Late last year, a few banks like Credit Suisse got attention for announcing it would pay some bankers in toxic assets rather than its oh-so-precious cash. We know, it seems like a lifetime ago.
Back then we still thought that these assets would be frozen for years and that there was a good chance the bonuses would be worth nothing. We also still thought it would take banks years to pay back TARP, though that’s another matter.
Well, times have changed.
WSJ: Late Wednesday, the bank told 2,000 of its top bankers that a $5 billion fund of soured mortgages and bonds — which it granted as a big portion of 2008 pay — had returned 17% since January, according to people familiar with the matter.
The returns registered well below the 75% increase in Credit Suisse shares over the same period, and the 30% uptick in the benchmark Merrill Lynch high-yield bond index. But the fund still outperformed major stock indices, as well as initial expectations of bankers inside and outside the Swiss bank. Many were originally sceptical of the plan, with one decrying what he called the “eat your own cooking” plan as unfair to employees who didn’t contribute to the bank’s 2008 net loss.
What’s still not clear, though, is how the assets were valued when originally allocated to employees? Were they strictly marked to market, because if so, then in a way, a 17% gain sounds surprisingly low. But if they were given at inflated prices based on belief and hope, then we could see it.
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