Kass: Political Pratfalls in Our Financial Farce

This blog post originally appeared on RealMoney Silver on Feb. 12 at 7:29 a.m. EST.

Yesterday in The Edge, my RealMoney Silver exclusive trading diary, I was critical of the political theatre of the absurd and suggested that the bank managements should have turned the table around and asked the members of Congress whether they would be willing to work for $1 until the government returns to a budget surplus.

This morning, I will add to my list of grievances:

1. how poorly Congress was prepared; and

2. how disingenuous Citigroup's (C Quote) Vikram Pandit was in his response.

Let me be specific.

During the course of the testimony, Congress had specific questions with regard to bankers' compensation in 2007, 2008 and 2009.

In questioning Citigroup's Vikram Pandit, not a single member of Congress knew to query him about the absurd level of compensation ($165 million) he received in 2007 in connection with Citigroup's purchase of his Old Lane hedge fund. In essence, Citigroup dramatically overpaid for his "smallish" hedge fund in order to incent Pandit -- the large premium over fair market value of Old Lane was clearly 2007's compensation to him -- but, again, nobody asked him to lump the $165 million into his 2007 compensation answer. Clearly, none had done the research. (The Old Lane deal was a disaster. It turned out to be another value-destructive Citigroup deal. In June 2008, Citigroup closed down Old Lane because of terrible performance.)

Just as poor as Congress's research was regarding Pandit's 2007 compensation, Pandit's responses to their compensation questions was disingenuous. When asked about his projected 2009 compensation, Pandit, with a smile of approval on his face, repeatedly underscored that he had asked the Board of Directors of Citigroup for "only $1 in salary." Not volunteering that he received excessive compensation back in 2007 (when he sold Old Lane) was insincere. He should have volunteered the fact that he had previously received such a large sum less than two years ago.