Citi’s Pandit warns of 'setback' if bonus tax passes

Citigroup’s chief executive tried to reassure employees about compensation a day after House legislators passed a bill to claw back bonuses for employees earning more than $250,000 at companies which received more than $5 billion in bailout funds.

Acknowledging that some negative sentiment in Washington D.C. regarding compensation is warranted, he disapproved of painting all employees with a broad stroke.

“I take exception when there is a discussion about spreading the blame to each and every employee in the financial services industry,” said Citigroup CEO Vikram Pandit in a memo to employees released Friday afternoon which was also released to the media.

House Speaker Nancy Pelosi said yesterday that the bill was needed due to poor judgment shown by companies receiving bailout funds, adding that the Congress should protect “the American taxpayer from executives who would use their companies’ second chances as opportunities for private gain.”

In his daily media briefing, White House spokesman Robert Gibbs was non-committal when asked if President Barack Obama would approve a measure to impose a 90 percent tax on bonus payments, which was passed by the House of Representatives on Thursday.

Yesterday President Obama said the House vote “rightly reflects the outrage” many feel over bonuses which AIG gave its employees recently. He hoped the final bill he receives to sign into law would “serve as a strong signal” to executives that such compensation won’t be tolerated.

Stabilization in the financial system and the economy would be “significantly set back” if the company lost “our talented people” if Congress passed a special tax on financial services employees, Pandit wrote.

“I want you to know that we are working in every appropriate way with policymakers in Washington, and with other financial institutions and industry associations, to come to agreement on a constructive industry compensation system that is good for the company, the financial system and the country,” he said.

Senior Citi managers and experts in Washington are addressing the debate, he said.