Citigroup is asking the Treasury for permission to pay special bonuses to many key employees it worries will leave the company—despite the fact that taxpayers will soon become the largest shareholder in the bank. Citi is chafing under Treasury restrictions on executive pay, particularly in its lucrative energy trading unit, Phibro, where senior bankers are threatening to quit if they don't get hefty compensation, reports the Wall Street Journal.
Many Citi employees have received compensation in stock, but as shares lost 95% of their value those awards have become largely worthless. A Treasury source said that Tim Geithner had not made a decision on whether to permit the bonuses at Citi, which has received $50 billion in taxpayer aid and $301 billion in asset protection. Either way, Citi may spin Phibro off into an independent hedge fund to retain its best employees—its leading investor pulled down $100 million in compensation last year.