Credit Suisse pays out bonuses in "toxic assets"

Thursday, April 30, 2009

The AIG bonus scandal stirred intense anger from the public, the media and the president. Swiss bank Credit Suisse has adopted a creative solution to the bonus paying problem — pay part of employees bonuses in "toxic assets," those repackaged bad loans that are at the center of our economic downturn. Jesse Eisinger, a financial writer who has worked at the Wall Street Journal and Condé Nast Portfolio, explains.

Click through for a transcript.

Femi Oke: Do you remember all that public rage about our banks that gave their employees bonuses?

Nancy Pelosi on tape: It isn’t right, it just simply isn’t right, when there is a reward, a spelled-out-in-advance reward for those who take undue risk, when they fail they get a bonus, the taxpayer gets the bill.

Femi Oke:That was Nancy Pelosi in March of this year. But Swiss bank Credit Suisse has found a very creative solution to the bonus-paying problem: pay part of your employee bonuses in toxic assets. Toxic assets are all of those bad loans that the banks have made. Jesse Eisinger is a financial writer who has worked at the Wall Street Journal and Portfolio. So, Jesse, just imagine that I work at Credit Suisse for a moment and I’m getting paid toxic assets as my bonus. What do I actually get?

Jesse Eisinger: What you get is an interest in a complex security, all these securities that we’ve heard about. Really what you’re doing is getting an income stream from a bunch of loans that Credit Suisse has made. In fact, you have helped make those loans, and so you’re eating what you cooked. Or as I like to say, you’re eating your own garbage.

Femi Oke:Right, OK. So does that mean that I actually have to pay out any money because I have toxic assets? Do I lose money?

Jesse Eisinger:No, what happens is, you get an interest in a security. So you’ve gotten a bonus and you’ve gotten a bonus half in cash, as you normally did. Instead of stock, this time you got an interest in a loan, in a fixed-income security, and you get an interest payment. If the value goes up, you get part of that as well.

Femi Oke:Ah, I get it. Light bulb moment.

Todd Zwillich: So what’s in it for Credit Suisse? Do they get to unload these toxic assets off their books that they’re giving to employees?

Jesse Eisinger:Exactly. So they get two benefits from this. They get a little nice publicity from financial writers like me who praise them. And then they also got to move the toxic assets off the books. The central problem with the banking system globally, as we know, is that the banks made collectively way too many bad loans to commercial real estate, to residential real estate, to companies that can’t afford to pay them back, and they’re having to take write-downs. So Credit Suisse took a write-down on this collection of loans and gave portions to the employees.

Todd Zwillich: The other thing we know about this global crisis, though, is that nobody knows what toxic assets are worth, and what the market wants to pay for them, the banks won’t accept. So if you’re an employee who just got a bonus in toxic assets, do you have any clue what it’s worth, if anything?

Jesse Eisinger:That’s exactly the crux of the whole issue, and this transaction lends a lot of insight into that. What happened is they priced these at 65 cents on the dollar. Essentially they said, “All these bundles of loans we’ve taken from all over the world, and we’ve taken commercial real estate, and we’ve taken loans to companies, we’re going to price them at 65 cents on the dollar.” And that sheds a lot of light on what they may be worth, what the banks think they may be worth, when they’re trying to sell them in the Geithner plan that we’ve heard so much about. Maybe they’re worth 65 cents on the dollar, but we don’t really know. At least the banks think, at least Credit Suisse thinks, that this kind of loan is worth this to the employees. Now, residential real estate securities are going for much less now, sometimes 20 or 30 cents on the dollar, so this is a lot higher than those really toxic assets. There are degrees of toxic assets.

Femi Oke:Do you think they were exaggerating how much they’re worth just to make their employees feel a little better perhaps?

Jesse Eisinger:This presented this interesting negotiation, because the employees now are pitted against the employer. The employees want them to be marked down as low as possible, so that they’re paying essentially the lowest price and then they get the appreciation. The employer has the interest of paying them in a higher price, so if they got them for 25 cents on the dollar, they’d obviously have more upside than if they got them at 90 cents on the dollar. And they ended up with this compromise and they tried to be disinterested in how they arrived at it. We’ll see if it’s too optimistic or not. It’ll take about five years for it to play out.

Femi Oke:Has this ever been done before, Jesse?

Jesse Eisinger:No. The banks haven’t really faced this problem in this kind of scale before, so they haven’t had this kind of toxic asset problem before. Credit Suisse is the first to do this, and to my knowledge they’re the only ones to do this. The problem with pay, as Nancy Pelosi pointed out, is all the bankers were incentivized to solely perform on a short-term basis. They had extraordinary myopia. They only were paid on the basis of producing loans rather than how the loans performed. This goes to the heart of solving that problem, but it won’t really solve it because no bank has the interest of acting unilaterally. Credit Suisse, they did this, this is a one time deal, it was very good that they did this, but no bank is really going to really, sort of, jump into this and give their employees less money or money in difficult-to-price assets again. And that’s why I think pay should really be regulated.

Femi Oke:Jesse Eisinger. He’s a financial writer who has worked at the Wall Street Journal and Portfolio. Jesse, I understood you for five complete minutes. Congratulations. Thank you so much.


Jesse Eisinger

Hosted by:

Femi Oke and Todd Zwillich


David J Fazekas

Comments [8]

jack loach from Manchester

Sods ---- Law.

Dec. 2013.

For almost two decades we have strived to get justice for the injustice we have suffered at the hands of a world renowned bank .( Pictet & Cie.)

Two Yorkshire men both running their own family businesses trying to resolve the problem by taking the correct legal procedures to recover their monies.

The matter was raised in parliament –twice – the FSA investigated the matter concluding that the bank had rogues operating in their London Bank --- but the rogues had left --- so there.

We then approached the Financial Ombudsman Service – our case was dealt with by seven different people ---- then numerous E-Mails were ignored --- nobody would speak to us. – so there.

We then asked the SFO ( Serious Fraud Office) to investigate our case
--- the criteria of our case ticked all their boxes --- we were instructed not to send down any documents / evidence --- in fact they wrote to us advising us to go to the Citizen’s Advice Bureau. ( CAB) .

RICHARD ALDERMAN ( The Boss) ---- who responded to our letter was the man who would not investigate the “ Madoff “ scandal or the “Libor” fiasco. The MP’S committee ----- said he was sloppy --- and the SFO was run like “ Fred Karno’s Circus. ----- so there.

Our M.P. approached our local Chief Constable to investigate – our West
Yorkshire Police Force --- made “ Dad’s Army” look like the S.A.S.
Inept , corrupt – from top to bottom. We were criminally dealt with by the Forces Solicitor --- the Head of the Economic Crime Unit --- and the Chief Constable --- one SIR NORMAN BETTISON. ---- so there.

We then were advised to pass our complaint against West Yorkshire Police to the I.P.C.C.--- which we did -- they instructed the West Yorkshire Police to look into our complaint. ----so there.

Sir Norman Bettison ---and the Forces Solicitor –and the Head of the Economic Crime Unit – all removed from their posts and facing criminal allegatioins. --- So there

We even sought justice through the Courts , culminating in a visit to the Court of Appeal. London. On leaving the Court of Appeal that day our barrister ( a rising star ) informed us that if that was justice then they can keep it. He quit the law and moved to Canada.----so there.

We learned a few years later that one of the judge’s in our case at the Courts of Appeal was related to a senior executive of the Bank.—so there.

The Bank ---- PICTET & CIE.. London. --- Geneva.
Voted private bank of the year ---2013.
IVAN PICTET ---- the senior partner --- lied on numerous occasions and had documents destroyed --- said genuine documents were forgeries.
2012—Voted Banker of the Year.
Oct 2013 --- Given the LEGION of HONOUR --- so there

But saying that honours were given to Hitler—Eichmann--- Mussolini --
Franco – he’s in fitting company. ---- so there.

Dec. 29 2013 03:32 PM
jack loach from Manchester

Update ---- Nov.9th 2013.

Pictet & Cie Bank
List of Crimes.
1996 --- F.S.A. --- Breach in London.
2003 --- F.S.A. --- States
Rogues were operating in Pictet’s London offices.
Ivan Pictet states that documents were forgeries but were later proved to be genuine in the British Courts. ( Ivan Pictet a proven liar.). He had documents destroyed in their London office – hoping to hide the crimes.
2007 --- The Securities&Exchange Surveillance ( Japan.)
Issued a recommendation that the Prime Minister and the Commissioner of the F.S.A. to take disciplinary action against Pictet Asset Management – Japan Ltd.
2008 --- Dec. --- Pictet Bank state – “ We have never chosen any funds linked to MADOFF.
2011 – Madoff Trustees sue Pictet & Cie. Bank . for $156,000,000. ( They lied again.)
2011 --- Pictet & Cie bank abetted a Bribery Scheme. --- Oil Company sues Pictet Bank for --- $350,000,000.
2012 --- April.—Pictet & Cie, Bank .Geneva implicated in offshore Tax Scheme. –USA .
2012 -- June. --- Published in Anglo INFO. Geneva, ---- USA Trust Fund were sent false and fraudulent documents by Pictet Bank in order to collect large fees.
(Like MADOFF). – Even after the SEC in the USA had uncovered the fraud Pictet Bank continued to charge fees and drain whatever was left in these accounts.
Estimated that - $90,000,000 was lost in this Pictet Ponzi Scheme.
2012 -- July --- German paper –De – Spiegel --- states --- Pictet Bank uses a letterbox company in Panama and a tax loophole involving investments in London to lure/gain German Millionaires as clients.
2012 --- August. --- German Oppositon Leader accuses Swiss Banks of “ organised crime”.
2013 --- Swiss M.P.’s table motion to freeze Tiab Mahmuds assets of “ criminal origins” held in Swiss banks -- $18,000,000 held in five accounts at Pictet & Cie Bank . Bahamas.
2013 --- Feb. -- The bank is now seeking to re-structure --- to cut the partners liability ( not to risk their ill gotten personal wealth.) --- hoping to offload the decades of criminal responsibility. ( Some listed above.)
The Germans are right – the bankers should go to prison if found guilty of financial crimes. ( Madoff got 150 years in prison --- surely the Pictet Bank’s partners should go to jail.)
Ironically the Pictet & Cie .Bank partners are bigger criminals than the criminals who have accounts in their bank.
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Pictet & Cie Bank.--- Partners ----- ( 1996—2013)—Guilty.
Peters & Peters --- Partners ------ (1996 --- 2013) ---Guilty.

Nov. 09 2013 04:37 PM
jack loach from Manchester

Feb 3. -2013.

Peters & Peters Partners ----(1999 ---2013.) – guilty.
Pictet & Cie Bank – Partners -(1996---2013) – guilty.

The bank and it’s officials/lawyers deliberately withheld crucial documents requested under a High Court order. The bank and it’s officials/lawyers deliberately withheld evidence from the Police, and one of it’s account managers Susan Broadhead gave a false witness statement to the Police.
Another one of it’s managers Nicholas Campiche ( Now Head of Pictet – Alternative Investments.) concocted a letter pretending to be a client and closed his account. The senior partner (Ivan Pictet.) sought to have numerous documents destroyed,along with those copies held in their London office’s of Pictet Asset Management. Initially stating that they were forgeries then their lawyers Peters & Peters – Monty Raphael Q.C.–and the barrister Charles Flint.Q.C. later had to admit in Court that the documents were genuine.

British Parliament. Hansard .29th March 2007.
Barry Sheerman .M.P.—quote.

---------“ Constituents of mine have lost £2 million through fraud. The fraudster used Pictet & Cie - - a French Bank - - and Pictet Asset Management to back the fraud being perpetrated.””

(1) It is a criminal offence for a bank to knowingly act for an undischarged criminal bankrupt in so far as it seeks to assist that criminal bankrupt in the fraudulent movement of monies. ( Money Laundering.) assisted by Monty Raphael.Q.C.

(2) It is a criminal offence for a bank to lie to the police and the bankrupts trustee in bankruptcy in so far as any knowledge of, or dealings with the bank was refuted . + Monty Raphael.Q.C.

(3) A bank can be guilty of Contempt of Court if it fails to comply fully with the Courts order for discovery .+ Monty Raphael Q.C.

(4) The banks contempt is further compounded if it fails to address its error after it is specifically drawn to the to its solicitors attention. ( Monty Raphael Q.C.).

(5) It is a criminal offence under the Financial Services Act to seek to destroy evidence that might be relevant to an investigation .+ Monty Raphael.Q.C.

(6) It is a criminal offence not to relinquish control of funds to the Trustee immediately the fact of the bankruptcy is drawn to the banks attention.+ Monty Raphael Q.C.

(7) It is a criminal offence to lie or otherwise obfuscate the lawful and proper enquiries of the F.S.A. + Monty Raphael Q.C.

In the F.S.A. cover up , they concluded that there had been “ Rogue” elements in Pictet & Cie’s , London operations . They had been moved from their London Office so who was there left to prosecute. “ Unbelievable.”

Feb. 03 2013 07:52 AM
jack loach from England

Pictet & Cie. Bank – list of crimes.

1996 ---- Breach in London.
2003 --- FSA --- States rogues operating in Pictet’s –London
Office . Ivan Pictet said documents were forgeries but
were lated proved to be genuine. Had documents held
in London office destroyed.

2007 --- Japan. ---- The Securities and Exchange Surveillance
issued a recommendation that the Prime Minister and
The Commissioner of the FSA to take disciplinary
action against Pictet Asset Management. Japan Ltd.

2008 --- Dec. ---Pictet Bank state --- “ we have never chosen
any funds linked to Madoff.”

2011 --- Madoff Trustees sue Pictet & Cie. For $156 Million.

2011--- Bank at centre of Bribery and money laundering case.
Being sued for $350 million. ( In U.S.A.)

2012.--- Geneva Bank Pictet used in Offshore Tax Scheme.
U.S. Authority states.

May. 13 2012 09:15 PM
Jack loach from manchester England

West Yorkshire Police.

We note that Det Chief Inspector Steven Taylor has been removed as Head of the Economic Crime Unit and demoted to Det. Inspector. ( One down two to go.)

A file of some 339 pages including scores of documentation has been forwarded to the following ---
640 --- Members of Parliament.
460 --- Members of the House of Lords.
Ministry of Justice.
F.S.A. – Financial Services Authority.
Serious Fraud Office,
Peters & Peters .London. -- Solicitors.
Pictet & Cie Bank --- London & Geneva.
West Yorkshire Police Authority.
I.P.C.C.--- Independent Police Complaints Commission.
C.C.R.C. --- Criminal Cases Review Commission.
Swiss Ambassador London.

Aug. 30 2011 07:09 AM
Jack Loach from Manchester England.

*** Were currently waiting to see if the West Yorkshire Police :-
(1) Chief Constable. --- Sir Norman Bettison.
(2) Forces Solicitor . -- Mike Percival .
(3) Head Of Economic Crime Unit. -- Det . Chief Inspector Steven Taylor.
continue to attempt to cover this case up like their F.S.A. counterparts. If they do –“ then watch this space.”

We were informed that due to pressure from our M.P. that the Ministry of Justice have asked Lord Myners to investigate our claims that the F.S.A. covered up the illegal activities of Pictet Asset Management. London.
It has been noted that the book launch for PICTET was held at Lord Myners Belgravia home.We might as well have asked Ivan Pictet to investigate our complaint.-or someone from FRIENDS RE-UNITED.
Lady Myners on Prix PICTET advisory board.

The consensus of opinion is the Pictet & Cie should be prosecuted , and that their U.K. banking licence should be taken away.

Their Solicitors at Peters & Peters .London “ struck off and prosecuted..”
In America ---- they would have all been in prison for the last seven years.

Apr. 26 2011 08:23 AM
jack loach from england

Swiss Banks.
& other offshore banking countries.
Secrecy.-----. Secret numbered accounts.

The benefits to the bank are far greater than the benefits to the client .
The funds are easy to deposit but very difficult to withdraw.
You can/might be paid the interest accrued but don’t ask for the capital.

This type of banking facilitates crime. ( a place to hide criminally obtained monies.)
A. Drug Trafficking , Arms Dealing. International Fraud.
B. Organized Crime. Serious Fraud .
C. Tax Evasion . ( Income Tax – V.A.T—Corporation tax. Etc.

60% of the funds held in these banks fall into Categories A & B.
20% of the funds held in these banks fall into Category C.

If you have monies in one of these banks. ( either legal or illegal monies.)

Remember. ( do not die.)

Even if you have told your wife about your “secret account.” or your children , or solicitor ,or left documents with your Will , it is impossible for them to claim the monies from that account. ( clever these banks.)

Do you recall. ( Don Johnson--- in TV Show . Miami Vice.)

In 2003 he and three associates were sent by American Business Organisations to withdraw £,6.000,000,000. ( six billions.) from the accounts they had in Swiss Banks. (in bonds- securities etc.)

I wonder how the police on the Swiss border knew to stop their particular car that day after they had been to the Swiss banks . They were searched and arrested. Don and his friends made a mistake . They should not have asked for their monies back from the Swiss Banks.( clever these banks.)

Feb. 18 2010 07:01 PM
peter humphries

Pictet & Cie.- claim they are the “Rolls Royce”of swiss banks.

Swiss Banks or more correctly Swizz banks.

Swizz. ---- “ a great disappointment.” or a “ fraud.”

Fraud. ---“ an intentional deception or dishonesty.”— “a crime.”

Crime. ---“ an act committed or omitted in violation of a law.”

Serious Crimes .

Conspiring to pervert the Course of Justice.
Perverting the Course of Justice.
Contempt of Court.

The Establishment “ Cover up crimes”.

The ‘Doyens’ of the establishment.’ ( Ivan Pictet and Monty Raphael.)

May. 15 2009 06:21 AM

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