Got this via e-mail from a reader who has no axe to grind. Since it comes from a single source, it qualifies as a rumor, but knowing the ways of the big end of finance, I would be loath to dismiss it.
Do any readers have any direct knowledge here? Thanks!
Also, to be clear, even if this story is true, I know of MDs at Citi in areas that produced good profits last year that still took big bonus hits.
I had a conversation with a headunter who places a lot of quantitative prop traders, mostly equity quants (stat arb, etc.). Not surprisingly, he said most of the hiring he was seeing was by hedge funds, not much by banks. What is surprising is what he cited as the one exception: Citi. He’s seen them aggressively paying large guarantees. He was asking me WTF, why are they doing that? (Not that he was complaining of course, good for business, but he was trying to understand.) To me, it seems like classic variance-seeking behavior. The shareholders are long an option on an insolvent enterprise that is being propped up, so they’re going for broke. Yet another argument for recognizing reality and nationalizing the thing of course.