From NYT:

After all those losses and bailouts, rank-and-file employees of Citigroup are getting some good news: their salaries are going up….

The troubled banking giant, which to many symbolizes the troubles in the nation’s financial industry, intends to raise workers’ base salaries by as much as 50 percent this year to offset smaller annual bonuses, according to people with direct knowledge of the plan….

For some Citigroup investment bankers and traders, the changes could mean salary increases of as much as 50 percent, depending on their position. Legal and risk management employees, as well as those in the credit card and consumer banking units, whose pay is typically skewed toward salary, rather than bonuses, are expected to receive smaller increases.

Ugh. The fact that Citi employees could get raises is rather obnoxious. By definition, every dollar they earn comes directly or indirectly via taxpayers.

Particularly irksome is that these raises are going to supposedly “high-value” employees—traders and bankers—the guys who broke Citi’s balance sheet in the first place.

That government-backed banks are allowed to operate hedge funds remains beyond comprehension. Now Citi is jacking up pay so their hedgies traders don’t jump ship. One great way to manage risk at Citi, and to wind down taxpayer support, would be to let the bank’s prop desk die by attrition, which may happen if Obama can keep pay in check.

As for bankers, for years they’ve literally leveraged the company balance sheet in order to drive deal flow. None should be rewarded. If Citi’s feel underpaid, they can go somewhere else.

Bankers will argue that Obama has no business making compensation decisions. That’s simply wrong since taxpayers now functionally own the banking system. Still, I agree that letting politicians insert themselves into pay decisions smacks of central-planning wackiness.

But that’s not an argument in favor of letting failed bankers use taxpayer money to pay themselves bigger salaries, it’s an argument in favor of letting the market wipe them out in the first place.