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) -- The revelation that


(C) - Get Citigroup Inc. Report

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

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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

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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.

Citigroup's Hohlt situation is tricky mainly because it looks bad. Citigroup said it didn't disclose the decision to retain Hohlt's services in public documents because it didn't legally have to, as long as Hohlt wasn't lobbying for the firm.

Should shareholders care that Citi is paying an influential point man in Washington for his knowledge and influence? Probably not.

It's not unusual for a top bank to have employees monitor the pulse in Washington, report back to top executives and develop strategies around potential problems. Furthermore, the banking world's major lobbying groups are openly financed by Citigroup and its peers. Those groups are openly pushing back against regulatory measures and getting many of them watered down enough to have minimal impact.

Their main challenge today is breaking down the Obama administration's plan to create a consumer protection agency. It's yet to be seen how effective they will be.

The Financial Services Roundtable, a key lobbying group arguing against the idea of setting up a consumer protection agency, is financed by just about

every major bank

, including Citigroup, BofA,

JPMorgan Chase

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(UBS) - Get UBS Group AG Report


Wells Fargo

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, as well as


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General Electric

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. Notably missing from the list of FSR members is

Goldman Sachs

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, as well as its main competitor,

Morgan Stanley

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Goldman may take issue with the title - or perhaps just the implications -but it is the bank most tied to Washington and most criticized for those ties. Many influential regulators have Goldman listed on their resumes, in this and previous administrations. The most notable alumnus is former Treasury Secretary Henry Paulson, but others include Robert Rubin, who served the same role under President Bill Clinton, as well as his underling Gary Gensler; President George W. Bush's economic adviser Stephen Friedman, as well as his chief of staff Josh Bolten; World Bank President Robert Zoellick; New Jersey Governor Jon Corzine; and former Wachovia CEO Robert Steel. There are a couple of Goldman relics in the Obama administration as well, including Robert Hormats, who now serves in the State Department.

Critics say such ties helped Goldman survive the crisis and reap the financial rewards that have made it both the most venerable firm on Wall Street, but also what one writer famously called "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

But given Citigroup's precarious financial situation and its less friendly regulatory relationships, it may not be such a bad thing to be in Goldman's company.


Written by Lauren Tara LaCapra in New York