Please welcome Sridhar Iyer back after a long time. He is a financial industry expert, working for the company that loves urban landscapes – Sukumar

“It’s mayhem out there,” cries the CDO trader to a fat cat investor on a long distance phone line. We could get 20p to a dollar if we are quick and lucky. The client shudders “ I am already down 20MM, and this will wipe me out ”. “Things could get worse. It is best to close positions now. DB is offering 18.6, MS 19 and Merrill only 17.2. 20p is a great price, given the state of the market ” pearls of wisdom on recorded lines travel through fibre optic cables across continents. The trade is booked, the deal is done and the market crashes even further.

And as if to console that far away investor, FT headlines cry out the next day “ Chuck(ed) out – Citi fires CEO ” followed by another lyrical one “O’Neal exits Merrill ”. New phrases are added to the financial services lexicon and bandied about by every expert worth his salt – credit squeeze, liquidity crunch, the balance sheet impact of a low tier one capital, sovereign funds …… . .. If you are not predicting recession, you are definitely not in vogue. Fed cuts interest rates, stock markets plummet, job cuts all over.

Given this scenario, you would think that the financial services industry was in deep turmoil .It is time to tighten belts and see through this difficult period. Well, not quite. That , certainly is not the signal if one were to go by the bonuses that have been handed out to the big shots this week – both to current and former bosses.

Chuck made $94 MM as farewell gift from Citi and O’Neal showed what a good negotiator he was by plucking out $150MM from Merrill. Chuck’s successor, at Citi made a healthy $28MM for 2007 , and the new head of the of Citi’s fixed income division ( which caused all the write downs) a cool $22MM.

But surely, a whole bunch of traders and analysts were fired and they bore the pain. Fired, yes. But pain ? That’s a different story . Look at this career model – a crisis like the present one, occurs once in 5-6 years and lasts at best for a year. The last one occurred in 2001 and was followed by 5 years of undiluted prosperity. In a decent year, an average trader makes a modest $0.5 to 0.7MM. So while the good years last , the kitty fills up pretty quickly. Will s/he complain, if in order to calculate the new average pay for all 6 years, nothing incremental is added to the numerator ?

But what about their reputations, loss of face? Here is a secret – a trader’s worth in the job market goes up with the number of down turns he has managed – whether in the job or out of it. And if nothing else, most top business schools offer great 1 year programs, which will help change career paths.

So who lost out and who gained? – Consumer banks, that wrote off substantial portions of mortgage loans to the sub-prime segment (an estimated 200$Bn) especially in the US made big losses. The CDO crisis, though, is a zero sum game. There are winners and losers who balance each other out. Citi, Merrill and the other big banks, which betted on sub prime lost heavily while Goldman Sachs and numerous hedge funds profited to the same extent. The hedge fund owners who made billions, must be wondering what this furore is all about. One thing is for sure though, the traders and investment bankers, who precipitated the crisis certainly did not lose out. They never do.

So why are you not a trader? Well, that is another long story.