Credit Suisse gives bonuses that could be naughty or nice

CREDIT Suisse set a good example last week when it announced it would pay half of bank officers' annual bonuses in sickened assets such as subprime-mortgage bonds. If the sickened assets revive, officers of the Zurich investment bank will prosper. If not, they won't.

Seems fair to us.

Some bank officers didn't think so. One Credit Suisse man bellyached to The Wall Street Journal that he was being paid in "a bunch of junk they can't move in the market."

Exactly so. But bankers created the junk. They marketed the junk. Other bankers decided to buy the junk without looking too closely at what it was. All the while, their pay packages were tied to the volume of junk they moved, no matter how junky it was or how much the final owner would curdle from the taste of it.

Who has had to eat the losses so far? Bank shareholders. Then taxpayers, who have been drafted into this, against their will. Then savers, who lost when the Federal Reserve cut interest rates. The purpose of the cut was said to be to stimulate business, but it was also to shore up the banks by widening the profit margin on loans.

More of the cost of the Crash of '08 should have been by the mortgage brokers, securities analysts and bankers who created it.

For the most part, it is too late to do this. An employer cannot claw back a salary already earned. But with bonuses, there is flexibility. Bonuses can be paid in junk, or potentially valuable things that look at the moment like junk.

The banker quoted above went on to bellyache that Credit Suisse's new bonuses felt like "two lumps of coal" for Christmas. There are a lot of people who are having lumps of coal, or who will soon enough. Pray some of them are investment bankers.