Tuesday, August 11, 2009

A Novel Proposal

Ian Mathias writes:

Here’s a good idea: Credit Suisse has been paying its hotshot bankers with
mortgage-backed securities. Since the end of 2008, the Swiss bank has been
paying out most of its bonuses with stock — not shares or options of CS, but
shares of a fund the bank created that’s composed of its own distressed
mortgages and toxic assets.

As the WSJ put it, “This means the performance of bets these bankers
were originally involved in structuring will help determine whether their 2008
compensation turns into big money or big losses.” It’s actually a double win for
Credit Suisse: Not only does the move insentivise accountablity among its ranks,
but the bank is able to jettison these bad assets off its balance sheet and into
a separate bonus pool.

And surprise, surprise… when you’re forced to “eat your own cooking,”
the food ends up tasting just fine. The fund is up 17% this year, well ahead of
the Dow and S&P 500.

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