Ah, Citigroup (NYSE:C). The U.S. government has poured $45 billion of taxpayer money into its tills, leaving all of us with 34% of this messed-up, "too big to fail" entity. Given not-so-distant outrage over bonuses at places like AIG (NYSE:AIG), well, hurray, the people at Citigroup aren't getting any bonuses. However, it looks like some of them are getting massive pay raises instead. Sounds like good work if you can get it.

You've probably heard by now that Citigroup's giving out pay raises of up to 50% to many employees to make up for the lack of bonuses. Citigroup isn't alone, though; Morgan Stanley (NYSE:MS) and UBS (NYSE:UBS) recently upped pay, too. (And of course, apparently there's no recession at Goldman Sachs (NYSE:GS) -- that company might embark on the biggest bonus payouts in history, although granted, it also repaid $10 billion in TARP funds.)

Of course, we can't really ignore the fact that part of the whole "moral hazard" component is the fact that Citigroup, in its crippled state, still has to compete for talent -- and now that we taxpayers are on the hook, everybody would like to see it do well. Unfortunately, maybe the deeply unsettling thing here is that this so-called talent were the ones who helped fashion this economic disaster in the first place.

We all collectively sneered when the truth came out about the "smartest guys in the room" at Enron. Now it appears that we're rewarding the same kind of arrogance, greed, and stupidity, simply saying it can't be helped. I suppose we're all supposed to assume that we're making a gesture of good faith for these folks, and this is the way to ensure they do a good job -- hey, you screwed up, but we know you know better and won't do it again.

I fear that means we're the big suckers, and unfortunately, this may just be a meaningless rant because at this point, situations like Citigroup's are so convoluted and fraught with philosophical confusion, it's difficult to know which way to turn.

I will say this, though: There's something pretty sick about people who feel so entitled that performance versus failure doesn't matter, and I fear that our culture is getting poisoned with that mindset; I recently called it downright depressing. We are rewarding for failure over and over again; the government directing taxpayer funds into entities that basically failed has underlined why it's called "moral hazard."

My Foolish colleague Morgan Housel recently described Citigroup as "a failed company taped together by a government whose sole mission is to ensure that a disaster of this magnitude never happens again." I'm not too pleased with the idea that there will be fatter wallets, but probably not for shareholders or taxpayers. Unfortunately, complication appears to be a sign of the times as the state of confusion mounts surrounding the chimerical economy (and by that, I mean, part great white shark, part three-toed sloth, and a dash of slime mold … ew, that's ugly, and I don't think it can survive) and the monstrous "incentives" that are being created.

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Alyce Lomax does not own shares of any of the companies mentioned. The Fool has a disclosure policy.