No fiddling while Rome burns

Anyone who’s been concerned at the size of executive remuneration at financial firms will be excited to hear about Credit Suisse’s latest move. Rather than allowing its executives to fiddle as their mortgage backed security investments cause the balance sheets to go up in flames, CS is paying its executives bonuses in illiquid mortgage-backed securities.

I wonder if, given the risk associated with those assets, their bonuses will be correspondingly higher. I wouldn’t want to be the one explaining to shareholders that bonuses were surprisingly high this year, but it’s actually OK because…[drowned out by lynch mob]

ht: Megan McArdle

2 replies
  1. John
    John says:

    You mean they are given the mortgage backed security over the (annual income $14000 per year) strawberry pickers $750,000 house?

  2. Kimble
    Kimble says:

    They are effectively selling their illiquid securities to their own employees at fire sale prices. The realised value of those securities looks low at the moment, but that only matters if they are priced correctly.

    Their effective bonus could be very lucrative.

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