The Credit Suisse Solution

[Winstonm]

The bank Credit Suisse has come up with an interesting approach to at least some of the problems inherent in the "toxic waste" securitization pools that have been at the heart of the credit crisis.

 

Credit Suisse, instead of paying bonuses with cash, will create a pool of toxic waste funded by top-level employee bonuses. Think of it: formerly “toxic” assets move off the balance sheet and are replaced by the cash once set aside for bonus compensation. Voila! Credit Suisse cleanses its balance sheet and the top-level employees get a stake in a long term pool of assets that they helped create. Never has force-feeding senior employees a heaping helping of their own cooking been such a good idea.

 

Now, if we could only get all the Wall Street banks to follow this example.

[Al_U_Card]

Oh those Swiss! With their watches and chocolate and secret bank accounts....what will they think of next?

 

Actually, this is a damn fine idea except how about deducting the toxic waste from their salaries???

[y66]

I really like this idea for partially restoring the risk / reward equation for decision makers. From Financial Times:

“While the solution we have come up with may not be ideal for everyone, we believe it strikes the appropriate balance among the interests of our employees, shareholders and regulators,” wrote Brady Dougan, Credit Suisse’s chief executive, and Paul Calello, the head of the investment bank, in a memo to employees.

 

Under the scheme, all of the thousands of managing directors and directors – the top two grades – in Credit Suisse’s investment bank will receive equity in the new pool of illiquid securities, as well as a cash bonus and shares or options in the company.

 

Bankers receiving such equity will not get any payments for at least five years and will only receive the bulk of the money after eight or nine years, according to people close to the situation.

more