While Merrill staggered, 11 top executives were paid more than $10 million in cash and stock last year, say people familiar with the situation…”
—The Wall Street Journal, 4 March
Simon Crashenburner, CEO of the floundering Wall Street bank CrookesTheeves PanAmerica (CTPA), had a spring in his step as he walked into his cavernous office on the 36th floor of the Crookes House building in Manhattan. The time is sometime in late 2008 and CrookesTheeves was bang in the middle of the spiralling subprime mortgages crisis that is engulfing Wall Street.
As Crashenburner stepped out of his personal 2,300 sq. ft. (built-up) lift complete with mini-bar, he received an update on his BlackBerry that Goldman Sachs had just downgraded CrookesTheeves stock to “No. Not even with a bargepole” status. In any other economy this would have been sufficient for Crashenburner to go into an almighty funk. With millions of dollar worth of CTPA stock in his name, this announcement could destroy most of his personal worth, and that of many of his top lieutenants.
But these were not usual times. All around him other top banks were floundering—except Goldman Sachs, of course, nothing ever happens to those guys—and stock downgrades were commonplace. In the last three months alone he had seen CTPA stock ratings go from “Totally awesome!” to “We have a bad feeling about this” to “Only if that Saudi prince also buys” to now “bargepole”.
Most analysts had written the bank off and employees downstairs were already beginning to smuggle the smaller art objects and miniature paintings strewn around the lobbies and trading floors, just in case. (Crashenburner himself conveniently “forgot by mistake” a CTPA Gulfstream seven-seater corporate jet at his farmhouse last weekend, containing all the petty cash.)
Yet Crashenburner was nonchalant. That’s because the veteran Street operator had a plan up his sleeve that would solve all his problems. And to kick that plan into operation he made sure that 15 of his senior-most executives were already waiting for him in his office when he reached.
As soon as he had settled into his chair behind his desk and taken off his jacket, Crashenburner began to speak:
“As all of you are no doubt aware, especially (rolling eyes for emphasis) Michael who is incharge of our mortgages business, CTPA is merely days away from shutting shop. We are losing millions upon millions of dollars each day and if things continue the way they are, our closure is imminent. Michael…are you listening to me? Stop fiddling with your Berry, will you please?”
“Sorry Simon. I just need to send an email to my team to tell them to ignore the downgrade, assume all is well with CrookesTheeves, and carry on with work as usual. The children tend to get agitated by all this.”
“Oh yes, yes. I do not need to remind all of you that with respect to underlings our policy remains: ‘Tell them nothing till the court-appointed liquidators have to’.”
Everyone nodded solemnly.
“So now that CTPA is the laughing stock of the Street…”—Crashenburner paused for a few giggles at his astute punmanship—“…I have come up with a plan to salvage the situation.”
“Earlier today I spoke to the CEO of Boring National Bank (BNB). For years they have desperately tried to break into corporate and investment banking hoping to diversify their businesses. But mainly because consumer banking bonus pools are laughably small. I have now asked BNB to look at a possible buyout of CTPA.”
The assembled crowd exploded with questions.
“Calm down. Your bonuses and compensations are the most important but secret components of my plan…”
Silence suddenly descended on the room like the S&P 500 over last week.
“My plan is this: BNB will take over CTPA in an all-share deal by the end of the year. No one in the media or government will oppose the deal. They will think that it is a desperate attempt by CrookesTheeves to save the firm. A more honourable end than the poor sods at Lehman surely.”
Nods all round.
“Under the cover of this deal I will then ensure that all of you will receive your bonuses and salaries. Some of us senior members will publicly renounce our bonuses as a sign of solidarity with the firm and with the McCain government. However, in reality, our bonuses will be paid out to all of you in equal amounts to be reclaimed at a later date. To ensure this James in HR has confiscated your passports and your first-born. Later when Boring National Bank scrounges for bailout funds, no one will even know what happened.”
“Now if you will all go and reassure your teams, I need to call in at CNBC and deny all Street rumours of an imminent sell-out.”
Cubiclenama takes a fortnightly look at the pleasures and perils of corporate life. Your comments are welcome at email@example.com