You might have noticed that we’re not so into piling on the banks lately. First because we’re willing to concede that maybe, just maybe, working at a large financial institution whose actions affect the global economy is harder and more complex than we understand, and second because getting over-the-top worked up about bonuses and office renovations seems kind of counterproductive; all of the noise and smoke and screaming creates a giant distraction, and then politicians, being politicians, feel they have to respond to that instead of dealing reasonably with the larger problems at hand, and then people start saying stupid things and making bad decisions in the heat of the moment, and then they have to try to awkwardly extricate themselves the next day — it’s just exhausting, and we’ve seen enough situations like this in our own personal lives to know that this kind of volatility is no good in the long run.
Above all, we’d really like to go back to living in a world where we don’t think about them anymore. But then we read something that makes us reach for our pitchfork, like this morning’s Times story about the payment of “retention” bonuses at Citigroup.
First, there was Lewis Kaden, Citigroup’s chief risk officer, a man who, by all outward appearances, has not done a bang-up job. Obviously, we don’t know what went on inside the Citigroup executive suites. Very possibly, Kaden was doing everything to sound the alarm over the last two years, pounding tables with his fist and imploring his colleagues, “Rein in the risk or THIS SUCKER’S GONNA BLOW.” However, we strongly suspect that’s not what he was doing, and that he bears a good deal of personal responsibility for one of the world’s most powerful firms being reduced to a pitiful ward of the state. So why exactly was he paid $8.3 million NOT TO LEAVE?
Then there was Michael Klein, formerly head of Citigroup’s investment-banking operation, who apparently received almost $50 million to keep him from working for Citigroup’s rivals. Now, perhaps Klein is a genius who knows every sheikh, oligarch, and sovereign-fund manager in the world and can produce megadeals while sipping rum and tonics on the deck of his boat. (We have no idea if boating is among his hobbies — we’re just guessing. He’s probably more into fly-fishing, or the hunting and eating of endangered species.) But once again, we doubt that. Is Wall Street talent really this scarce that every non-bonehead has to be bribed to not immediately act against the interests of his former employer? Sure, he can’t take his inside knowledge of Citigroup and use it against his former firm, but then you wouldn’t really have needed much inside knowledge to score on that trade, now, WOULD YOU?
Of course, we said to ourselves, some of these payments were in stock, which has nose-dived. So maybe those guys aren’t quite as gloriously rich as they once were.
The idea of that calmed us enough that our pulse rate was almost back to normal. At least, it was, until we came upon this post on Calculated Risk, which told us about how Citigroup foreclosed on properties in hell-and-gone suburban California, tried and failed to sell them at prices that were set stupidly high, and then made block sales to speculators, some of whom were able to immediately flip houses for $100,000 gains per pop. Easy money taken right out of Citigroup’s pocket, which, remember, is one-third our pocket. Maybe executives in New York would have noticed something like this if they weren’t so busy sticking their own hands in there.
Paid Handsomely to Stay [NYT]
Banks Sell Some REOs in Bulk below Market Prices [Calculated Risk]
