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Explaining the Cash Considerations Craze

How did a series of trades for no-name players help the Rockets circumvent league salary cap restrictions and land Chris Paul?

(Getty Images/AP Images/Ringer Illustration)
(Getty Images/AP Images/Ringer Illustration)

If you pay attention to the NBA exclusively by following the league’s transaction wire, Wednesday must have been one of the strangest days you’ve ever witnessed. Early in the afternoon, the Trail Blazers traded Tim Quarterman to the Rockets for cash considerations. Then the Pistons traded Darrun Hilliard to the Rockets for cash considerations. Then the Mavericks traded DeAndre Liggins to the Rockets for cash considerations. Then the Hawks traded Ryan Kelly to the Rockets for cash considerations. And the Sixers traded Shawn Long to the Rockets for cash — and a 2018 second-round draft pick, because the spirit of Sam Hinkie will never die, and because nobody will ever out-process the Sixers. The Sixers laugh at those who believe their so-called "money" is more valuable than second-round draft picks.

Teams had fun with this trend on social media, happily celebrating their new … players.

If you analyzed each individual trade — as at least one diligent breaking news blogger tried to do — they seemed silly. Why was Houston hoarding players most fans had never heard of? Did general manager Daryl Morey discover the new market inefficiency is guys who kinda suck? Were they building the world’s worst superteam?

The short answer is that Chris Paul decided he wants to play with James Harden. Perhaps the pair assumed Paul could make that happen by simply signing with the Rockets, as Paul’s upcoming free agency loomed. But with Houston already over the salary cap, the franchise couldn’t sign Paul to a reasonable contract.

The league’s best players have become more powerful than ever in terms of dictating where they’ll play, yet it’s the league’s GMs who orchestrate the maneuvers that allow them to play together within the NBA’s salary cap structure. And while there’s a chance you find the next few paragraphs really interesting, there’s also a chance you find them boring, because they’ll get into the nitty-gritty details of a complicated document agreed upon by lawyers and accountants. So if you think you’ll be bored, skip ahead to the GIF of an otter dunking a basketball.

Still with me? OK, so here’s how it worked. First, Paul opted into the final year of his contract with the Clippers, a move that would have seemed strange on its own given that most of the league had presumed he would opt out. This allowed the Clippers to trade him to the Rockets — great news for the Clippers, since they got something in return for their departing superstar, and great news for the Rockets, since NBA teams can acquire players with salaries that would put them over the cap so long as the salaries they receive are less than or equal to 125 percent of the salaries they export.

But the players Houston was willing to give up in the deal — Patrick Beverley, Sam Dekker, and Lou Williams — had a combined salary of $14.3 million. Paul’s 2017–18 cap hit — after a clause that increases player salaries up to 15 percent if they get traded — is $24.6 million. To make the trade work, the Rockets had to ship off at least $20.5 million.

Finding assets to fit that equation was difficult. Including a player like Eric Gordon or Ryan Anderson in the deal would blow the negotiations to smithereens — beside the fact that it would throw off the basketball calculus of the trade, their respective $12.9 million and $19.6 million salaries would put the Clippers on the wrong end of the desired 125 percent balance and leave them on the hook for tens of millions of dollars in future years. Including end-of-the-bench players like Montrezl Harrell and Kyle Wiltjer (salaries of $1.5 million and $1.3 million) wouldn’t do enough, and the Rockets didn’t have enough of those guys to lump into the trade to even out the finances.

So the Rockets sought players who were (a) under contract for next season and (b) had nonguaranteed salaries, thus allowing the Clippers to take them on without seriously hampering their other personnel plans. These players were likely to be cut by their previous teams anyway — it didn’t really matter to the Blazers whether they dealt Quarterman or this sea otter from the Oregon Zoo whose handlers taught him to dunk a basketball:

Everybody back? Good.

To summarize: the Rockets bought a bunch of players so they could include enough salary in the trade to get Chris Paul. It was particularly inventive GMsmanship from Morey, who is far from the first GM to use cash to complete a deal or to treat players as throw-ins to make salary figures work but took both concepts to the extreme to engineer a move that could push his team closer to challenging the Warriors in the top-heavy NBA.

This phenomenon has to be weird for the players involved. I’m sure they knew they weren’t priorities for their teams. But to be traded not because of basketball value, but because of salary — and specifically the fact that their salaries don’t actually have to be paid?

This is essentially money laundering. The Rockets wanted to create a cap situation that rules indicated they shouldn’t be able to have. So they paid middlemen to make everything look clean. Hilliard is a shell corporation: On paper, he will get paid $1.47 million next year, making the Paul deal possible. In reality, the Clippers can cut him and never pay him a dime.

The NBA knows this is weird, and this is the last time a team will be allowed to do this: According to "capologist" Eric Pincus, the new collective bargaining agreement, which kicks in on July 1, will prevent teams from using nonguaranteed salaries as countable money in trades. And we know this is weird. We spend most of our lives acquiring things for cash considerations — I have tentative plans to acquire a chicken burrito for cash considerations from the Mexican spot across the street from my house in a few hours; it’s a move that makes sense for both parties, as I want the burrito and the Mexican spot wants my cash. (I think that burrito might push me over the calorie cap, but luckily I don’t care.) But that’s not how we want NBA teams to operate. When the Blazers and Sixers jokingly tweeted about the situation, they were playing off how strange it is for teams to make trades for money when all fans really want is for them to make trades that will help them get better at basketball.

Recently we saw the largest cash deal in NBA history. Teams are allotted a certain amount of cash per year to use in trades — a number that increases each year; this year it was $3.5 million — and they’re not allowed to use trades to buy first-round picks. So the Warriors used the entirety of their $3.5 million allotment to buy an early second-round pick, Jordan Bell, from the Bulls. There has been a lot of criticism of Kevin Durant in recent weeks claiming that he took "the cheap way out" to create a superteam and win a title with the Warriors. Instead of bashing KD, we should ridicule the Bulls for being cheap, helping that superteam become even more super for no reason other than their wealthy owner’s financial gain.

This line of thinking doesn’t fully apply to the Rockets’ trades. There are tons of players around the league with salaries that could have made the Paul deal work. Some team was going to give up those players — it might as well take Houston’s cash and curry favor with another GM if all it has to do is give up a guy it didn’t really want anyway — and it was unlikely the entire league would collude to stop the Paul-Harden conglomeration. (The Rockets would have to split that $3.5 million between all the teams they traded with, so the sum per team would be significantly lower than the Bulls’ payday.)

As of Wednesday, it seemed as if the Rockets had overestimated how much salary they’d need to finalize the trade with the Clippers. They only included Liggins and Hilliard in the package for Paul, holding onto Quarterman, Kelly, and Long. But it’s possible more dealings are afoot: On Thursday afternoon, the Mavs shipped Jarrod Uthoff to Houston’s cash considerations dream team. The Rockets’ plans to turn players with fictional value into superstars may not be done yet.