How to Solve the Toxic Asset Problem: Give Them to Bank Executives as Bonuses

James Kwak has the best idea I"ve heard this week: solve the toxic asset problem by give those assets to bank executives as bonuses.

As Kwak writes:

Why not say that all bank compensation above a baseline amount - say, $150,000 in annual salary - has to be paid in toxic assets off the bank�s balance sheet? Instead of getting a check for $10,000, the employee would get $10,000 in toxic assets, at their current book value. . . . That would get the assets off the bank�s balance sheet, and into the hands of the people responsible for putting them there - at the value that they insist they are worth . . . think about the incentives: talented people will flow to the companies that are valuing their assets the most realistically (since inflated valuations translate directly into lower compensation), which will give companies the incentive to be realistic in their valuations.

Of course, there"s an argument that the executives" base salary should be paid in toxic assets as well. Since these fatcats don"t seem to be motivated to run their companies well so as to save the economy and the people, maybe having their own salaries on the line will motivate them. But if you believe that is too harsh, at least demand that their bonuses be paid in this way.

Update: Apparently, Credit Suisse is already doing this.

Share this idea with your elected officials in Washington.