's cash hungry workers will push hard to sell you anything they can -- regardless of whether it makes money for you or not. This will encourage more of the bad banker behavior that got us into this mess.
Another reason that Citi should not be paying bonuses is that it's losing money. The idea of a bonus is that it's a reward for a job well done. If a company loses money, that's not a job well done. So its employees don't deserve a bonus. (To be fair, Citi reported a $1.6 billion first quarter profit but since that was based on a $2.5 billion accounting trick, Citi really doesn't have the cash to pay bonuses.)
Finally, since Citi is among the financial institutions that brought the global financial system to its knees, now that the bank is losing money its workers should not get a bonus from U.S. taxpayers who never got bonuses when Citi was making money. If taxpayers had shared in Citi bonuses during the good times, then it would seem more fair for us to bail it out during its time of need.
Banks should be afraid of losing their top talent to hedge funds and other high payers that are not under TARP restrictions. But if they're losing money, I think Credit Suisse has come up with the right idea, pay them bonuses in toxic waste -- that will make them rich if the sales pitches they used to push that dog food onto the global investment market pan out.
And if not, Citi workers will gain personal insight into how it feels to be on the receiving end of Citi-brand dog food.
Peter Cohan is president of Peter S. Cohan & Associates. He also