Citigroup begs Treasury for Traders' Bonuses

Treasury’s reaction to Citibank’s request is a negative one. Probably, Treasury wants to avoid bad public opinion and stay out of trouble with Congress.

But according to Wall Street Journal, this decision would be a mistake. They fear that if government turns down the request, these people might leave for hedge funds, join banks outside the U.S., or even start their own businesses. They said further that government needs to face this fact. Even if the idea may not popular at all, they have to compensate the best bankers.

Traders are very important because they make extraordinary income for the bank. It’s easy to determine the value of the best ones just by looking at the bank’s books.

Citigroup is requesting to lift pay restrictions in order to prevent their legendary energy-trading unit to fall apart. They believe that if their critical people leave, then critical income will also follow.

Today, all banks are keeping minimum new investments because they might be asked to raise some capital when the results of the “stress tests” come out. They argue that they have some profitable divisions who will contribute to their earnings. These divisions will help offset their losses. But if the government will take away this opportunity by driving people out their door, then they have no choice but to grow their investment in financial firms.