Dealbreaker has long admired Credit Suisse for being on the cutting edge of creative approaches to compensation. In 2008, they gave bankers bonuses consisting of “toxic assets” to (1) incentivize the risk-takers to stick around and (2) remind people that “toxic assets” is a meaningless term if you don’t consider price. That worked out okay. This year, they’re giving junior mistmakers bonuses consisting of nothing, as a gentle reminder that there are other, similarly nonremunerative careers that might be better suited to their interests and talents. That also seems to be working. And now there’s this piece of magic:
Credit Suisse Group AG, Switzerland’s second-biggest bank, plans to pay a portion of senior employees’ 2011 bonuses in bonds packaged from derivatives linked to about 800 entities.
The move “is a risk transfer from the firm to employees,” Chief Executive Officer Brady Dougan, 52, wrote in a memo to the firm’s staff and obtained by Bloomberg News. “We are trying to strike the right balance and align employees with shareholders. These measures help to put us in a good place and to perform well in 2012.” …
The bonds mature in nine years and will pay a coupon of 5 percent for Swiss franc holders and 6.5 percent in U.S. dollars “for holders elsewhere,” Dougan wrote. Credit Suisse will absorb the first $500 million of losses on the portfolio, according to the memo.
How can you not love this? My favorite part is that shareholders eat the first tranche of losses. OOOH NO BANKSTERS ROBBING SHAREHOLDERS, you think – well, not you, but someone thinks – except no. Read more »
Last Friday afternoon, while many a financial services employee was dealing with the fallout of receiving a bonus they did not believe to be commensurate with the work they put in for 2011, Bridgewater was dealing with a far weightier issue. The hedge fund had a thief in its ranks and said thief’s jig was up. Read more »
A couple weeks back, a report circulated that Wall Street banks were considering freezing compensation for junior employees. The firms were hesitating, however, supposedly on account of the backlash they feared would occur from failing to keep “potential future stars…engaged and happy.” Yes, they were terrified at the consequences of how their junior mistmakers would react to the news and didn’t want to pull the trigger unless everyone promised to do the same, preventing a dire situation wherein a handful of first and second year analysts quit to join firms where their unique talents would be appreciated. Credit Suisse CEO Brady Dougan, for one, has decided not to be afraid anymore. Read more »
Lagarde Says Europe Must Boost Firewall (WSJ)
The global economy faces a depression-era collapse in demand if Europe doesn’t quickly act to dramatically boost the size of its debt-crisis firewall, implement pro-growth policies and further integrate the euro zone, the head of the International Monetary Fund warned Monday. “It is about avoiding a 1930s moment, in which inaction, insularity, and rigid ideology combine to cause a collapse in global demand,” IMF Managing Director Christine Lagarde said in prepared remarks before the German Council of Foreign Affairs in Berlin. “A moment, ultimately, leading to a downward spiral that could engulf the entire world,” she said.
A Sears Wager Stings At Goldman (WSJ)
Clients of Goldman invested about $3.5 billion in Eddie Lampert’s hedge fund through a special deal more than four years ago. Goldman invested about $75 million of its own money as part of the arrangement. At the beginning of this year, that investment was down several hundred million dollars, in large part due to a 57% plunge in Sears stock in 2011. Sears is one of the largest investments of Mr. Lampert’s fund, ESL Investments Inc., according to the most recent securities filings. A sudden rebound in Sears this year has put Goldman and its clients in the black on the deal, although ESL still trails the average return of rival hedge funds since the Goldman money was invested. Goldman and its investors need to see the Sears rally continue. The reason: They can’t withdraw their money until the end of this year, according to terms of the investments. And some analysts are skeptical about whether the recent gains will last.
Wall Street Pay Gets Even Trickier To Figure (WSJ)
Since the financial crisis, banks have lessened short-term incentives. Base salaries have risen, while bonuses have fallen. And a bigger portion of incentive compensation is now paid in stock that typically vests over three years. While positive for investors, it poses new risks. Higher base salaries mean firms have less flexibility on pay. And by deferring more bonus pay, usually with restricted stock units that are charged over several years as they vest, firms may be locking in compensation expense that isn’t matched by future performance. That is a worry since Wall Street is in a state of flux and revenues have been falling. If that continues, expenses from deferred compensation could limit banks’ room to maneuver. Firms are paying out an ever-larger share of compensation in deferred-stock—Morgan Stanley in 2010 changed the percentage from 40% of bonuses to about 60%. For 2011, it capped the cash portion of bonuses at $125,000.
French front-runner pledges to cut his pay by 30 per cent as he aims to become next president (Telegraph)
“I like people while others are fascinated by money … I will be the president of the end of privileges,” Francois Hollande said, accusing Mr Sarkozy of presiding over the “degradation” of France just days after the country lost its coveted triple A credit rating for government loans. “My real adversary has no name, no face, no party … it’s the world of finance.”
Buffett Sings for China, With A Year’s Delay (China Real Time Report)
Warren Buffett sang after all on the online version of China’s annual Spring Festival gala — though the audience wasn’t the one he originally intended. Earlier this month, the gala’s organizers said Mr. Buffett, would sing as part of a new year’s greeting to China’s fast-growing Internet community. On Sunday, the gala’s website featured a video of Mr. Buffett, wearing a dark sweatshirt and sitting in front of what looked like a model train set, playing his ukulele and singing the American folk song “I’ve Been Working on the Railroad.” But Mr. Buffett didn’t originally record the song for the gala. Instead, he recorded it for a charity event from a year ago, said Wu Zheng, a Chinese media executive and friend of Mr. Buffett. Originally — as Mr. Wu told China Real Time earlier this month — Mr. Buffett objected to repurposing the video for the new year’s audience. Mr. Buffett appears to have changed his mind: Mr. Wu said Sunday that Mr. Buffett later gave his assent to use the video in the gala.
Bull with flaming balls of wax attached to head fatally gores man in eastern Spain (AP)
A flaming-horned bull trampled and fatally gored a man early Saturday during a festival in eastern Spain, an official said. Large balls of flaming wax are traditionally affixed to the beasts’ heads before they are let loose to rampage through squares and narrow streets in such festivals…Many towns in east and northeastern Spain celebrate feasts with “toros embolados,” or “flaming bulls,” which feature the animals racing around and shaking their heads as a reaction to flames or fireworks attached to or close to their horns. At these regional festivals, flaming-horned bulls are taunted and teased by rowdy crowds in bullrings, town squares or down streets. Read more »
$$$“Mr. Colbert could not get on the ballot. I could not get off the ballot. That’s how this came about,” Cain said Friday. “And Mr. Colbert mentioned that there was one thing that I had that he did not have, which is a bus with my face on it.” [MSNBC] Read more »
The Federal Reserve on Friday released blank templates showing the format of the two charts it will use on January 25 to report Federal Open Market Committee (FOMC) participants’ projections of the appropriate target federal funds rate. It also released a draft of an explanatory note that will accompany the projections.
The first chart, which will have shaded bars when released on January 25, will show FOMC participants’ projections for the timing of the initial increase in the target federal funds rate. The second chart, which will have dots representing policymakers’ individual projections when released on January 25, will show participants’ views of the appropriate path of the federal funds rate over the next several years and in the longer run.
Bars and dots! What’s not to like? The actual form, in its forlorn blankness, has the look of an exam you’re supposed to fill out,* and there’s this: Read more »
Occupy protesters, taking aim at what they dubbed Wall Street West, were arrested after converging on Wells Fargo & Co.’s headquarters in San Francisco today in a bid to shut down the city’s Financial District. Demonstrators shouting “Give Us Our Money Back” and saying they wanted the bank to stop foreclosures chained themselves to entrances of the bank. Seven people were arrested, according to police Lieutenant Liam Frost. The arrests were made at the request of a Wells Fargo representative, Frost said. [BW, related]
Unlike some private equity famewhores, Steve Schwarzman is a modest, retiring type who shuns all ostentation and just wants to be left alone with his crabs. So it’s not surprising that he doesn’t want those gossip hounds at the Fed all up in his personal finances, and that he’s willing to go to extreme lengths to avoid just that. How extreme? Check this out:
Blackstone is converting part of its 14.1% stake in BankUnited Inc. to nonvoting preferred stock, these people said. The deal will shrink its voting stake to less than 10%, pushing the New York firm below the level at which the Fed requires personal financial data from the Florida bank’s owners.
It isn’t clear why Mr. Schwarzman is sensitive about providing such information. The longstanding Fed rule is in place to allow the regulator to gauge the safety of banks by evaluating the financial resources of their owners. The financial information gathered about a bank’s owners isn’t available to the public, even if requested under the Freedom of Information Act, according to people familiar with Fed policies. …
The matter of Mr. Schwarzman’s personal financial information is tied to BankUnited’s plans to convert from a savings-and-loan institution to a national bank. … As part of the conversion, the Fed requires detailed financial information from “principals” of entities that own more than 10% of the bank’s stock.
Remember, back in December 2008, when Credit Suisse announced it would be paying out bonuses comprised of toxic assets? And Brady Dougan was staring at the business end of a hissy fit from many a miffed employee, who thought good and hard about threatening to leave before realizing it was cold out there? Apparently things turned out pretty okay for them. Read more »
You know what they say: You can’t choose your family, but you can choose your financial planner. Or something like that. One of the great things of being in charge of your money is choosing who (if anyone) will help you manage it. The choice isn’t always an easy one. How will you know that your planner is reputable and trustworthy?
These five red flags may be good indications of whether the financial planner sitting across from you is someone you should trust with your money. LearnVest Planning also provides an innovative 7-step program for your money where you work one-on-one with a financial planner. To see if this program is right for you, start with a free financial consultation.
1. She Isn’t Certified
“There are a lot of good planners out there who aren’t Certified Financial Panners™,” says Samantha Vient, CFP®, of LearnVest Planning Services. “However, CFPs® are required to adhere to the CFP® Board’s standards of professional conduct.
We believe it’s always a good idea to work with someone who has the CFP® designation, which is issued after completing a CFP® Board-approved personal financial planning curriculum, passing a rigorous exam issued by the Certified Financial Planner Board of Standards, meeting experience requirements and passing an ethics and background check.
Recently, there’s been a lot of talk amongst leaders in Washington about how to improve the painful process of repaying student loans. At SoFi, we feel your pain and work hard to offer more flexible, more affordable options for our borrowers. One idea that’s getting a lot of attention is increasing the options for refinancing debt after graduation. The only lender currently focused on refinancing private and federal student loans is SoFi.
We recognized early on that borrowers who have made timely payments on their loans, graduated from school, and have a job should be able to refinance their student loans at a lower interest rate. This may be why, after resuming lending by invitation, the media became increasingly interested in what we are doing.