Banker bonus backlash is so 2009.
is forking over $30 million to hire a top UBS energy banker and his team. The move comes after a bidding war for Stephen Trauber’s services that will, at least briefly, give Trauber a salary 9 million times the size of Citi chief Vikram Pandit’s – a rare instance of the CEO pay gap in reverse.
(Update: Citi contends the $30 million figure “is totally speculative and was according to WSJ, not Citi.” So noted.)
A year ago, a fresh sighting of spiraling banker salaries might have provoked an outcry. It was around this time last year that outrage over the surging Goldman Sachs bonus pool was just picking up steam, for instance. With the collapse of the financial sector fresh in the public mind, the idea of new round of banker overpayments was anathema.
But then the bankers caught a break. The world realized it has bigger problems, centering on jobs and stretched government finances. And the banks, their finances restored with taxpayer help, find themselves free to start throwing money around again.
No one is exactly lining up to erect statues of Lloyd Blankfein and Pandit, obviously, and for good reason. No doubt, much banker pay is still ridiculous and excessive, regardless of the government’s efforts to crack down on risky practices. The government has yet to fully cash out its Citi investment, though that appears to be only a matter of time.
All the same, it seems exceedingly unlikely that ridiculous financial sector paychecks will cause our next crisis. Much better candidates are deteriorating U.S. finances and trade tensions with China, both of which seem apt to send political shockwaves this fall.
Even those who have spent months and months trying to deal with the banker pay question seem tired of it. Take Kenneth Feinberg, the supposed pay czar.
Feinberg was charged with making sure banks acted appropriately in their compensation decisions during the Troubled Asset Relief Program. But Feinberg hardly sounded czarlike in July when he announced his findings about the overspending of big banks that took TARP checks.
More than a dozen banks led by Citi, Goldman
and Bank of America
misspent $1.6 billion on executive pay and perks during the financial crisis and its aftermath, Feinberg found. But Feinberg declined to specify which banks or execs were involved in the misguided payouts, saying only that the banks made decisions that were “ill-advised.”
Time will tell whether the big checks for Trauber and his pals are similarly wrongheaded. But given the large sums Trauber & Co. attracted to UBS during his tenure there, and the fact that he’s a banker rather than a trader, it seems unlikely Citi will have any regrets.
It’s worth noting that the person who stands to gain most from this hiring, besides Trauber, is Pandit. He will make $1 again this year, but Citi said Friday it plans to give him compensation next year that is “commensurate with the job of CEO.”
Pandit’s predecessor, Chuck Prince, made $26 million in 2006, the last year in which Citi didn’t appear in danger of imminent collapse. If Trauber keeps bringing in big deals, Pandit will have a lot to dance about.