Subscribe to this blog's feed...at Merrill Lynch, which has unilaterally improved the terms on its LYON puttable convertible notes to prevent having to make up to $2.2 billion in redemption payments - it's increased the conversion rate, essentially sweetening its bondholders with its shareholders' money.
...and at Fannie Mae, where CDS have gone well over 200 (despite a government guarantee!) and spreads on its mortgage backed bonds are at 237bp - the markets are "utterly unhinged", one banker tells Bloomberg,m and there are rumours of the "mother of all writedowns" at the agency.
And Calculated Risk keeps its fury under control surprisingly well on reading this news:
WaMu has revised its bonus plan for nearly 3,000 top executives so continuing damage from the subprime-lending collapse won't crimp their annual awards.The struggling Seattle-based lender said in a regulatory filing Monday it will exclude the cost of soured real-estate loans and foreclosure expenses when it calculates net operating profit, the biggest component of executives' 2008 bonuses.
The original filing is here. And, sure enough:
...For the 2008 Bonus Plan the Committee selected the following performance measures and relative weights: The Company’s 2008 net operating profit, weighted at 30%, calculated as operating profit before income taxes and excluding the effects of (i) loan loss provisions other than related to our credit card business and (ii) expenses related to foreclosed real estate assets...
WaMu makes the entirely valid point that, if you include the cost of all those mortgage loans going bad, then the bonus pool will be a lot smaller, and so it will be more difficult to retain their executives.
Well, yes. That's the point.
