Last week saw some quite impressive accomplishments, even by Citi’s august standards. In just a few days it tried to come up with a new way to overpay its investment bankers and traders, then it had to remind its staff NOT to accept undocumented mortgages and finally its Japan operations were shut down because of money laundering.
Last Tuesday, Citigroup walked into a feces storm entirely of its own making by announcing it would raise salaries by 50% to offset cuts in bonuses.
To be fair to Citi, they are taking (well-deserved) crap for the entire industry on the salary issue. BofA, Morgan Stanley, UBS and others are also trying to dodge the bad PR when huge bonuses are awarded following huge losses. So now instead of bonuses for bad performance execs will just get a huge salary for bad performance. It’s all about retention – or so Citi would like us to believe. Quote from the NYT: “Citigroup executives are so eager to keep employees from fleeing, that in some cases, they are offering them guaranteed pay contracts.” Well, given that those contracts are being paid for with $45 billion of US taxpayer debt who can blame them. Citi is once again free to play with someone else’s money and are being just as responsible as they were the last time. BTW, the idea that these raises are going to the rank-and-file is absolute hogwash. As Alphaville notes, “the biggest increases will go to investment bankers and traders.”
Also on Tuesday, Citi temporarily stopped buying new loans after “discovering” it was missing property appraisals and documents showing borrowers’ incomes.
The discovery came in Citi’s correspondent division, which buys loans from banks and independent mortgage firms, and was responsible for about half of the bank’s $115 billion in mortgages last year. Two great quotes about this:
“There remain key areas that fall short of our quality- control process. We ask you to review your processes and join us in this effort to collectively address these areas of concern.” — Brad Brunts, a managing director at the bank’s CitiMortgage division.
And this from an analyst
Not a good sign when you have to re-train people processing mortgages on the most basic elements of how to do their jobs. Are these some of the folks being offered those guaranteed contracts?
- Finally, on Friday Japan ordered Citi to halt the marketing of all financial products to retail customers for a month because of bank “failed to implement sufficient measures aimed at preventing suspicious transactions, including money laundering.”
This really takes the idea of not verifying income to a new level.
RealityFrame’s comment about the raises could really be applied to pretty much everything the bank touches: Anybody want to dispute that those banksters aren’t indeed the "best and the brightest"?