Credit Suisse demonstrates that not all bankers lack moral character. The New York Times reports that Credit Suisse compensates its Lehman investors.

Credit Suisse Compensates Its Lehman Investors
By THE ASSOCIATED PRESS
Published: January 25, 2009

ZURICH, Switzerland (AP) -- Credit Suisse Group said Sunday it has paid around 100 million Swiss francs ($86.7 million) in compensation to 2,000 clients who lost money in collapsed U.S. investment bank Lehman Brothers.

Most of the beneficiaries received the money in the third quarter, said spokesman Jan Vonder Muehll, confirming reports by the weeklies NZZ am Sonntag and Sonntagszeitung.

Only 11 clients declined to accept the money, Vonder Muehll said.

Switzerland's second biggest bank compensated clients who had half or more of their investments with Lehman Brothers and whose total investments were less than 500,000 francs ($433,700) he said.

He declined to say how the level of compensation was worked out.

''We've looked at each case individually,'' he told The AP.

Lehman -- once the fourth-biggest U.S. investment bank -- filed the biggest bankruptcy in U.S. history in September.

This isn' t the first time Credit Suisse has shown more moral character than its rivals. Last year, the Wall Street Journal reported that Credit Suisse gave its bankers an unusual plan for bonuses.

Credit Suisse Gives Bankers Unusual Plan for Bonuses
DECEMBER 19, 2008
By HEIDI N. MOORE

Some Credit Suisse Group bankers were left reeling after the bank said it would pay a substantial percentage of their 2008 compensation with an illiquid group of junk bonds, mortgage-backed securities and corporate loans.

The move Thursday represents a radical revamp for the Swiss bank, which posted as much as $4.6 billion in losses so far this year, a number that could increase when it announces full-year earnings. For years bankers had received about half their compensation in cash, and the rest in stock.

This year, up to 80% of the stock portion will come via what Credit Suisse is calling a "Partner Asset Facility," of the illiquid assets, largely corporate loans. The bank categorizes 90% of the assets as "performing," which means Credit Suisse believes the loans will pay out over time.

Bankers won't receive a return on the PAF program for eight years, although they can start to collect some of the principal in 2013. If the firm finds outside buyers for the assets, it will pay the proceeds to itself first, then provide the rest to employees.

The PAF applies only to senior bankers within the firm's investment bank, which includes merger advisory, capital markets and leveraged finance. Those in Credit Suisse's private bank and asset-management division aren't subject to the PAF.

The announcement elicited livid reactions from senior bankers, many of whom questioned whether it was legal. Many said they believed they were being unfairly punished for risky assets bought by colleagues in distant parts of the firm. And while the securities may prove lucrative over time, many bankers are already stretched for cash.

"I did not lose one penny for this firm this year," said one senior banker who advises on mergers and acquisitions. "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."

Credit Suisse told employees the move was necessary to help the bank reduce its pile of risky assets. It also wanted to show shareholders and regulators that the bank is taking the credit crisis seriously, and to provide at least some compensation in lieu of otherwise meager payouts.

Gary Goldstein, founder of Wall Street recruiting firm Whitney Group, applauded the move and said it could turn out to be a smart investment. "Take the emotion out of it, step back and assume there are pretty smart people putting this together," Mr. Goldstein said he advised bankers. "Everyone thinks cash is king, but firms don't have cash right now."

My reaction: Credit Suisse' s actions make its rivals look bad, especially Merrill Lynch, Bank of America, and Citigroup. It also shows that banks did have an alternative to giving huge, taxpayer-funded cash bonuses to their bankers.