The Wall Street Journal reports that Credit Suisse bankers were 'livid' when they learned that around $5bn in illiquid assets (junk bonds, mortgage-backed securities and corporate loans) are to transferred into their bonus pool.
According to the newspaper, up to 80% of the stock portion of the firm's bonus package for directors and managing directors this year will come from this 'Partner Asset Facility'.
Although the initiative is certainly a smart move in that it conserves much-needed cash, not everyone is likely to be applauding. One unnamed banker is quoted by the Journal, saying: 'I did not lose one penny for this firm this year. I guess I had a hard time vacillating between which was more offensive - that cash is no longer cash, or that equity is no longer equity'. Having said this, there is a good chance of upside for participating bankers here, as the pool of assets may well rise in value. In that event, however, expect howls of protest from investors angry that bankers are benefiting in this way.
And Bloomberg reports that Morgan Stanley has cut its employee compensation and benefits pool by 26% to $12.3bn this year. The 'average' employee's total comp is $262,030, down from $339,556 a year ago. Financial News also reports that the firm has spent $600m on severance costs this year.
Finally, The Financial Times reports that partners at Goldman Sachs expect to see their bonuses fall by 80% this year, with the cash component capped at $400,000. The remainder of the bonuses will be paid in stock and options.
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