5th weekly news

1. Bernanke hopes US not relegated to slow recovery

2. PRINCETON, NEW JERSEY: Federal Reserve Chairman Ben Bernanke said on Friday it was unclear whether the US economy would be relegated to the type of slow recovery that typically follows a financial crisis. Acknowledging the economy was growing less than the US central bank would like, Bernanke noted that recoveries following financial crises historically have been more sluggish than rebounds from normal recessions. However, he said it was not clear if that was because of the unusual economic headwinds financial crises create or because past policy responses have not been aggressive enough, saying he hoped the current US recovery escapes that fate.

3. "It could be that financial crises lead to slow recoveries because of the headwinds created by deleveraging, by bad assets, by problems in the banking system and the like and I'm sure there's some of that" in the current US episode, he told a group of scholars at Princeton University. "But it could also be that in some episodes in the past ... maybe governments and policymakers weren't aggressive enough in fixing their financial systems and using monetary and fiscal policy appropriately," he said in answer to a question. "Certainly the Federal Reserve has been quite aggressive ... so we're hopeful to get a better result." Bernanke offered no guidepost to the US central bank's next step, and steered clear of offering his thoughts on the economic outlook.

4. The Fed said on Tuesday it was prepared to take action to help the recovery and lift inflation. Many analysts expect it to resume buying longer-term government debt later in the year to drive borrowing costs down further. In his prepared remarks to the group, Bernanke acknowledged the economics profession has a lot to answer for after the financial crisis of 2007-2009, including why economists have been unable so far to engineer a healthy recovery. "Although financial markets are for the most part functioning normally now, a concerted policy effort has so far not produced an economic recovery of sufficient vigor to significantly reduce the high level of unemployment," he said. However, Bernanke defended the field of economics. He said the recent crisis reflected a failure to regulate financial institutions, manage risks and anticipate shocks rather than shortcomings in economic theory.

5. He urged economists to learn more about human behavior, especially under uncertain circumstances, and to learn more about how asset bubbles form and how the ability of financial firms to sell assets can come to a screeching halt in a crisis.

6. Citigroup gives pay hikes to top execs in stock

7. NEW YORK: Citigroup, still partly owned by the government after a rescue during the financial meltdown, is giving raises to top executives that could amount to millions of dollars. CEO VikramPandit, who is drawing a salary of $1 for the second year in a row, did not get a raise, but the chairman of the bank hinted it plans a big payout for him next year. The announcement Friday by Citi, which remains weaker than most of the large American banks two years after the meltdown, raised questions among experts on corporate governance. By paying the raises in company stock, not cash, Citi has decided to follow previously issued guidelines that limited salaries to $500,000 for the top 25 executives at financial institutions still receiving large amounts of federal help.

8. The question is do they deserve higher salaries, and are they evading rules to avoid losing ?" asked Charles Elson, director of the Weinberg Center for corporate governance at the University of Delaware. Citi is fighting to keep talented bankers from jumping ship to any of its rivals on Wall Street, all of whom have repaid their federal bailout money and are not under the same kind of compensation restrictions. Edward Skyler, a spokesman for the bank, said the compensation levels "correspond with similarly situated executives in the industry." Citi was the hardest-hit US bank during the credit crisis of 2008, and received $45 billion in government bailout money under the Troubled Asset Relief Program, part of which was converted to stock last year. The government is gradually selling its stake and still owns about 17 per cent of the bank.

9. Though Citi has posted profits recently, Citi continues to be weighed down by large amounts of bad loans and investments it made in the run-up to the crisis. Pandit, who pledged last year to take a $1 salary until the bank returned to profitability, elected to keep that figure for this year, but he seems set for a big payday in 2011. Citi's chairman, Richard Parsons, said in a statement that beginning next year the bank's board "intends to compensate Vikram commensurate with the job of CEO of Citi." Rolfe Kopelan, a managing partner at search firm Capstone Partnership and an expert on corporate compensation, said $1 still seems appropriate for Pandit. "It's not ridiculous when you're living on public funds, and when you're one of the major causes of the recession," Kopelan said. The biggest raise disclosed in Citi's regulatory filing will go to John Havens, head of the bank's

10. institutional clients group. He will get a cash salary of $500,000 this year, the maximum under the cap, and $9 million of salary paid in stock That compares with a salary of $975,000 last year for Havens, also in a blend of cash and stock. Including other awards of stock and options last year, Havens' total compensation last year came to $11.2 million. Citibank did not disclose how much Havens might be awarded in other stock grants, but he could be eligible for a bonus this year of up to 50 per cent of his salary, or $4.75 million. Manuel Medina-Mora, head of consumer banking for the Americas, will also get a cash salary of $500,000 and $7.45 million of salary in stock, making him eligible for a bonus of up to $4 million. Last year, Medina-Mora's base salary was $972,000, and his total compensation including other awards of stock and options was $9.8 million.

11. Chief Financial Officer John Gerspach's salary will be $500,000 in cash and $4.17 million in stock, making him eligible for a bonus of up to $2.3 million. Last year, his cash and stock salary was $3.3 million, and his total compensation including other stock awards was $5 million. Under an amendment to the bank bailout law of 2008, Citi is still subject to the compensation restrictions as long as the government remains a shareholder. That means the top 25 executives cannot receive bonuses exceeding 50 per cent of their salaries. In deciding to give their salary raises in stock, Citi chose to abide by a previous rule that governed the bailout, under which top executives could not receive more than $500,000 of their salary in cash. The Associated Press' calculation for executive pay aims to isolate the value the company's

12. board placed on the CEO's total compensation package. The figure includes salary, bonus, incentives, perks and the estimated value of stock options and awards. The calculations don't include changes in the present value of pension benefits, and they sometimes differ from the totals companies list with federal regulators.