Dec. 19th, 2008

peterbirks: (Default)
Not content with being one of the first places to see mention of a government-run "Bad Bank" (copyright G Challinger, sometime late last year), I think EHAL can also now lay claim to being one of the first to print mention of the fundamental disconnect between the bonus system for people working in the financial sector and the underlying reality (copyright M Woodhouse, early 2008).

Well, lo and behold, Crédit Suisse has listened. Part of bankers' bonuses are to be linked to a $5bn portfolio of illiquid assets -- for which read, stuff which has a mark-to-market value of far less than the estimated maturity value.

The FT notes that the new scheme "could face opposition, especially from bankers who were not involved in mortgages or leveraged loans".

To which, of course, there are two easy responses. The first is "life isn't fair" and the second is "perhaps you would care to go and work at Lehman Brothers?"

The brilliance of the CS proposal is not just that it actually ties some of these employees into a bonus system that depends on real profits rather than fictional end-of-year figures, but also that CS avoids any further writedown liabilities on those assets, because the risk is shifted to the bonus scheme. Thus we have an almost unique commodity in the banking system. One that is subtle, clever, and just. The top two management grades at CS won't get any payments on the capital of this stuff for five years, and the bulk of it after eight otr nine years -- precisely, indeed, what Mikey was proposing much earlier this year.

When times get good again, I'm sure that the irrational bonus system will return, but at least, for the moment, banking employees are actually going to have to earn bonuses on real profits.

++++++

Went to see Robert Bathurst as "Alex" last night in that small theatre where I went to see the Round The Horne tribute. Mr Young, who suggested that we go, said that he saw it last year and that it was very good. He seemed to be assuming that it would be a new show, whereas in fact it was just a retread of the show he saw last year. So I got the full value of a new show, while he paid twelve quid for a repeat. Pwned.

Atter that I actually ventured into a live game at the Empire for a couple of hours -- during which I saw precisely two flops and no turns or rivers. Game of patience, this live stuff.

It would have been better to turn up an hour or so earlier, because two loopo Chinese lasted precisely two hands and 10 hands before going broke (or nearly going broke and then staging a recovery) and then fucking off. The second Chinese put in about £250 in a multi-wayer (with one player all in) on a board of 9873 with AT off. When I tell you that the live counterparty was a Mr DY of Fulham, you will doubtless be able to guess the ending. DY had a set of eights, all-in player had JT for the flopped straight, and a Jack came on the river. Live poker eh? Fixed I tell you.

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