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...bailed-out businesses, the notion that there's a correlation between excessive pay and excessive risk-taking isn't quite accurate. It may be true in the case of hedge funds or leveraged-buyout - which call themselves private-equity (PE) - firms or some parts of stricken outfits like AIG, Citi and the former Merrill Lynch, now part of Bank of America. But hedgies and PEs aren't covered by pay czar Ken Feinberg's ukases...
...fact, much of Hall's ability to produce outsized profits for Citi comes from the creative ways he had found to make money off the oil markets, doing things that would either be impossible for the average small trader or that most traders just won't think of. Earlier this year, for instance, Hall and his traders rented a tanker and filled it with 1 million barrels of oil. Oil prices were down, but most traders thought they were going up again, so futures contracts pegged to distant-month deliveries were expensive. The better deal was the real thing...
...early October, Citigroup sold its commodities-trading division Phibro to energy company Occidental Petroleum. Citi was motivated to dispose of the unit because of pressure from regulators to curtail the pay of Phibro's top trader Andrew Hall, who made $100 million last year, and reportedly has a contract that would award him roughly the same amount in 2009. Oxy declined to comment on Hall's compensation. But the energy giant says Hall will remain with the unit at Oxy. Hall had threatened to leave Citi if his pay was cut, which means Oxy is probably honoring his contract. Says...
...Citi, the controversy surrounding Hall's pay was about whether a bank that has received $45 billion in government assistance should be turning around and handing over big bags of cash provided by taxpayers, most of whom won't make one-tenth of Hall's annual salary in their entire lifetimes, to its employees. But now that Hall has left Citi, a larger question remains: Is anyone really worth $100 million a year, and what exactly do you have to do to deserve that much...
...Citi executives are taking a different path out of the financial crisis than many of its rivals, which at times has been a benefit to those rivals. With the acquisition of Citi's Salomon Smith Barney, Morgan Stanley now has the largest brokerage force in the nation. And while Morgan has gotten out of some trading businesses, it is expanding its retail banking business. Executives at Bank of America and Wells Fargo say there are no plans to sell off major pieces of those banks...