Bailed-out CitiGroup Raises Employees' Salaries: Where's the Taxpayers' Raise?

This is a rush transcript from "On the Record," June 24, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Get ready! As you know, the bank CitiGroup got into some deep trouble. You bailed them out. You handed them $45 billion. Apparently, they have now come up with an idea how to spend your money -- raising the base salaries of their employees. We report, you decide. Joining us live is my good friend, Alexis Glick, vice president of business news for FOX Business Network. Alexis, I guess they figured out how to spend that bail-out money at CitiGroup.

ALEXIS GLICK, FOX BUSINESS NETWORK: Oh! I know. There's a lot of outrage about this, Greta. This is -- you know, this is sort of shocking, given what we have seen. "Sort of" is probably a bad way to phrase it. It is shocking. Specifically, as you just mentioned, we've given them $45 billion, but that's not all. We've backstopped about $300 billion of assets.

The issue CitiGroup is raising is an issue that a lot of firms on Wall Street are talking about, particularly those ones who received TARP funds, which is that they can't remain competitive. They're not able to retain talent if they don't do something about compensation. And as a result, many of them are talking about increasing the size the base salaries.

VAN SUSTEREN: You know, if people are outraged, though, they should think about it. Like, who are the ones who leant this money to CitiGroup and could have put the strings attached to it? All the people behind me who work on Capitol Hill. They knew very well when they gave your money and everybody else's money, $45 billion, away -- they could have put strings attached to it. They didn't. They didn't -- I mean, I don't know if they're not thinking or didn't care.

GLICK: Yes, no, look, I mean, Greta, you raise a very important point. And the bottom line is the role right now that the pay czar, Kenneth Feinberg, has for these institutions, particularly the ones that will retain major invention-type situations, like the CitiGroup, Bank of America, particularly, the auto companies, is that he can oversee the compensation for the top 100 paid employees of any of these institutions, not just the executives, but those who are paid because they could be top traders in the industry. But there are no guidelines for the upwards of 300,000 people who work for CitiGroup worldwide. And so as a result...

VAN SUSTEREN: But that -- but...

GLICK: Go ahead.

VAN SUSTEREN: But that -- that -- but that, Alexis, that was something that came with the pay czar long after the fact.

GLICK: Absolutely.

VAN SUSTEREN: Before they even gave the bail money -- Congress, before they wrote that check and handed out the money, they could have said, These are the strings attached, and they failed and they're either inept or didn't care!

GLICK: Yes, no, look, they failed to do it. They (INAUDIBLE) to deliver. They were so concerned about the pushback from Wall Street. The problem here is, Greta, the way I view it, is -- look, I worked on Wall Street. I worked at Goldman Sachs and Morgan Stanley. I know how executive compensation works. This is the way that it is.

The base salary for a lot of these people is a small fraction of what they get paid in total compensation. What they're trying to do right now is figure out, How do we retain people when we are under the government's arm? The only way we know how to do it without having these egregious bonuses is to do it in base compensation, or to give them longer-dated options, which will vest over multiple years -- i.e., giving them a specific price where they can own stock now, and then hope that that stock appreciates over multiple years.

Greta, I was paid that way back five, ten years ago. You know, we got a very small base compensation. The problem here is that you've got UAW workers who are taking 50 percent pay cuts, and then you come out and say, Look, we need to be competitive, and therefore, we're going to raise base salaries by 50 percent. Well, look, I understand there's a brain drain, but the problem is, most American people across this country are seeing their wages decline right now, not increase, nor are they companies that are seeing increase who are getting taxpayer-funded dollars!

VAN SUSTEREN: Even if, Alexis -- even if it turns out that, for some reason, they should because they're being given a low base pay -- I don't know. The problem is, is that Congress never even bothered to contemplate that when they leant them money. And so now we've got this situation. If they'd even thought before they handed out so easily everyone's money...

GLICK: Here's one last point...

VAN SUSTEREN: That's the problem.

GLICK: ... Greta, that I'll make, though. We need to think about the human capital in this situation. And you and I are fully invested in companies like CitiGroup and others. We're going to own 34 percent of this company. We do want them to succeed. And if some of that succession (SIC) means that they're going to have to pay some people to stick around, we don't want there to be a massive brain drain because we want to get our money back.

VAN SUSTEREN: And I'm not opposed that. All I'm saying is I'm opposed to Congress not thinking about it before they leant the money.

GLICK: Absolutely.

VAN SUSTEREN: You know, before the -- that to me -- I mean, there may -- it may be that things like that have to be done, but the problem is Congress never bothered to consider that before they handed the money out! But anyway...

GLICK: Well, and Greta, here's the issue. Look, the guys who received those TARP funds are rushing back to give that money away, in part because they don't want to deal with those compensation guidelines. But the thing here that is very interesting, Greta, which there is a back story on, is somebody within CitiGroup is letting this news out. They're funneling it to the press, and it's happening at other institutions, but it's coming out specifically at Citi.

VAN SUSTEREN: Alexis, I got to go. I got to run. Thank you, Alexis.


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