Someone at Credit Suisse has a wicked sense of humor

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It really is a thing of beauty (via Bloomberg):

Credit Suisse Group AG’s investment bank has found a new way to reduce the risk of losses from about $5 billion of its most illiquid loans and bonds: using them to pay employees’ year-end bonuses.

The bank will use leveraged loans and commercial mortgage- backed debt, some of the securities blamed for generating the worst financial crisis since the Great Depression, to fund executive compensation packages, people familiar with the matter said. The new policy applies only to managing directors and directors, the two most senior ranks at the Zurich-based company, according to a memo sent to employees today.

“Monstrously clever,” says financials analyst Dirk Hoffmann-Becking. Credit Suisse moves along impaired assets and reduces its own risk exposure while at the same time handing out bonuses without the now-requisite public outrage. The assets will be put into a new fund and employees will be given units—if asset values make a comeback, the pay-off could be handsome. Though if there are further losses, bonuses take a hit. Almost like incentive-based compensation, eh?

It all seems so smart. Well, except maybe for this part:

Outside investors may also be permitted to invest in the facility, according to the people familiar with the matter, who declined to be identified because the plan hasn’t been made public. The bank will boost the potential for returns by providing leverage to the facility, and will be paid back first, according to the people.

Levering up mortgage-backed debt to boost returns… Yeah, that doesn’t seem smart nearly as much as it does spookily familiar.