Credit Suisse Bankers to Eat Toxic Cake They Baked

Justice so sweet, you can taste it: Instead of cash or stock, bankers at Credit Suisse will get their bonuses in the form of the devalued mortgage bonds they helped peddle.

Reporters for Reuters got their hands on a memo from Credit Suisse CEO Brady Dougan and Paul Calello, head of its investment-banking arm. They wrote to 2,000 investment bankers:

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.

It's wickedly brilliant. Credit Suisse takes $5 billion in questionable assets off its books, which immediately benefits shareholders. Publicly, it looks like the bankers are being punished with the toxic junk they made a fortune selling, which satisfies regulators and a bloodthirsty public.

And in reality? The bankers are getting bonds, derivatives, and other instruments whose value has already been discounted by 35 percent — a loss borne by Credit Suisse investors. If they rebound, Credit Suisse's moneymen will end up getting more than $5 billion. But that scenario assumes that the credit markets unfreeze and housing prices recover — at which point no one will be calling for guillotines on the streets of lower Manhattan. Wall Street always finds a way.

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