Wednesday, December 24, 2008
This is utterly brilliant: �Credit Suisse makes chicken salad out of ...
Credit Suisse Group AG�s investment bank has found a new way to reduce the risk of losses from about $5 billion of its most illiquid loans and bonds: using them to pay employees� year-end bonuses.At least they laid the bad paper on the people who actually bought it. (As I told you a few years ago, there was a story in Armenia about workers at a piano factory receiving a piano in lieu of cash wages.)
The bank will use leveraged loans and commercial mortgage- backed debt, some of the securities blamed for generating the worst financial crisis since the Great Depression, to fund executive compensation packages, people familiar with the matter said. The new policy applies only to managing directors and directors, the two most senior ranks at the Zurich-based company, according to a memo sent to employees today.
�It�s monstrously clever,� said Dirk Hoffman-Becking, an analyst at Sanford C. Bernstein Ltd. in London who has a �market perform� rating on Credit Suisse stock. �From a shareholders� perspective it�s great because you�ve got rid of some of the assets and regulators will be pleased because you�ve organized a risk transfer.�It would have taken some foresight to have done this with bank execs in 2007, which is why they got a load of bonuses back then. I don't begrudge that money, and it was known when we supported bailouts, so the shock and outrage we hear now is misplaced. �If they pay them�now, we can rise up with the pitchforks. �But let's hope a few of those firms follow CS's example.
For employees, �there�s some upside in there and if the alternative is nothing, it�s a lot better than nothing,� Hoffman-Becking said.