Citi is Cracking

When the Citigroup execs come out publicly and refuse their bonuses you just know that all there is to pilfer has been plundered and all that's good to get has been got. While the credit bubble swelled, refusing a bonus would have been considered to be setting a bad example at least and at worst treason, but now they do it loud and proud.

Citigroup’s chief executive and chairman said on Wednesday that they would forgo their bonuses for 2008 and slash the amounts paid to other senior bankers, joining a growing list of financial executives who are passing up some pay.

In a memo to bank employees, Vikram S. Pandit, Citigroup’s chief executive, said that he and Winfried F. W. Bischoff, the bank’s chairman, would not take year-end rewards.

“The harsh realities of 2008, primarily our earnings results, mean that our bonus pool is dramatically lower than last year,” Mr. Pandit wrote about a year in which the bank has so far announced more than $10 billion in losses. “The most senior leaders should be affected the most.”

The harsh realities of 2008 have nothing to do with it, nor do the earnings results, Citigroup has a recent history of rewarding bad performance and even good times, for which its previous CEO Chuck Prince is grateful.

Charles O. Prince III, who resigned under pressure as chairman and chief executive last week.

Mr. Prince, arguably the person most responsible for Citigroup's enormous problems, can expect at least a $12.5 million cash bonus, compared with last year's cash payout of$13.8 million.

And as he awaits his official retirement next month, Mr. Prince can rest assured that he will leave with $68 million, including his salary and accumulated stockholdings; a $1.7 million pension; an office, car and driver for up to five years -- all in addition to the bonus. That is on top of $53.1 million he has taken home in the last four years, a period when $64 billion in the company's market value has evaporated.

His $12.5 million bonus is based on a formula that adjusts the 2006 bonus for current stock performance, instead of simply awarding it on his performance during 2007, as with most everyone else. Pay experts say the unusual time-traveling maneuver effectively guarantees him a windfall.

Don't be distracted by the noise of a great performance supposed to imply that the bonus was based somehow on merit. The reality is that during the subprime good times, Chuckie sold out all Citigroup's tomorrow's to get his bonus and get out. Mission accomplished!

Mr. Prince's payout raises questions about Citigroup's compensation philosophy at a time when Wall Street bankers are anxious about smaller bonuses and the current credit crisis. It also raises new questions for Citigroup's board, which for years handed Mr. Prince lavish paychecks that encouraged risk-taking -- and is now handing him extra money despite the billions in losses on his watch.

Well actually Mr. Francis payout answers questions about Citigroup's compensation for lost it also does the same for Citigroup's board which for years handed Mr. Prince lavish paychecks so long as what he did kickback lavishly to them.

There is also the matter of transparency. Mr. Prince's big payout can be found buried deep in paragraph 4(d) of his 10-page separation agreement with the company filed late Thursday night. It states that he is entitled to a ''prorated incentive award'' that adjusts his 2006 bonus based on the 2007 shareholder returns. It does not, however, provide an estimated amount.

Actually everything is perfectly transparent as written above. and nothing has actually changed about Citigroup's compensation, but the times today are a changin.

Under pressure from lawmakers, Citigroup Chief Executive Vikram Pandit and Chairman Win Bischoff opted to forego their 2008 bonuses. The company's new executive pay limits also feature a clawback provision in which Citigroup can recoup executive pay "that over time proves to be based on inaccurate financial or other information."

Sure there was pressure from lawmakers but remember all that's good to get has been got and once you blow all the smoke away you can clearly see that the Citigroup CEO already got his.

Pandit, 51, received 1 million shares from Citigroup as part of a “sign-on” bonus in January, in addition to a $2.5 million “retention equity award,” the company said in March. He was paid $250,000 in salary in 2007.

Pandit got $165 million from Citigroup in 2007 when he sold Old Lane Partners LP, the hedge fund he co-founded and ran. Citigroup closed New York-based Old Lane in June and took a $202 million writedown on its $800 million investment.

Just to put some context behind the one million shares that Citigroup kicked back to Pandit.

The 1.1 million share units and options for additional three million shares being awarded to Pandit is estimated to be worth about 30 million dollars (Rs 120 crore) -- an amount close to six times of total compensation paid by all the Indian banks together to their top executives last fiscal.

See what I mean, Pandit got all of his and then some.

Finally when there was nothing except $306 billion worth of toxic debt and the prospect of billions more of taxpayer funding Robert Rubin saw there was nothing left to get and got out.

Citi today announced that Robert E. Rubin has retired as Senior Counselor effective today and has decided not to stand for re-election as Director at Citi's Annual Meeting. Mr. Rubin will continue to serve as a Director until his current term expires at Citi's next Annual Meeting.

"Since joining Citi nearly 10 years ago, Bob has made invaluable contributions to the company," said Vikram Pandit, Chief Executive Officer of Citi. "From the beginning, Bob has been instrumental in working with clients around the globe and forging strong relationships for our businesses. He has also been a trusted advisor to senior management as well as to me personally, and I am pleased to say Bob has agreed to continue to be available as a sounding board and resource for me and for the company."

Yeah well platitudes aside this is bull sh!t.

From the beginning, Bob has been instrumental in working with clients around the globe and forging strong relationships for our businesses.

Bob is an economist not a banker using his government connections to rig deals in favor of Citi worldwide.

He has also been a trusted advisor to senior management as well as to me personally

Given that Citigroup is on the verge of collapse bob has been an untrustworthy and incompetent adviser.

Mr. Rubin, 70, decided last month that he was ready to leave the company, according to a person familiar with the matter. That conclusion was driven by the overwhelming amount of time that his role at Citigroup was requiring...

It's more likely that the underwhelming amount of wealth remaining steel is why Mr. Rubin decided last month that he was ready to leave the company. And If you need any more proof that there's nothing left to get notice how the cracks in Citigroup are beginning to rip into wide gaping fissures.

Citigroup signaled a breakup of its unwieldy financial supermarket model with a possible deal to sell a share of its prized retail brokerage business to Morgan Stanley, said several people with knowledge of the discussions, underscoring the enormous problems the bank continues to confront even after receiving taxpayer bailout funds.

The new chapter of wrenching change came as former Treasury Secretary Robert E. Rubin, who came under fire for his strong support of that model in an advisory role that helped fuel the bank’s troubles, said he would resign.

It better underscores the way the bank was gouge gutted by its executives during the housing bubble and how there is always a cost to be born in the future for excesses of the past. The cost will be born by Citigroup's investors shareholders and the US taxpayer while true to form the Citigroup executives like panted and Rubi theirs and got out.