Citigroup says AIG tax would hurt firm, sector
2009-03-21

People Vikram Pandit Event Global Financial Crisis Company Fannie Mae Freddie Mac Citigroup General Motors Source (AFP)

NEW YORK (AFP) - Citigroup's top executive said Friday the special tax being considered in Congress on bonuses to bailed out firms could "set back" efforts to restore profitability at the ailing banking giant.

Chief executive Vikram Pandit said in a memo to employees that he sees "a tide of negative sentiment rising in Washington, DC regarding compensation" and that "some of it is warranted."

But he added, "I take exception when there is a discussion about spreading the blame to each and every employee in the financial services industry."

His comments came after the House of Representatives passed a 90 percent tax, written with American International Group in mind, that would apply to employees whose total annual pay exceeded 250,000 dollars at firms that received more than five billion dollars in government rescue funds.

Pandit said the tax would punish employees needed to help Citi and similar firms recover.

"At our company, we removed the people responsible for Citi's financial distress," he said.

"The work we have all done to try to stabilize the financial system and to get this economy moving again would be significantly set back if we lose our talented people because Congress imposes a special tax on financial services employees."

He said it would affect people "who will find it difficult, if not impossible, to pay back the bonuses that they earned."

Lawmakers approved the measure amid a frenzy over news of 165 million dollars in bonuses paid to AIG, which got a bailout of more than 170 billion dollars.

If approved by both houses of Congress, the measure would apply to Citi and five other banks, as well as mortgage finance firms Fannie Mae and Freddie Mac, General Motors and its former finance arm GMAC.