Citi's Hiring of Hohlt Shouldn't Surprise

NEW YORK (TheStreet) -- The revelation that Citigroup (C Quote) has a high-powered, controversial Washington insider on its payroll is something of a public relations disaster, but it's neither surprising nor necessarily a bad thing.

The New York Times reported over the weekend that Citi Chairman Richard Parsons had enlisted the services of Richard Hohlt, an old hand on Capitol Hill who's been associated with aggressive lobbying during financial crises of yore. Chiefly, Hohlt was a big advocate for banking deregulation during the savings and loan crisis of the 1980s and 1990s, which helped lead to the crisis that has Citi in tatters today.

Since regulators have an unprecedented amount of control over banks -- especially those like Citigroup and Bank of America(BAC Quote) who accepted so much assistance -- one has to ask: Why wouldn't Dick Parsons put his old friend on the payroll?

Hohlt undoubtedly has enemies within the Washington establishment, whether for his S&L lobbying or the wide assortment of other behind-the-scenes activities he's involved with. (He is a founding member of the Off-the-Record Club, a group of influential Republicans who feed stories to journalists on background, and played a minor role in the outing C.I.A. agent Valerie Plame a few years back.) But he also undoubtedly knows what he's talking about. That knowledge could end up being indispensable to Citigroup, which is up against major pressure from at least one regulator, Federal Deposit Insurance Corp. Chairwoman Sheila Bair.

Hohlt says he is paid only for his advice, not any lobbying activity. He told the Times his contract stipulates that if he does talk to regulators with the purpose of assisting Citigroup, he'd be "fired." However, he also runs a key lobbying operation and the lines between advising and lobbying can become blurry, to put it mildly.