Bonuses paid in mortgage backed securities
(h/t reader mcwop)
Clusterstock points a how to handle bonuses in an interesting way.
We’re shocked that nobody has suggested this before, but on its face this looks like a great idea… Credit Suisse announced today that bonuses for its top executives would be made in illiquid, mortgage-backed securities. Seeing as these guys are responsible for getting this stuff on the companies books, it makes sense to shove it back to them. And if the market gets liquid again, and the stuff goes up, that’s going to be a huge windfall for execs:
Bloomberg: 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.
“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 and helps position us well for 2009,” Chief Executive Officer Brady Dougan and Paul Calello, CEO of the investment bank, said in the memo.
Another bonus: This moves the stuff off of Credit Suisse’s books, while letting it hold onto its precious cash. Will we see any copycats?
Update: Reader Anna Lee adds “I saw this yesterday at another blog. One of the commenters suggested that the Congress critters receive their pay and bonuses the same way to shift risk from the TARP to shared risk. I enjoyed that picture in my head.” Let us try it out.