Citigroup (NYSE:C) is concerned that the government will pressure it to reduce or eliminate a $100 million bonus that it apparently owes the head of its Phibro energy trading unit. The bank fears that the federal government's "pay czar" will try to make it cancel the compensation agreement.
Andrew J. Hall, the head of Phibro, has an agreement with Citi to share the unit's profits. His contract could cause the bank legal headaches. That leaves Citi's management with very few ways out of a messy situation.
In an exclusive report, The New York Times writes that "Phibro and Citigroup say that Mr. Hall is quietly pushing for what is being called 'a quiet divorce' from his parent company and that he has had preliminary talks with one possible suitor."
The government is probably being short-sighted. While the Hall payment would be a PR problem for the Administration since Citi was one of the banks that received huge sums of bail-out cash and the government now owns 34 percent of the firm, Phibro is also highly profitable, which helps Citi's bottom line.
The Hall conundrum gets to the heart of the disasters that federal meddling in bank management can cause. Pushing Wall Street's most profitable employees out the doors of troubled financial firms hardly does much for the long-term health of the companies in which taxpayers have large investments and risks.
Douglas A. McIntyre is an editor at 24/7 Wall St.