Sunday, November 16, 2008

The Carlyle Group Stamp of Viability

A number of storied Wall Street firms watched their stock prices plummet after getting money from Hank Paulson's Financial Rescue Program (FRP). Ex-Deputy Secretary of the Treasury and Carlyle Group managing Director Randall Quarles spoke to this issue.

“Institutions are realizing that in this environment they do need to anchor confidence, and I don’t think that a TARP capital injection will be found to be a useful anchor of confidence,” Randal Quarles told a gathering of Wall Street executives last week. “I think that people will realize soon enough that the government is simply not set up in such a way that the allocation of TARP capital can be an effective signal of viability or future merit.”

Will direct capital injections morph into indirect ones? Will TARP money pass through an intermediary, one that gives markets more confidence? Would The Carlyle Group like to serve in such a role?

Access to borrowing is severely restricted, at least that's a common theme in a Hong Kong meeting of private equity underwriters (PEU's). Will Carlyle, a politically star studded PEU, use the Treasury window as it's deal funder?

Hank recently hinted at partnering with the private investment community. How might that benefit the Carlyle Group and their Kentucky Derby like stable of political insiders?

The federal government has a $3.8 trillion sovereign debt fund to manage. Our denuded democratic institution contracts out most functions. How might the new federal deficit investment program be managed by the private sector? Will Carlyle get their management fee plus the opportunity to continue their string of 30% annual returns on investments?

I feel another Hank Paulson lurch coming. One thing is clear. The big money boys will benefit.