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Credit Suisse Bonus Packages

All I want for Christmas is some triple-B CMBS

For those senior bankers bemoaning the fact that they were not awarded a bonus this year take heart - things could be worse. You could be working for Credit Suisse. The Swiss bank decided to pay employee bonuses for 2008 with illiquid leveraged loan and CMBS debt that no-one else will touch with a bargepole.

Investment banking chief executive Paul Calello admitted that the solution "might not be ideal for everyone". But the bank should be commended for its fresh approach to the concept - making bonuses something that employees actually want to receive is just so last year. The scheme applies to managing directors and directors only but who gets what remains a mystery. Maybe securities backed by city-centre buildings with solvent highly rated tenants are being reserved for blameless managers in wealth management. If so those in structured finance and leveraged finance should brace themselves for a deluge of triple-C paper backed by deserted shopping malls in Nowheresville, Tennessee (staff will actually be given equity stakes in a dedicated fund).

The ultimate value of the bonuses that employees receive will be determined over the next eight years "as the loans and securities mature or default" - not exactly a ringing endorsement of their quality. And remember - these are the people that Credit Suisse actually wants to keep.
"******* hysterical," snapped one employee at the bank. "They can't sell it so they give it to the staff! You might think it's funny but we are not laughing here..." But given where these assets are now marked, if liquidity returns, the unfortunate recipients of this largesse could end up having the last laugh after all...
 
My friend here in Canada working in i-banking team of Credit Suisse got some high yield tar sand bonds as bonus last year at book value....those bonds were very illiquid, and worthless....I just hope she didn't get taxed at book value...didn't have the guts to ask that question (she is a very emotional person)
 
...those in structured finance and leveraged finance should brace themselves for a deluge of triple-C paper backed by deserted shopping malls in Nowheresville, Tennessee (staff will actually be given equity stakes in a dedicated fund).
Reminds me of the old Soviet stories, when the plant employees were receiving their wages in the produce of that particular plant. What is more illiquid, ABS's for structured finance guys, or steel rails paid to a steel plant worker, remains to be arguable :)
 

doug reich

Some guy
Reminds me of the old Soviet stories, when the plant employees were receiving their wages in the produce of that particular plant. What is more illiquid, ABS's for structured finance guys, or steel rails paid to a steel plant worker, remains to be arguable :)

Who knows, with steel rails you can at least melt them down and sell them back to the plant as raw material; the banks have no capital to take ABSs at any price!
 

Eugene Krel

sunmulA
Speaking of Soviet stories... Back in the early to mid 90's there was a bank in Russia called MMM. It was very popular and collapsed with just as much glamor. Of course, in Russia there is no FDIC insurance for the average person so the bank ended up paying people in sunflower seeds or some other sort of seed.
 
MMM was not a bank. It was investment fund which promised enormous interest rates and advertised heavily on TV. Then they used money of new investors, to pay "interest" for current ones. Thus, it's very similar to what Madoff did.
 

Eugene Krel

sunmulA
MMM was not a bank. It was investment fund which promised enormous interest rates and advertised heavily on TV. Then they used money of new investors, to pay "interest" for current ones. Thus, it's very similar to what Madoff did.

That sounds more plausible, but none-the-less they couldn't be forced to pay out physical cash at the end, so there were "other" payments.
 
Reminds me of the old Soviet stories, when the plant employees were receiving their wages in the produce of that particular plant. What is more illiquid, ABS's for structured finance guys, or steel rails paid to a steel plant worker, remains to be arguable :)


This is not outdated at all. Exactly THIS YEAR, a lumber factory in south China, gave out their most luxury coffins (their own products) to workers as bonus.

CS is not creative at all!
 
Only except if you got them at book value this year, you would have to pay a big tax on something that has no value at all...
 
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