Saturday, November 29, 2008

Jeb's New Boss?

Lehman Brothers' investment management business had two famous employees when the firm sank beneath the asphalt of Wall Street. President Bush's brother Jeb worked for Lehman's private equity group, while cousin George Herbert Walker was global head of investment management.

Lehman was the fourth-largest investment bank before it filed the biggest bankruptcy in history Sept. 15 with $613 billion in debt. The fire sale price of Lehman's Neuberger Berman investment division was a mere $2.15 billion. That price may not hold with imploding financial markets. Auction bids are due December 1st.

Bain Capital planned to become part owner, but The Carlyle Group challenged the sale. Where will Jeb and George Herbert Walker land for Christmas? Will The Carlyle Group find two more Bushes under their Christmas tree? Stay tuned... (Update: Carlyle did not place a bid)

Thursday, November 27, 2008

Carlyle Group Invests in Recession Proof Chinese Private Education

The Carlyle Group invested $50 million in Hao Yue Education Group, a Chinese for-profit educator. Reuters reported:

The Washington, D.C.-based private equity giant said the investment was funded by the Carlyle Asia Growth Partners Group and would support Beijing-based Hao Yue's plan to boost enrolment through campus expansion and acquisitions of other private vocational schools.

The deal comes after Carlyle, which had $91.5 billion of assets under management committed to 66 funds at the end of September, last year invested $20 million in Topia Education, which runs tutoring institutes in South Korea.

Private equity firms are increasingly investing in the fast-growing private learning sector, betting that the obsession of many Asian parents with their children's education will make it recession-proof.

Will they teach students about producing quality goods and services? America's innovative financial products and Chinese infant formula proved toxic. It's unclear how either market will recover from such poor quality production.

Let's hope Carlyle does better with for-profit education than they did with Carlyle Capital, Blue Wave Partners, SemGroup, and patients in their New Orleans LifeCare Hospital after Hurricane Katrina struck.

Wednesday, November 26, 2008

FDIC Looks to PEU's to Buy Failed Banks?

Bloomberg reported an FDIC decision could open the door for private equity underwriters (PEU's) to buy failed banks. NYT's Dealbook stated:

The Federal Deposit Insurance Corporation is widening its search for buyers of failed banks.

The agency said Wednesday that it would allow qualified parties without bank charters make offers to acquire the deposits and assets of failing institutions. The decision comes a day after the F.D.I.C. reported that bank failures rose 46 percent in the third quarter, to 171.

“The F.D.I.C. is responsible for ensuring that failing institutions are resolved in a manner that will result in the least cost to the Deposit Insurance Fund and minimal disruption to the financial system,” the agency said in a statement.

“In order to achieve this result, the F.D.I.C. markets the deposits and assets of a failing institution to known, qualified and interested potential bidders,” it said. “The F.D.I.C. recognizes that investors not organized as an F.D.I.C.-insured depository institution or holding company may potentially be interested in bidding to purchase a failing institution.

Sean Ryan, an analyst at Sterne, Agee & Leach, told Bloomberg that the rule change could encourage private equity firms to buy banks.

The Carlyle Group has a $14 billion fund nearing close. With $1 billion in TARP money, Carlyle could put $15 billion to work buying those banks. Aren't there ownership percentage restrictions? They were recently increased from 28% to 40%. Have they gone higher in all the rescue machinations?

Carlyle Group Raises $14 Billion yet Needs TARP Money

The Carlyle Group raised nearly $14 billion for their latest buyout fund. The Washington based private equity underwriter (PEU) needs another billion or so to close out the offering. Will Hank Paulson provide the final amount from his TARP?

The fund's openness helps explain why $153 million in taxpayer money was needed to boost Carlyle affiliate Boston Private Financial Holdings. The investment firm caters to the "high net worth marketplace". And they need loans, on the taxpayer's back?

Rest assured The Carlyle Group will make out like bandits from the $5-7 trillion financial rescue and the upcoming $500-700 billion stimulus plan. Surely, the taxpayer can do his part to get Carlyle back on track to 30% annual returns.

Monday, November 24, 2008

Greed Killed Investing

CNBC's Rick Santori said the big money boys did their part to create the rotating crisis of confidence in storied financial firms. Big banks and Wall Street firms took turns buying credit "insurance" (credit default swaps) in a weak kneed firm. Subsequently, they shorted the stock. This practice is akin to secretly buying insurance on your neighbor's house and burning it to the ground.

Instead of prosecuting the likes of CitiGroup, Morgan Stanley and Goldman Sachs, Uncle Sam opened up the Treasury vault. Hank Paulson repeatedly puts tens of $ billions of taxpayer money into the pirating entities.

Greed overran the system. Firms jettisoned quality in pursuit of extrinsic motivators. Commissions/fees encouraged realtors to sell homes, mortgage writers to accept almost any applicant with little information, and rating agencies to give investment pigs triple A ratings. Executive incentive compensation encouraged excess leveraging and the packaging/selling of investment junk via derivatives and securitizations.

Derivatives are financial bets on a future event. Credit derivatives were intended to provide peace of mind to a firm's bondholders, only CDS buyers don't have to hold the bond. Accounting rules enabled companies to keep most of their derivative obligations "off balance sheet." This makes it difficult for a shareholder to get an accurate financial picture of the publicly traded company.

The "mark to market" accounting rule was intended to improve financial statement accuracy. It arose in a time of rapidly rising asset values. It required companies to value their financial assets at market value. Financial firms wanted it in a time of rising assets. They could borrow more, keeping the same high relative leverage. The accounting change turned into a razor when assets declined.

Our elected leaders look to stop "mark to market" accounting. They do so to save our imploding financial system. While it may work, Wall Street and big banks killed investing. Balance sheets can longer be trusted.

It takes a long time to build and grow a market. Poor quality can kill it overnight. Ask Johnson & Johnson about their poisoned Tylenol crisis. Imagine if everyone in the acetaminophen retail chain behaved similar to America's storied financial firms. The pain killer would be off the shelf.

J&J did the right thing. Their product is still for sale.

Sunday, November 23, 2008

CitiGrab Goes for Taxpayer's Wallet Again

A capital injection of $25 billion wasn't enough. The promise to jettison 52,000 jobs didn't assuage the market. CitiGroup's stock is in free fall. The diversified financial firm needs $50 billion more.

While Congress turns a blind ear to pleas from jet setting auto execs, CitiGroup only has to return to Hank Paulson's TARP window. Congressional committees berated Big Three CEO's for their inability to adapt to change. The three companies propose to split $25 billion in bridge financing.

Citi may get twice that amount, after ingesting $25 billion last month. That's some burn rate. But wait! Executives say they have a robust capital position. CEO Vikram Pandit told employees the company did not want to change its business model.

Is anyone else confused? Change, won't change? $25 billion here, $50 billion there? If we give CitiGrab $50 billion more, does that mean another 100,000 employees will be laid off?

Saturday, November 22, 2008

Carlyle Group's Next Stop, Libya?

The Jamahiriya News Agency published a curious report on thawing U.S.-Libya relations. They cite a missive from President Bush to Saif al-Islam Muammar al-Gadhafi, the son of Libya's notorious leader. National Security Adviser Stephen Hadley delivered the message, alongside David Welch, Assistant Secretary of State.

The article highlighted a Tuesday evening dinner in honor of Muammar's son. The Carlyle Group hosted the event at the Washington Club. The Libyan reporter butchered the names of influential Reagan officials, but one could deduce James A. Baker, III and Frank Carlucci attended, in addition to the State Department's David Welch.

Saif met with thirty one Senate and House members during his trip. The story ended with:

Former and present US officials welcomed the visit of Saif al-Islam Muammar al-Gadhafi and expressed a keen interest in developing American-Libyan relations.

JANA learned US officials informed Saif al-Islam Muammar al-Gadhafi of the desire of the American side to sign a package of cooperation agreements with Great Jamahiriya in the areas covering prevention of double taxation, ensuring and promoting investment, trade exchange and cultural cooperation.

They also expressed desire to operate direct flights between US and Great Jamahiriya. JANA also learned that meetings of Saif al-Islam Muammar al-Gadhafi with US officials in Washington stressed on the need to facilitate granting entry visa and residency to Libyan students and nationals and easing travel within US airports.

U.S. Corporacrats and their sponsors work to open up Libya to American investment. History shows it will be on their terms. Was that part of Secretary of State Condoleezza Rice's message in their Thursday visit? Or did President Bush relay it in his phone call to the elder Gadhafi last Monday?

Update 3-7-11:  HuffPo reported David Welch left his State Department post in 2009 to take a job with Bechtel, the construction giant which later opened its first office in Libya since the 1960s and helped build a massive power plant east of Tripoli, Libya's capital city. Welch, who is the president of Bechtel's Europe, Africa, East and Southwest Asia region, did not return a request for comment. Yet another glimpse of the Government Corporate Monstrosity (GCM), Eisenhower's MIC on steroids....  

Carlyle's Quarles Votes for Geithner

Randall Quarles gave two thumbs up for President elect Obama's Treasury nominee, Tim Geithner. Quarles is an ex-UnderSecretary of Treasury and heads up The Carlyle Group's financial portfolio. He recently landed $153 million from Hank Paulson's TARP for Boston Private Financial Holdings. The On Wall Street reported:

"He's a very strong choice for some very specific reasons," said Randal Quarles, managing partner of Carlyle Group and a former Treasury undersecretary in the Bush administration. "He has a wealth of experience at the Treasury and Federal Reserve. He's been intimately involved in dealing with the financial crisis. And before the financial crisis he was very thoughtful and involved in trying to reduce some specific risks in the system."

How will Quarles' kind words translate into future capital injections? Will Tim prop up any past deals with taxpayer recapitalization? Will Geithner put up Treasury funds in joint venture deals with Carlyle, sold to the public as "private matching funds"? Stay tuned...

Friday, November 21, 2008

Carlyle Group Looking to Change its Luck

What could be luckier than owning part of The Bank of Ireland? Carlyle, a politically connected private equity underwriter (PEU), is in heated discussions to buy up to 40% of the bank for $2.5 billion. The Irish government already guaranteed bank liabilities of 370 billion pounds.

The Emerald Isle has leprechauns guarding pots of gold at the bottom of rainbows. While the sun isn't shining yet in our global economy, The Carlyle Group sees better days ahead. When the sun comes out, the gold hunt begins. How many little people will be slaughtered in process?

The big money boys don't like a level playing field, as they pursue super profits. Carlyle expects 30% annual returns. The Bank of Ireland can access cheap central bank money. Will they pass that through to Carlyle? Will the PEU gain a captive bank, one that can fund their deals?

Carlyle needs their luck to change after Carlyle Capital Corporation, BlueWave Partners, and SemGroup failed and the Russian firm dropped their $3.5 billion bid for steel maker John Maneely. Will Irish equity improve their luck? It may have turned with $153 million in U.S. taxpayer funded capital for affiliate Boston Private Financial Holdings. Which streak will continue?

Thursday, November 20, 2008

Paulson Speaks from Treasury's Rear Window

Hitchcock like fear is back in a big way on Wall Street. The flight to safety reached the stratosphere as people flocked to low yield Treasury bills. The Dow Industrials tanked 444 points, imploding to levels not seen since Bill Clinton's second term.

Most of the deterioration occurred after Treasury Chief Hank Paulson spoke from the Ronald Reagan Presidential Library. Market stress clearly continues after $4.28 trillion in federal interventions. Credit default swaps for Warren Buffet’s Berkshire Hathaway reached 500. In other words, people are thinking the previously unthinkable. Systemic risk is baaack.

The big money boys still don't trust each other to make good on their debts. Crisis remains on the table. That means more taxpayer funded Corporafornication. It's amazing what they can get away with, especially when the public is scared.

Taxpayer Invests Alongside Cerberus Capital & Carlyle Group

Current Treasury Chief Hank Paulson's sovereign debt fund will buy a piece of two private equity affiliates, GMAC and Boston Private Financial Holdings. GMAC is majority owned by Cerberus Capital Management and lead by ex-Treasury Chief John Snow. The financing firm applied for bank holding company status. That designation enables GMAC to receive Treasury funds via the capital purchase program.

Yesterday, Boston Private Financial Holdings announced approval by for $153 million in taxpayer investment through preferred stock and common stock warrants. BPFH is an affiliate of The Carlyle Group.

Private equity underwriters (PEU's) are rumored to have billions on the sidelines, waiting for values of financial firms to fall. If they have so much money, why is the taxpayer propping up their existing businesses? Are we doing so at below market rates? I think I smell a PEU.

Wednesday, November 19, 2008

Tax Cheating UBS Keeps Spot on Bush's SIPC

Swiss bank UBS illegally helped 19,000 wealthy Americans avoid $2.1 billion in taxes from 2000-2007. In 2005 an internal whistle blower wrote UBS executives and the bank's general counsel about the scheme. The New York Times reported:

Senior executives were alerted at least three years ago to possible violations of securities laws in dealings with American clients of its private bank. The letters cast a spotlight on the senior executives who were copied on them, including Marcel Rohner, who led the bank’s global wealth management unit and has been chief executive since 2007, and Peter Kurer, the bank’s former top lawyer, who is now its chairman.

Who did Marcel and Peter involve in their internal investigation? Did they inform Vice Chair Phil Gramm? Did either ask Mark S. Shelton for assistance?

Mark S. Shelton is managing director and general counsel, Wealth Management US, and co-global general counsel, Global Wealth Management & Business Banking, UBS. He joined UBS in May 2003 and is responsible for over 400 lawyers, compliance officers, and other professionals. The US Legal and Compliance Departments provide advice, surveillance, and training services, and act as control functions, for the Wealth Management businesses located in several broker-dealers, trust companies, UBS AG bank branches, and UBS Bank USA.

Mark S. Shelton was appointed to the Securities Investor Protection Corporation by President George W. Bush in 2007. Today, the President nominated him for reappointment as the Securities Industry Representative. What was Mr. Shelton's role in his firm's widespread tax cheating? Surely for symbolic reasons alone, George W. could have found another guardian.

The SIPC is charged with protecting investors. Their press release states:

The Securities Investor Protection Corporation is the investor's first line of defense in the event a brokerage firm fails owing customers cash and securities that are missing from customer accounts.

Who's looking out for the taxpayer, now a direct investor in financial firms through Hank Paulson's sovereign debt fund? UBS didn't care about wealthy clients paying their legal tax obligations for a seven year period. Why should I trust their representative to look after my interests?

Paulson's Sovereign Debt Fund Invests in Carlyle Group Affiliate

Six weeks after Congress passed the TARP, Treasury Chief Hank Paulson reached a new low in the use of taxpayer money. MarketWatch reported Carlyle affiliate, Boston Private Financial Holdings received approval for a federal equity injection.

The Treasury intends to invest approximately $150 million in Boston Private in the form of preferred stock and common stock warrants.

"We are extremely pleased by the U.S. Treasury Department's preliminary approval of a TARP capital investment in Boston Private," said Timothy Vaill, Chairman and CEO of Boston Private. "It will enhance our already strong capital position and allow us to expand lending programs in each of our markets nationwide, among other things. Along with the $173 million of funds from our highly successful capital raise in July, including a strategic investment by The Carlyle Group, this investment by the Treasury provides further additional flexibility to manage our business in the current market environment."

The Treasury Department's TARP Capital Purchase Program is a voluntary program for healthy U.S. financial institutions designed to encourage these institutions to build capital to increase the flow of financing to U.S. businesses and consumers and to support the U.S. economy.

The TARP has been criticized for giving billions to banks, who have yet to increase lending. How will $150 million help Boston Private?

BPFH is a national financial service organization comprised of independently operated affiliates located in key regions of the U.S. that offer private banking, wealth advisory and investment management services to the high net worth marketplace.

Already strong capital position? High net worth marketplace? This is the latest round of Bush sponsored Corporafornication. American taxpayers will soon own a chunk of The Carlyle Group. Will we get the 30% historical returns earned by the private equity underwriter (PEU)? Or are we recapitalizing a rich man financial services firm on the cheap? More details, please....

Monday, November 17, 2008

Great Worldwide Writedown Hits Private Equity

Private equity underwriters (PEU's) continued to shed value on both the debt and equity side. Carlyle Group co-founder David Rubenstein bragged in Hong Kong about his firm's buying back affiliate debt on the cheap. Corporate debt is going for 60 cents on the dollar.

PEU equity is also on sale. Institutional investors, including big endowments and pension funds, are selling their private equity stakes on the secondary market. Bids have come in as low as 50 cents on the dollar.

The great unwinding continues, even as private equity enters its "golden age". But new deals await and Hank Paulson indicated the TARP would look for matching private investment. How long before a Treasury-Carlyle Group deal? Will Olivier Sarkozy and Randall Quarles hit a home run in their first public deal? Stay tuned...

Sunday, November 16, 2008

Hawaiian Telecom: Next Carlyle Group Affiliate to Crater?

Hawaiian Telecom may declare bankruptcy, according to company officials. The Carlyle Group purchased the company from Verizon in 2005. It took on $1 billion in debt to fund the deal, $574.5 million in bank loans and $550 million in floating rate bonds. Hawaiian Telecom delayed $26 million in bond interest payments earlier this month and got a Moody's downgrade to "D". The investment downgrade drives up interest expense in their floating rate bonds.

Other Carlyle affiliates and investment vehicles cratered in 2008. Carlyle Capital Corporation imploded first. Afterwards, Blue Wave Partners disappeared and SemGroup was taken over by creditors. Is Hawaiian Telecom next?

The Carlyle Group is known for their shrewdness. Co-founder David Rubenstein stressed Carlyle's current strategy of buying affiliate's debt back on the cheap. Is the bankruptcy threat part of generating returns for the private equity underwriter's distressed debt fund?

While one arm of the politically connected PEU takes, the other gives. Watch out for sleight of hand! Investors and taxpayers are subject to fleecing. Ask the good folks in Dallas, Texas. They're waiting on thousands of promised new jobs from Carlyle affiliate, Vought Aircraft Industries.

My guess is Vought would pull a Hawaiian Telecom, long before it met promised job increases for $35 million of Texas taxpayer funds. Is a threatened Vought bankruptcy next? How much affiliate debt can Carlyle buy back for pennies on the dollar? About $1.35 billion worth, or more with leverage? Stay tuned...

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.

Saturday, November 15, 2008

Carlyle Infiltrated, Defense Business Board Advises Obama on Pentagon Spending

What luck for The Carlyle Group! They have a representative, Dov Zakheim, on the Defense Business Board advising the President elect on military spending. Carlyle acquired Dov Zakheim's services this past summer when it acquired Booz, Allen, Hamilton, a huge government consulting firm. Dov served as Pentagon Chief Financial Officer for Bush, but prior to that Zakheim contributed to the foundational document for the Project for the New American Century.

Over the last few years Carlyle cut their investments in defense firms, preferring to expand into other areas of the Government-Industrial Monstrosity, Eisenhower's MIC on steroids. But the pie is big, and the private equity underwriter (PEU) has their hands in the Pentagon's pocketbook, primarily through Booz, Allen.

U. S. defense spending has climbed more than 60 percent during the eight years of the Bush administration, and will total at least $612.5 billion in fiscal 2009. This includes $542.5 billion for the core defense budget and an initial allowance of $70 billion for the wars in Iraq and Afghanistan.

Obama has two Carlyle Group employees as bundlers for his record spending political campaign. Now he has a PEU military adviser via the Defense Business Board. The infiltration is deep and air spray alone won't purge our government of the PEU.

Friday, November 14, 2008

Conaway Quiet on Success of TARP, but Effusive about Process

Rep. Mike Conaway, R-TX bragged about America's red and blue political parties coming together to deal with the financial crisis. He failed to say anything about the logic behind the "most significant measure passed by the 110th Congress." Nor did Mike address Treasury Sec. Hank Paulson's trashing the plan he and Fed Chief Ben Bernanke sold to the House.

Yesterday, Hank said "no" to the purchase of toxic assets. preferring direct investment in financial institutions, also known as taxpayer funded recapitalization. So what changed, Representative Conaway? As a CPA, my Congressmen is in a unique position to translate high fa looting financial talk. But the cat got Conaway's tongue, especially on the surprise tax cut the Treasury Chief decreed.

Free wheeling Hank Paulson wants to steer money to nonbank financial institutions, insurance companies and other providers of consumer credit. He plans to buy equity in conjunction with matching private investment. Look for private equity underwriters (PEU's) and sovereign wealth funds (SWF's) to join Treasury in the new program. Will Uncle Sam guarantee the match, as well? Between all the programs, America now runs a huge $3 trillion sovereign debt fund.

While the list of financial firms getting aid expands, American auto makers are reeling. The deepening recession has them on the ropes. Conaway voted for the big money boy bailout bill, but is drawing the line on auto's.

At a time economic stimulation is in order, Mike returned to his conservative roots. He wants lower spending and to reduce the size of government. That could prolong the financial pain.

Mike's correct when he said Republicans lost independents. Hint, we're still confused. Consistent logic or theory is not apparent.

My vote was for honesty. Conaway is yet to earn it, as he nears his third term.

The Carlyle Group's Debt-a-Palooza Takes Advantage of Blue Mood

Carlyle Group co-founder David Rubenstein repeated his mantra of buying back debt on the cheap in Hong Kong. Reuters reported on the latest strategy of private equity underwriters (PEU's):

"When history is recorded, the single best deals done in this environment will probably be deals done about near the bottom for the debt of one's own company," he said at the Asian Venture Capital Journal conference.

Private equity firms were doing a lot of this right now, he said. As a result, the term "private equity" may soon switch to "private credit," as more buyout firms prepare to purchase the cheap debt of companies they have studied in the past.

The question is whether the Fed will serve as the middle man, now that Hank Paulson's TARP is a pure investment program. Hank's taxpayer funded, sovereign debt fund could clear the decks of struggling financial institutions. How would the average citizen feel about billions in taxpayer money used to clear credit decks on the cheap for PEU's?

The good news is banks will lend to PEU's, at least on a limited basis. The article reported:

With debt consistently traded at 60 cents on the dollar, companies should buy it back, holding it until the turmoil clears and selling it later for a premium. Banks are even allowing debt buyers to borrow money from them for these purchases.

David Rubenstein knows how to make big money off the Financial Rescue Program (FRP). In good times and bad, the Bush administration knows how to deliver Corporafornication. The Carlyle Group enjoyed a wonderful eight year ride.

Unfortunately, they're well positioned for that to continue. A few of their boys on the blue team: McLarty, Marchick, Bayh, Emanuel, Kennard & Rossotti. Suit up! The game is on...

Thursday, November 13, 2008

Al Gore Green PEU

Al Gore expressed no interest in serving in an Obama administration, despite thoughtful proposals as to his role. The elder statesman read the tea leaves and decided considerably more green lay outside the confines of our federal bureaucracy. Vice President Gore's environmental credentials are clear from his Nobel Peace prize and his successful movie, An Inconvenient Truth. Later studies revealed Gore exaggerated sea level rise. A British judge ruled the film had nine errors but found the film "broadly accurate."

Albert has a financial incentive to drive green changes. He is Chairman of London based Generation Investment Management and a partner with Kleiner Perkins Caufield & Byers, a private equity underwriter (PEU).

In March the International Herald Tribune reported on Al's investment fundraising skills.

The sustainable investment firm run by Al Gore, the former U.S. vice-president, is about to be closed to new investors, having raised close to its $5 billion target. Generation Investment Management will probably restrict inflows into its main Global Equity Fund next month, Gore and David Blood, co-founder of the company, said at a news conference Tuesday. Blood said the firm could not manage more than $5 billion in assets.

Gore serves on KPCB's GreenTech initiative. Information on their fundraising effort comes from a May press release:

Kleiner Perkins Caufield & Byers (KPCB), the Silicon Valley venture capital firm, announced today it is launching a new $500 million investment vehicle: the Green Growth Fund. The fund is intended to help speed mass market adoption of solutions to the world’s climate crisis.

KPCB separately announced today the formation of KPCB XIII, a $700 million fund that will invest in greentech, information technology and life sciences ventures. Within the greentech sector, KPCB XIII will mainly back early-stage entrepreneurs, while the Green Growth Fund will support companies that have already entered their growth phase.

Within months, Al Gore raised more than $5.5 billion for investors to profit from green commercial development. Ironically, Generation Investment Management and KCBP joined forces last year. Fortune highlighted Al Gore's association with the two firms. But, to Al's credit:

Mr. Gore also announced that as part of the agreement between the two firms, 100 percent of his salary as a Partner at KPCB will be donated directly to the Alliance for Climate Protection—the non-partisan foundation he chairs that focuses on accelerating policy solutions to the climate crisis.

Al also serves on the Apple Board of Directors and advises Google. Gore knows when to be quiet, a skill needed in today's political landscape. Do his private equity firms expect 30% annual returns like standard setting Carlyle Group? If so, the taxpayer pays for egregious returns. Our green becomes Al's green.

What happens if the partnership of Blood & Gore is prophetic? How high will the financial blood get in the streets as old energy battles new energy? Will the red or blue franchise win? Stay tuned...

Update: Katie Couric interviewed Al Gore, calling him the "Godfather of Green." He discussed his upcoming book on climate solutions. How many arose from his financial investments in Camco (carbon projects), Ausra (solar energy), Ocado (green grocery), New Forests (green investment management), Silver Spring Networks (smart electricity) or New Resource Bank (green banking)? Al didn't disclose.

Carlyle Pleads with Investors to Stay

The Carlyle Group recently told its limited partner backers, “Please don’t default. We will try to work with you.” Did the financial position of Carlyle's backers change abruptly, such that they need the money? Or did they watch Carlyle's Blue Wave Partners, SemGroup and Carlyle Capital Corporation implode and are worried about the same for their investment?

The golden age of private equity is just around the corner, according to Carlyle co-founder David Rubenstein. How many of their investors will stay in? And how soon will the turn come? Answers remain to be seen.

Behind TARP's Closed Doors, Hank Lets Hair Hang Down

Mid-September the Bush administration cried "wolf" as the big money boys quit lending to each other. They no longer trusted one another to make good on their debts. Congress rushed to approve a $700 billion bailout bill to buy up toxic assets. Update:

1. Credit hasn't unfrozen, despite use of $290 billion
2. Hank wants to invest in non-bank financial firms
3. Treasury won't buy any toxic assets, the plan 50 days ago

The American taxpayer is recapitalizing sinking financial firms. Now Paulson wants to put our money in firms that securitize auto loans, student loans and credit card debt. We are involuntary investors in America's New Sovereign Debt Fund.

Given that, who's looking out for our interest? No one. No oversight panel has been appointed and the Bush team missed the deadline for their first monitoring report. George W. Bush is a consistent performer on behalf of his business friends. The Corporafornication continues...

Wednesday, November 12, 2008

Phil Gramm Aloof UBS Vice Chair?

Senior executives at UBS were informed in 2005 of illegal offshore accounts used by wealthy Americans to avoid taxes. This led to the indictment of a UBS senior executive Raoul Weil. Surely, Raoul couldn't have perpetrated the tax evasion plot on his own given the 19,000 offshore accounts.

Plus, what did those executives do once the whistle blower came forward in 2005. Not much. This all points to more UBS top dogs being involved. The New York Times reported:

In a move that could spell bigger trouble for UBS, the indictment also referred to unindicted co-conspirators who “occupied positions of the highest level of management within the Swiss bank.” The individuals, the document said, sat on committees that oversee legal, compliance, tax, risk and other issues. The indictment also referred to unindicted senior bankers and the managers and “desk heads” who oversaw them.

What role did Phil Gramm play in this scheme? I find it hard to believe the Vice Chair of UBS remained uninvolved. American UBS investors sheltered $20 billion in assets. The scheme ran from 2002-2007. The internal whistle blew in 2005. UBS did nothing.

One month ago, Uncle Sam provided $54 billion in capital to Swiss giant UBS. This injection made this taxpayer very upset. The question remains as to Vice Chairman Phil Gramm's role in all of the shenanigans. And I'm whining that I don't yet know.

FRP's New Acronym: TARP shifts to SAGGING

Treasury Chief Hank Paulson proposed America's Financial Recovery Program (FRP) shift its focus. When first proposed to Congress in late September, the Toxic Asset Relief Program (TARP) planned to buy up bad assets. Ironically, the Federal Reserve Bank beat Treasury to the purchase punch by buying a chunk of AIG's junk assets.

Hank wants the bailout money used as "an investment program." In other words, America started a sovereign debt fund of several trillion dollars. Your future taxes fund the FRP. I suggest it be called:

Sovereign American Glorious Goliath Investment in Noncommittal Groups (SAGGING)

Malodorous FRP to Spread Beyond Banks?

Treasury Chief Hank Paulson asked America to pull his finger, when he announced major proposed changes to the financial rescue program (FRP). Two months ago, Hank sounded the alarm on a credit crisis and Congress acted, passing a $700 billion toxic asset relief program (TARP).

Since then, Treasury freewheeled. Rather than buy junk assets, Uncle Sam is recapitalizing financial firms. In some cases, shareholders have been wiped out; not so with others.

Paulson proposed going beyond banks, to issuers of other securitized credit (car loans, student loans and credit card debt), insurance companies, unregulated financial firms (like hedge funds), and the auto industry. He also wants to pave the way for private investment, from firms like The Carlyle Group. William Conway likes an unlevel playing field, one titled towards his private equity underwriter (PEU). How might Uncle Sam and PEU's team up under Hank's proposal? That remains to be seen.

The aim of the FRP was getting credit and lending flowing again. That hasn't happened in any substantive way. It's hard to see anything other than a Three Stooge like home remodeling job. Tell me when the big money boys are done with their Corporafornication of the American taxpayer.

Tuesday, November 11, 2008

Trick or Treat at Hank's Bank Bailout Window

Two weeks after Halloween, corporations dressed up as banks to get access to the $700 billion TARP program. American Express and their Travel Related division are now banks. The Fed approved the two firm's applications, citing "emergency conditions."

Insurance companies are experiencing urgent conditions. How soon before they become banks? Hedge funds have cratered, do any surviving ones want to become a bank? Who's next? GM, Ford or Chrysler?

How does a CEO turn his company into a bank? Does he walk around holding metal bars asking for deposits from the Fed? If approved, do they get one trip or many? Fannie Mae is close to burning through their first $100 billion and may be back for more. Where does the taxpayer frightmare end? How much corporafornication can American stand?

Monday, November 10, 2008

Carlyle Group Wins U.S. PEU of Year

The Carlyle Group sashayed down the runway with their award, Private Equity Underwriter of the Year-United States. They spent the last year dieting to look good for the bathing suit competition. A dark secret revealed the PEU resorted to gorging and purging to keep their weight down, and investor returns up.

It turns out Carlyle threw up acquired firms' value. Private Equity Analyst had the following headline, "Carlyle: 7 Of 32 U.S. LBO Portfolio Cos. Now Valued Below Cost." The ugly side of competition reared its head, yet again. Greed and leverage are amazingly resilient.

Sunday, November 9, 2008

Big Money Boys Belly Up to the White House Bar, Yet Again

Treasury Chief Hank Paulson, our financial rescue czar, wiped out a potential $140 billion in taxes for banking companies. This is on top of the $700 billion big money boy bailout passed by Congress. Yet, Hank did it with a regulation change. No law provided the huge relief for financial firms.

AIG lined up more billions in taxpayer funds. The first $143 billion wasn't enough to save the company. In a confusing, financial magician move, AIG will get $40 billion for preferred stock, $52.5 billion in TARP money for junk assets, and their total debt to Uncle Sam shrinks by $25 billion. That sleight of hand brings the total for AIG to over $250 billion.

How's the Bush Bailout totalling up?

TARP $700 billion
AIG $250 billion
Fannie Mae & Freddie Mac up to $200 billion
Direct capital injections to banks of $900 billion
corporate commercial paper -$1.3 trillion qualifies
Holding commercial paper in an off balance sheet vehicle
Fed funds rate cut to 1%
Bear Stearns $29 billion
Bank tax savings $140 billion

We're closing in on a potential $4 trillion and that's without any direct aid to Big Auto. That's serious Corporafornication. All the big money boys need for Christmas is for Obama to put off his tax increases for people making $250,000 or more per year.

Barack's new Chief of Staff Rahm Emanuel wouldn't clarify his boss' intent on this campaign promise. He dodged George Stephanopolis' inquires with the skill of a lipstick-less pit bull.

CNBC pundits saw the President elect open this door at last week's press conference. They posited tax increases for the rich could be on hold until the economy improves. Rahm didn't move it a millimeter.

Thursday, November 6, 2008

It's Back! U.S. Chamber of Commerce Job Multiplier does Rip Van Winkle

In the late 21st Century a common economic development tool existed, the Job Multiplier. It projected the impact of new jobs on a community. Every new $1 of wages washed its way through the local economy, changing hands in boat lifting fashion. However, this measure tired from heavy use and needed to rest under a tree.

A young strapping "Dollar Extender" equation, took over for the exhausted Job Multiplier. The new formula calculated how much farther a $1 went, due to cheap items made in Asia. It assured people the job multiplier no longer applied. That old number was simply inert, asleep and harmless. A new century saw millions of U.S. jobs go to China, India, and Vietnam, to low wage environments. The dollar extender benefit and corresponding corporate profit boost meant all was well in America.

With Chinese apples crowding out our domestic version, an unharvested Red Delicious recently fell. It struck the Rip job multiplier equation square in the head, rousting it from a decade long sound sleep. The Van Winkle formula found job loss a huge concern for his country, as a recession deepened. He went right to work.

Adding machine tape flying, he calculated bankruptcy of a big three automaker would cause a projected 1.5 million job loss. Given the strengthening of the U.S. dollar, the Dollar Extender pumped his fists. His strength enabled people to buy more. An Olympic level competition seemed just around the corner. But the U.S. Chamber of Commerce benched the Dollar Extender.

Mr. Chamber said, "It's not your fight. The U.S. government needs to intervene to save good paying American jobs." Yes, jobs like the ones the Chamber previously watched disappear.

One intervention involves GM buying Chrysler, effectively bailing out Chrysler's private equity owner, Cerberus Capital Management. Cerberus Chairman John Snow is an ex-Treasury Chief. Hank Paulson replaced John two years ago. Is the plan intended to save workers or their high dollar, politically connected investors?

The race is on to influence the waning days of the Bush debacle, to position for the incoming Obama administration. But the Job Multiplier is now employed...

Monday, November 3, 2008

Banks Willing to Lend to Carlyle Group

Those billions Uncle Sam invested in big banks may circulate through the economy after all. The Financial Times reported The Carlyle Group can still obtain loans for its buyouts.

At our end of the market, deals are still happening, and interestingly we can still raise debt to fund transactions," offered David Fitzgerald, managing director of Carlyle Europe Technology Partners.

The infamous private equity underwriter (PEU) raised $673 million for a new fund aimed at small buy-outs of European technology companies.

The new fund is due to announce its first investment later on Monday, acquiring the Gardner Group, a small UK-based aerospace technology group that supplies top aircraft makers, such as Boeing Co.

Thank heaven Hank Paulson's money has a chance of going to work. I bet hundreds of thousands of Americans hope for the same opportunity. Carlyle's latest conference call reveals how the PEU may benefit in other ways from the TARP. Big writedowns on Freescale Semiconductor and HD Supply turns their debt to untradeable junk. Debt holders turn it into Hank Paulson's TARP window, where Reubenstein and Conway can buy it back for pennies on the dollar, courtesy of the taxpayer's wallet. Patience is required, but Carlyle gets a government sponsored win, yet again.

Saturday, November 1, 2008

UBS American Clients with Swiss Bank Accounts: 95% are Tax Cheaters

UBS, a giant Swiss bank, serviced 20,000 Americans with $18 billion in foreign bank accounts. Only 5% reported income from those accounts to the IRS, leaving 19,000 as likely tax cheats. With an average of $900,000 per account, UBS made $200 million annually from this book of business.

How will the investigation play out? UBS Chairman Phil Gramm called Americans a nation of whiners. It turns out we have something legitimate to complain about.

We already had widespread stock option cheating amongst public traded CEO's. Executives backdated options to maximize their incentive compensation.

Extrinsic motivators deformed Wall Street to the extent, every huge investment bank disappeared almost overnight.

It seems the money addicted don't just destroy companies or shareholder value, they also cheat the government. The question is how many of these 19,000 tax cheats can be found at the top donorship levels to either major political party? And how might that impact justice or future government business? I'd really like to know...

Big Oil Profit Party Bybasses Bear

What a week it was for big oil! Their new theme should be "Party like it's 3rd quarter 2009!" Never mind the glum American citizen, who watched their IRA or 401(k) drop 30-40% during the same period. How much did the big boys make?

ExxonMobil $14.83 billion
BP $10 billion
Chevron $7.89 billion
Shell $10.9 billion
ConocoPhillips $5.18 billion

Just from the top five, big oil earned a $48,8 billion profit. One quarter's profits alone could have saved Bear Stearns with nearly $20 billion to spare. It also could fund hospital uncompensated care, amounting to $31 billion in 2006.

John McCain's tax plan would reduce resources to address our national crises. He plan would cut corporate taxes 10%, or $4.88 billion from the top five oil companies this past quarter. Rather than stepping up to the plate to fund our financial rescue, big oil would slip away.

If McCain pulls a Truman, ExxonMobil and company can pull out the stops. Maybe a huge soiree in the Cayman's? They can party it up in Caribbean luxury and claim a business trip. Surely big oil has offshore subsidiaries in the Ugland House. I feel another round of Corporafornication coming, courtesy of Uncle Sam.