Citigroup (C) wants to pay some "key" employees big bonuses and it is seeking government approval to do so.
Most of the people Citi wants to compensate are heavy hitters with a history of creating big profits for the bank. Top traders and bankers have been leaving large U.S. financial institutions because of compensation restrictions. Citi is making the case that its most critical talent will walk out the door.
According to The Wall Street Journal, "The request comes as Citigroup is grappling with broad government pay restrictions that could break apart its legendary energy-trading unit."
Even though Congress and the public will howl their disapproval, the government needs to help Citi retain its key profit makers. It they are allowed to leave over compensation issues, especially ones where the very best people should be paid for their performances, it sets a bad precedent for all of the major banks.
The government can turn the departure of the best traders and bankers into an exodus, but that will only make it harder for big American financial firms to make money.
Douglas A. McIntyre is an editor at 24/7 Wall St.