Tuesday, October 14, 2008

Carlyle Group's Arthur Levitt to Testify on Credit Meltdown

The Senate Banking Committee announced a hearing to examine the turmoil in the credit markets. The hearing will take place on Thursday, October 16th. Witnesses include Arthur Levitt, Senior Advisor for the Carlyle Group, among other financial experts.

Will ex-SEC chair Levitt mention greed or leverage as causes? Carlyle prides itself on both. They cite their historic 20-25% annual returns for investors. They leveraged Carlyle Capital Corporation 39 parts borrowing to 1 part equity. It imploded this past Spring.

Ex-IRS Chief Charles Rossotti also works for Carlyle. His prior testimony in front of the Senate Finance Committee recommended a 25% corporate income tax and 8.25% capital gains rate. John McCain's campaign promises mirror that request nicely, only John lowers capital gains taxes to 7.5%.

Will the private equity boys indict their selfish management practices? When America optimizes part of the system, it suboptimizes the whole. Private equity's greed is insatiable. Like all extrinsic motivators, it cannot be fulfilled. But they will use their insider political influence to get their way....