Citigroup Inc., soon to be one-third owned by the U.S. government, is asking the Treasury for permission to pay special bonuses to many key employees, according to people familiar with the matter. The request comes as Citigroup is grappling with broad government pay restrictions that could break apart its legendary energy-trading unit. People at that unit, Phibro, are threatening to leave because of pay caps tied to the U.S. bailout of Citigroup. Phibro has been the source of hundreds of millions of dollars in profits for the bank, and has paid out hefty compensation, including a roughly $100 million windfall last year for the unit's leader, Andrew Hall.
The Treasury is poised next month to become Citigroup's largest shareholder, owning as much as 36% of its common stock
Citigroup executives say they are worried that employees, who have seen much of their past bonuses wiped out by the collapse of Citigroup's share price, will jump to U.S. and foreign financial institutions that aren't tethered by federal pay restrictions.