Editorial: Party on, Citigroup!

When the federal government bailed out Citigroup to the tune of $45 billion, raising the salaries of reckless investment bankers wasn't what taxpayers had in mind.

Citigroup's actions contributed mightily to the near collapse of the banking system last fall. Its employees took irresponsible risks to boost its stock price, and their actions seriously damaged the system.

Given that behavior, President Obama was right to insist on caps on bonuses at Citigroup and six other financial firms under federal supervision. These banks needed the government to keep them afloat, and they should be forced to live by new rules.

But now word has leaked out that Citigroup intends to raise employee salaries as much as 50 percent. The change could allow most Citi employees to get paid almost as much as they did in the disastrous year of 2008.

You can see the logic of greed at work here: If they're losing their fat bonuses, why not make up the difference by hiking base salaries? Merely switching bonus dollars to regular pay isn't fooling anyone. It's the logic of a company that still doesn't get the message of the bailout.

Taxpayers are footing this bill. The federal government will soon have a 35 percent stake in the company.

Citigroup is a ward of the state because it took unacceptable risks in the name of profit. There should be consequences, and new rules, for that kind of bad behavior.

Officials at Citigroup say they need to pay higher salaries to keep talent. If the gene pool is so talented, how did the firm get into this trouble in the first place?

The Obama administration has named lawyer Kenneth Feinberg a "special master" to review compensation packages at Citigroup and the six other companies that received the most government support - AIG, Bank of America, General Motors, GMAC L.L.C., and Chrysler. He has the authority to reject pay plans that seem unreasonable, which is what he ought to do with Citigroup's proposal.

Firms that have received government money should make sure their salary policies strike the right balance. When those compensation packages get out of whack, it encourages the very kind of excessive risk-taking that plunged Wall Street into chaos.

If incentives must be given at all, it would be preferable to hold reasonable bonuses in escrow for a period of years, then pay them out when the bank's performance is validated.

This is the kind of government meddling in private industry that shouldn't be necessary. But Citigroup brought this scrutiny on itself. At least until it pays back the government, it needs to forget about the good ol' greedy ways of doing business.