Sunday, July 19, 2009

Rahm Warrants Invite to JP Morgan Board Meeting

President Obama's Chief of Staff received an invitation to speak at JP Morgan's board meeting. The company moved it to Washington, D.C., reducing Rahm Emanuel's travel time to the elite gathering. What might they talk about? Future financial regulation, buying/auctioning TARP stock warrants, the next Fed Chair, and/or donations to Rahm's blue camp.

Warrants are likely high on the list from Jamie Dimon's perspective. Reuters reported:

The 10-year warrants were meant to allow taxpayers to share the upside as banks recover.
Did "share the upside" shift?

A Treasury representative said the government wants to dispose of warrants "in a manner that protects taxpayers."
That sounds like two different aims. The government sold warrants back to smaller banks at 66% of their value. On whose behalf will Rahm Emanuel work?

Given the state of financial products, might the cabal meet next time in Las Vegas? Rahm says it's OK. What happens in Vegas, stays in Vegas. I expect the same outcome from Rahm's JP Morgan talk.

(Note: Rahm Emanuel declined the invitation per advice from White House lawyers)

Saturday, July 18, 2009

Carlyle Group Lobbies Against Stricter EU Regulation

Buyout king Robert Easton of The Carlyle Group argued against European Union financial reforms. The Independent reported:

One of the major concerns is over disclosure of company investments. Any private-equity or hedge fund that has €500m (£430m) in funds under management must report detailed information on any of their portfolio companies that turn over at least €50m.

Mr Easton, the Carlyle Group managing director who sits on the disclosure working group, warned that the directive could end up being challenged by member states. He said: "Our starting point is that the disclosure requirements of the draft directive shouldn't even apply, given that each jurisdiction already has its own laws. Indeed, you might find that the required EU disclosures breach rules at local country level."

Mr Easton added that providing detailed information would be costly. "If you were to apply the €50m rule it would significantly increase the cost burden on many, many companies, and that's quite apart from the pressure on the FSA, which would have to recruit an army of people to oversee it," he said.

Easton's excuse is humorous in that a Carlyle sub has software helping hedge funds comply with any new reporting requirements. It's produced by Brussels based FRSGlobal. Can't they update it for private equity underwriters (PEU's)?

Carlyle has the rumored Obama nominee for America's EU ambassadorship in William Kennard. They have two co-chairs of key groups weighing in on financial regulatory reform David Rubenstein led a global study effort, while Arthur Levitt chaired a domestic industry group.

If it were American reform, Carlyle would be a shoe in for a free pass. Europeans may have more intestinal fortitude than PEU dominated Washington, D.C. Where will Brussels land?

Friday, July 17, 2009

Goldman Sachs PR Department to Earn Their Millions

Who knew the whole political range would pick on Goldman Sachs within a day's time? Consider the media personalities with GS in their sights, Paul Krugman, Jon Stewart and Glenn Beck. Add The Telegraph and Rolling Stone to the list. Even Forbes took a shot. The hardest punch came from across the pond.

Did Goldman executives issue a crisis call for media savvy consultants? Did they barricade top management in the bunker housing their proprietary computer trading software? Or did they enter the firm's vault, wading hip deep in gold coins, diamonds and bearer bonds (their 2009 bonus prizes)?

How will they handle their PR problem? Likely, Goldman will slough it off on their lackeys, the United States Congress and the Executive Department. It pays to fund appropriately connected talent, especially talent capable of making inconvenient things (like record profits in the middle of a deep recession) go away. Does it all seem a bit cartoonish?


Thursday, July 16, 2009

CIT Talking with PEU Boys

Financially distressed lender CIT is in talks with private equity underwriters (PEU's) to save the firm. The federal government passed on further aid to CIT. It has over $2 billion in TARP funds.

Will CIT enter bankruptcy before a PEU deal? That could cram down taxpayers, just as the FDIC zeroed out shareholders in the Carlyle Group et al Bank United deal.

CIT's credit default swaps soared today. Should a PEU strike a deal with CIT, they could compound those returns with timely CDS deals. Likewise, the big money boys could sink CIT.

Which private equity firms are at the CIT table? Did CIT board member Christopher Shayes call any Republican buddies at Cerberus? Did he dial the bipartisan stable on Pennsylvania Avenue, also know as The Carlyle Group? PEU's are known for employing the bondholder Trojan Horse. Which way might the barbarians win? Stay tuned...

U.S. Foreign Aid Goes PEU?

Secretary of State Hillary Clinton indicated change in her foreign policy speech. The U.S. will:

"seek to deliver results by reaching out beyond governments to private groups and individuals."
Private groups and individuals. If campaign donors get an Ambassadorship, can they get State Department money? Now, who has a foundation or are big donors? Pete Peterson, Bill Clinton, Bill Gates, Warren Buffet, Mike Bloomberg, George Soros and Oprah Winfrey. Funny, The richest people in America recently conferenced on philanthropy. (Pete Peterson told FT he would soon meet with George Soros on philanthropy.)

Rumor has it the big money boys will be able to name their project and get matching taxpayer dollars. How much will go to former or current private equity underwriters (PEU's)? How might they steer public funds to affiliates? Who knew the Government-Industrial Monstrosity, Eisenhower's MIC on steroids, had a philanthropic side.

Hillary Clinton plans to continue America's pattern of bribing cooperation and punishing non compliance. That might open the door for American branded global corporations in various world markets. She said:

"...facts demand a different global architecture -- one in which states have clear incentives to cooperate and live up to their responsibilities, as well as strong disincentives to sit on the sidelines or sow discord and division."
It sounds remarkably like "you're either with us or against us." U.S. foreign aid could soon have a public-private partnership (PPP) component. I smell PPP's partnering with PEU's.

(Note: Foreign governments will get assistance in buying U.S. military equipment via a $67 million contract with The Carlyle Group's Booz, Allen, Hamilton. Carlyle's ARINC purchased military helicopters at premium prices for Iraq)

Update 4-23-15:  Foreign aid 's PEU face can be seen in foreign donations to The Clinton Foundation, which seemed to ensure positive action by Secretary of State Hillary Clinton.  

Wednesday, July 15, 2009

CIT to Join Lehman Brothers & Bear Stearns?

Reuters reported as breaking news:

CIT says discussions with government agencies have ceased; advised there is no appreciable likelihood of additional government support being provided over the near term.

It seems the Obama suggestion that TARP be expanded to small businesses was offered to fill the gap from a CIT implosion. Watch for who makes big money in CIT's fall. Will it be Goldman Sachs? Will they do it straight up or on the taxpayers' back, courtesy of AIG's credit derivatives? The big money boys have been making bets. How will the wagers fall & when will they cash in?

New board member Christopher Shays' CIT stock may soon be worthless. Who will make it up?

(Note: for more on AIG's credit derivative exposure click here)

PEU's Say They Pose No Systemic Risk

A spokesman for the Private Equity Council stated:

Private equity contains none of these systemic risk factors and thus should pose little concern for policy makers seeking to develop a new regime to guard against catastrophic, cascading financial shocks.

None of the systemic risk factors? What about capital calls? Bloomberg reported:

Washington, D.C.-based Carlyle Group, the world’s second-largest private-equity firm, made $681.3 million of capital calls on the pension fund (CalPERS) in 2008.

What if CalPERS said no and asked for their funds back? It could spark a privte equity underwriter (PEU) run.

Are there other risky practices, other than paying premium prices in highly leveraging deals? Tulsa World reported:

Carlyle Group affiliate SemGroup lost $2.4 billion in margin calls on oil futures trades and had its credit line pulled by Bank of America.
Margin calls on energy futures trades? Who knew? Very few according to SEC documents.

Don't forget their ability to lose Michael Huffington's $20 million investment in Carlyle Capital Corporation in a year. Carlyle affiliate Hawaiian Telecom's bonds went from 102.75 to 0.5 cents on the dollar when it declared bankruptcy. Did another fund buy credit default swaps on HT bonds to soften the blow? Is that trading on insider information?

What might spark a PEU run? It would be non-systemic risk factors, according to the Private Equity Council.

Goldman Sachs will take discounted private equity stakes off investor's hands. Goldman started a $5.5 billion fund to acquire PEU investments on the cheap.

With all the political capital amassed by Carlyle, Goldman and company, I smell a regulatory free pass.

Update 2-11-12:  Carlyle's Boston Private Financial Holdings received $154 million in TARP funds, which they used to provide credit to "high net worth" individuals.  .

Update 4-1-12: Regulators warned banks about "covenant lite" junk bonds, heavily used by PEU's.  They're back and contributing to PEU systemic risk..

Tuesday, July 14, 2009

Carlyle Group's Bad News Day

It's getting harder to keep The Carlyle Group's pristine reputation. First, Michael Huffington sued David Rubenstein and Carlyle Capital Corporation for frittering away his $20 million investment in a year's time. SemGroup, another bankrupt Carlyle affiliate made Tulsa World:

The 9-year-old Tulsa company filed for bankruptcy protection on July 22, 2008, after losing $2.4 billion in margin calls on oil futures trades and having its credit line pulled by Bank of America, according to reports.

SemGroup's SEC filings made no mention of oil futures trading. The politically connected private equity underwriter (PEU) has Louis Freeh as Bankruptcy Examiner. Freeh serves on many corporate boards, including Fannie Mae, Bristol Myers Squibb, L-1 Identity Solutions, and MBNA.

Will other bad news hit the wires? Maybe Vought’s internal liquidity crisis that repeatedly hampered Boeing 787 production or LifeCare’s 24 patient deaths after Hurricane Katrina, the best kept secret in the Bush Katrina Lessons Learned report.

Carlyle will bring their cumulative expertise to distressed banks and public infrastructure.

Goldman Sachs Profit & Bonus Bonanza!

Goldman Sachs reported net income of $2.7 billion and net earnings of $3.44 billion. They set aside $6.65 billion in compensation for the second quarter. Bonus pay isn't a fraction of profits, it's a multiple. Quarterly bonuses are 2.46 times net income and nearly double net earnings.

Greed is back on Wall Street. It has some people worried. Higher risk means higher reward, at least until one makes the wrong bets. Isn't that what happened last September?

Monday, July 13, 2009

Michael Huffington Sues Carlyle Group for Imploded CCC

Michael Huffington, a wealthy investor, is suing David Rubenstein and the Carlyle Group for misrepresentations and deceptions in the marketing of Carlyle Capital Corporation (CCC), the Channel Islands investment vehicle that imploded in March 2008. Forbes reported:

Carlyle "offered to sell shares of stock in the fund by knowingly or negligently representing that, among other things, the fund was 'conservative,' 'low risk' and that the 'downside [was] very limited,'" according to the suit.

Huffington lost the full value of his $20 million investment in CCC when the fund blew up.

Huffington alleges the losses were a "direct result of the extremely risky 32:1 leverage ratio." Carlyle Capital was hit with margin calls when its assets lost value, and in March 2008 Rubenstein personally called Huffington to tell him the fund was in default on its debt and that Carlyle Capital's lenders were selling the collateral.

But that was during dark days. CCC used about $670 million of equity to amass a $22 billion portfolio of mortgage debt. For every dollar of equity, the pool borrowed $32. Mr. Huffington supplied nearly 3% of the initial equity. Arthur Levitt, Carlyle Group Senior Adviser, attributed the failure to "excessive leverage."

In May 2008, Rubenstein went to Boston to personally apologize for the losses and explain how they happened, according to the lawsuit. Rubenstein, however, said that his Carlyle partners would not let him cover Huffington's losses. Instead, Rubenstein said Huffington would have the opportunity to invest with Carlyle in the future without paying fees. They shook hands on it. "I guarantee you that you will get your money back," the suit quotes Rubenstein telling Huffington the next day over the phone.

Fortunately, the Obama administration brought back the light, counting on private equity to save banks, build infrastructure, reform healthcare, and improve education. Yes, they'll make it back in droves. The Government Industrial Monstrosity assures it.

Arthur Levitt and David Rubenstein led efforts to reform the world's financial system. Might private equity underwriters (PEU's) come out on top? They're shopping for distressed banks. Think what the PEU boys can do with captive lending institutions. Next time you pull up to a PEU owned bank, recall it took CCC a year to lose Mr. Huffington's $20 million.

Obama Rules Grease Skids for PEU Capitve Banks

Private equity underwriters (PEU's) are the salve for America's sick banking system. The FDIC proposed rules governing private equity purchases of distressed banks. They started tough, but look for powder puff final rules.

Presidents Bush and Obama relaxed rules governing PEU purchase of banks, without having to become bank holding companies. Obama wants to loosen more rules to favor bank buyers. His plan calls for:

"Permitting banks to expand across state lines improves their geographical diversification and, consequently, their resilience in the face of local economic shocks," the Obama Financial Regulatory Reform Plan states. "Competition through interstate branching also makes the banking system more efficient." To make it palatable to states, however, the plan removes federal preemption of state regulatory power.

So private equity controlled banks could add services in states where they have a concentration of affiliates? A captive bank could cater to PEU owned firms. The Carlyle Group has hundreds of affiliates. They could steer lots of corporate business to BankUnited. Funny, that's BankUnited's new market strategy. To think they can chose a state regulator over federal to boot! Let the Obama good times roll....


Obama Taps Carlyle Group for EU Ambassador?

Bloomberg reported on President Obama's likely nominee for U.S. Ambassador to the European Union. It's another private equity underwriter (PEU), William Kennard of the politically connected Carlyle Group. Obama's health care czar, Nancy-Ann DeParle worked for CCMP Capital Partners. The story stated:

William E. Kennard, a Carlyle Group executive and former Federal Communications Commission chairman, is President Barack Obama’s pick for U.S. ambassador to the European Union, according to people familiar with the matter.

Kennard plans to resign from the Washington-based private- equity firm once the nomination is announced, probably in several weeks, said the people, who asked not to be identified because the appointment isn’t public. His selection requires Senate confirmation.

The U.S. ambassador to the EU, an economic and political union with 27 member nations, is often the country’s advocate to the European institutions in Brussels on issues involving financial regulation, antitrust and trade, though most lobbying is done by U.S. envoys in state capitals across the continent.

Carlyle has a huge European presence between its funds and joint venture Riverstone Holdings. They might love an insider advocating on their behalf. President Obama loves PEU's. It all has a rather Bush-like feel. More corporafornication?

(In the picture, William Kennard is on the far left)

Carlyle Group Looks to Great White North

Carlyle Group co-founder David Rubenstein spoke from Quebec City. Globe & Mail reported:

Rubenstein said yesterday that the next boom for venture capital investments may well be in the "clean tech" sector, with environmental companies attracting major investments from venture capital entrepreneurs.

"There's no doubt that the world is yearning for more technological innovations that will make our lives better, clean tech being a very good example," Mr. Rubenstein said in an interview in Quebec City, where he is attending the North American Venture Capital Summit.

"You will see enormous amounts of money pouring into this area.

Most of the investments will probably not yield a good rate of return but there will be a Google or a Microsoft equivalent in that area. And we don't know today what it will be."

Carlyle has it's eye on the globe. It recently raised $500 million for a Middle East/North Africa fund and $1 billion for an Asian fund, heavily weighted toward China and India. What makes Canada so attractive?

After some difficult years, Canada is poised to attract investments from U.S. venture capital groups that now view their northern neighbour as a much more attractive place to invest, he said.

"United States venture capital companies are spending more time looking at companies in Canada," Mr. Rubenstein said. "The Canadian economy is booming, it has a strong currency, Canada has enormous energy self-sufficiency... and in many ways people are beginning to look north."

What does Mr. Rubenstein want, clean tech or Canada's enormous energy resources? Maybe a bit of both? Carlyle has enormous funds at their disposal for the right investment.

Sunday, July 12, 2009

CIT Next for Implosion?

Bloomberg reported:

The bid-ask spread on credit-default swaps in the Markit CDX North American Investment-Grade Index widened to 9.73 basis points yesterday, about 60 percent higher than the week before Lehman filed for bankruptcy and about 169 percent more than two years ago, according to CMA DataVision. The spread soared to a high of 22 basis points on Oct. 13.

The index is a benchmark for the cost of protecting bonds against default linked to 125 companies in the U.S. and Canada.

Funny, Larry Summers suggested the worst may be yet to come. What else happened? Another Bloomberg story stated:

CIT Group Inc., the century-old lender to 950,000 businesses, is trading in the bond market as if it may fail.
Its credit default swaps soared according to the WSJ:

The cost of insuring CIT bonds through credit-default swaps rose Friday, with CIT five-year CDS quoted at 38 points upfront, up from a Thursday close of 35.6, according to Markit. That means investors looking to protect their $10 million in debt for five years would have to pay $3.8 million up front in addition to an annual $500,000 premium per year.

Is Goldman Sachs up to their usual bets? Does AIG have any insurance on CIT Group debt? Larry Summers is worried about the financial tea leaves.

Is this why the Obama team floated expanding TARP for small businesses, CIT's served market? What's brewing courtesy of the big money boys and their political lackeys?

Friday, July 10, 2009

Obama Shakes Hands with Col. Gaddafi

For the first time a U.S. President shook hands with Libyan leader Colonel Muammar Gaddafi. The event was greased by Libya's paying restitution for the 1998 Lockerbie, Scotland bombing. It also promised not to pursue nuclear weapons.

The Carlyle Group has its eyes on Libya, even before it announced its $500 million Middle East/North Africa fund. It sponsored a Washington, D.C. dinner for Col. Gaddafi's son. James A. Baker, III helped host the younger Gaddafi. He added legal muscle in the region to do any deals.

Libyan leaders proved a quick study, hiring a lobbying firm to foster business exchange. It paid off with a public handshake. Who knows what else?

TARP to Expand Further?

The Troubled Assets Relief Program began with the goal of buying toxic assets from banks. It morphed from there. Consider the meandering:


Car Companies

Life Insurers

Small Businesses?
The Economic Stimulus Package targeted small businesses. How much stimulation can a firm handle? How much engorgement can one program offer? Corporafornication continues. Blue does as good as Red.

If banks lent their TARP proceeds, why would auto manufacturers, life insurers and small businesses need TARP funds? Who's next?

Is this intended to contain outrage from small employers on health care reform? Maybe the first step of a quid pro quo?

(New information shows it's more likely a response to CIT's financial troubles and possible implossion)

Carlyle Group's Chinese Affiliate Sues Board Member

The Carlyle Group announced a new $1.04 billion Asian fund, 80% targeted to China and India. Forbes reported a Chinese joint venture is suing a board member.

They assert the board member provided “false and misleading data” and “violated his responsibilities and duty of loyalty as a director of the joint venture and as a party to the transaction with Carlyle.”

Carlyle has a creative history of lawyer use. How might that impact future Chinese acquisitions? If it's negative, look for more funds to go to Russia. Obama's recent visit had a clear business bent.

A Big Day for America's Sovereign Debt Fund

America's investing government had a banner twenty four hours, investing in PPIP and a relaunched GM. The U.S. Sovereign Debt Fund (USSDF)started PPIP (public private investment partnership) with the goal of buying $40 billion in financial instruments. The number sounds large until one considers the existence of over $3 trillion in toxic commercial and mortgage backed securities.

GM's Fritz Henderson announced a streamlined exit from bankruptcy. He sounded almost schitzophrenic in his remarks. He said GM's people are the company's greatest asset, but he had to let large numbers go. Those that remain have to change fast.

He said they eliminated their matrix management structure. Then shared that management with functional responsibilities also needed to be responsible for U.S. operations. Is that the shadow matrix?

America's Sovereign Debt Fund has a very short term investment horizon. It's ready to give back warrants to TARP recipients. Fritz wants to pay off GM's greatly reduced debt by taking to company public within a year. Heaven forbid the taxpayer participate on the upside.

"Socialize the losses, privatize the profits."

Meanwhile AIG, placed in conservatorship by the government last fall, considers bonus payments for top executives. With estimates of negative equity, it will be interesting to see how much the USSDF funnels to management and derivatives traders who imploded the firm. Obama loves pay for performance, despite being bad leadership theory and repeated failures in federal execution. Federal employees under P4P find it unfair and a source of suspicion and mistrust. Contractors paid under P4P guidelines were paid regardless of performance.

"Ignorance is as ignorance does."-Forrest Gump

"Subsititute leadership!"-Dr. Wl Edwards Deming

Thursday, July 9, 2009

Esquire Missed Jeb Bush's Health Care Conflict of Interest

Tucker Carlson interviewed Jeb Bush in Esquire Magazine. When the topic turned to health care, Jeb noted:

Have you ever gone to HHS, the Department of Health and Human Services? Have you gone to CMS, the Centers for Medicare/Medicaid? It's scary. That's going to be the marketplace for health care if Democrats have their way. Senator McCain had a fantastic health-care proposal that he had a hard time explaining, that said that basically you should empower people, individuals, to make choices, and they should be rewarded when they make choices that improve health-care outcomes.

Under Obama, we're going to create a system that's not focused on quality; it's focused on access to care.

You end up insuring fewer people the more government expands its insurance. People drop out of the private market. For every person the government takes on the rolls, there's an equal number of people leaving the private sector. We're like gerbils running in place. We're not expanding health-care access per se.

There are all sorts of technologies now that exist that allow us to improve health-care outcomes if we organize our system differently.

Stimulating Infrastructure

The New York Times reported "the 100 largest metropolitan areas are getting less than half the money from the biggest pot of transportation stimulus money." Those 100 cities provide 75% of America's economic activity.

Private equity underwriters have billions in infrastructure funds available. They want to invest in projects capable of generating 15-20% low risk returns.

Socialize the losses (rural infrastructure development), privatize the profits (urban infrastructure projects).

The Obama stimulus plan was infrastructure light, compared to China's. The President has a $10 billion infrastructure bank aimed at financing public-private infrastructure projects. Under investing in cities is part of the plan, a back door franchise for the big money boys. Obama corporafornicates as well as Bush.

Boeing Buys Out Second Problem 787 Supplier Affiliated with Carlyle Group

Despite paying $2 million in annual management fees to the Carlyle Group, affiliate Vought Aircraft Industries and a joint venture partner clogged the 787 Dreamliner production line. Boeing purchased Vought's interest in the JV in June 2008. It took until May 2009 (nearly a year) for Boeing to clear up the bottleneck in the former JV's operations.

Did Boeing turn their attention to the next kink in the supply chain? Bloomberg reported Boeing purchased Vought's North Charleston operations for $580 million and will forgive $422 million in advance payments. Consider the words of Vought CEO Elmer Doty in Vought's press release:

“The financial demands of this program are clearly growing beyond what a company our size can support.”

Odd, the Carlyle Group has billions on the sidelines for infrastructure and failing financial institutions. This isn't the first time Doty complained of "financial demands."

Last October, Doty acknowledged that Vought was the highest-risk supplier on the 787 industry team. At the time, Doty attributed Vought's struggles to an internal liquidity crisis in 2006 that prevented the company from ramping up investment in the 787 programme at a sufficient rate.

Vought added to their difficulties with a $1.5 million settlement in an employment discrimination lawsuit.

Bloomberg noted Vought invested $540 million including capital and inventory in its South Carolina operations. The State of South Carolina provided $66.7 million in incentives for Vought to locate Dreamliner operations in the Palmetto State. That was nearly double Texas' $35 million job incentive. The point is Carlyle/Vought didn't pony up all $540 million in capital and inventory. They had public assistance.

What about other help? Carlyle had one insider on the Boeing board, the CEO of The Nielsen Company. The Carlyle Group purchased Nielsen in June 2006. Mr. Calhoun was appointed Nielsen's Chairman of the Executive Board and Chief Executive Officer that same year.

Vought booked a $47 million gain on the sale of the joint venture, according to SEC filings. How big a gain will they claim on the sale of Vought's North Charleston operations? It could range from $40 million to $529 million. I bet it lands toward the top of the scale. Stay tuned...

Wednesday, July 8, 2009

What Happens on Wall Street, Stays on Wall Street

At least in Las Vegas, gamblers know odds are in the house's favor. Investors got several clues that Wall Street is akin to Sin City. The Assistant U.S. Attorney prosecuting the theft of Goldman Sachs programming code said:

“The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways.”

Goldman Sachs clearly knows how to use the program. Are they doing so to manipulate markets?

About 28 percent of the shares traded in the U.S. during the fourth quarter were handled by automated brokerages using algorithms to generate rapid-fire trading strategies, according to estimates from NYSE Euronext, the world’s largest operator of stock exchanges. That’s up from 17 percent a year earlier, and almost three times larger than the portion of volume generated by individual investor.
The individual could abandon investing. They'd have every right to thumb their nose at firms packaging securitized pigs with a triple A lipstick. I choose not to gamble in Vegas.

NYSE Euronext left Goldman off their most active program trading list for June 22-26. The number one firm was not listed? Dow Jones called it a snafu. It coincided with the criminal case on theft of Goldman Sachs' program trading code and a report on record setting, program trading volume on the NYSE. Batten down the hatches in the mother ship! The hull has been breached...

The NYSE will no longer provide reports on the program trading volumes outside their exchanges. This is an effort to steer program trading to NYSE Euronext. What was systemic program trading information will revert to subunit data. Who's keeping their eye on the big ball? Systemic risk, anyone?

I don't trust Wall Street, Goldman Sachs or their purchased politicians. If the big money boys can't manage their millions, why should they handle my pittance?

(HT- Economic Policy Journal & Zero Hedge)

FDIC May Ease Bank Buying Rules for PEU's

It took a week for insiders to suggest the FDIC will relax its published "tough rules" for private equity underwriters buying banks. Bloomberg reported:

The Federal Deposit Insurance Corp. may relax proposed rules for buying failed banks after some investors said they would block private-equity firms from participating, according to people briefed on the talks.

The Private Equity Council, a trade group, warned last week that the rules would discourage buyout firms, which have about $400 billion to invest. Industry representatives also outlined their concerns in closed-door meetings, including an invitation- only roundtable this week in Washington with FDIC Chairman Sheila Bair. On July 2, Bair said such investors need guidelines to ensure a “transparent, long-term” approach.

Closed door, invitation only meetings? Since when is that part of public comment? It wouldn't be the first time the Obama team talked tough, before catering to the big money boys. Carlyle Group & company got $4.9 billion in FDIC subsidy for taking over BankUnited. Existing shareholders were zeroed out. The $4.9 billion came with no TARP strings attached.

To date President Obama is populist talk and corporafornication implementation. Watch the final rules.

Sunday, July 5, 2009

Carlyle's Wiggle Room in $1.04 Billion Asia Fund

President Barack Obama, the occupant of America's corporate sponsored White House, will pressure his Russian counterpart to clean up corruption. American branded mulit-national CEO's will join Obama and Medvedev for a business oriented session. Who stands to benefit?

1. America's Government-Industrial Monstrosity sent James A. Baker III and a coterie of red/blue ex-Secretaries of State/Defense to Russia in March.

2. The Carlyle Group's new $1 billion Asia fund is 80% slated for China and India. That leaves 20% for other Asia investments. Carlyle co-founder David Rubenstein recently visited Khazakstan.

Will Obama pave the way for Western financial barbarians? The Government-Industrial Monstrosity, Eisenhower's Military-Industrial Complex on steroids, is going global. I believe it's known as change. A handful will garner billions. The rest will be left with chump change.

Saturday, July 4, 2009

Baker Botts Aggressively Grows Middle East Presence

The law firm of James A. Baker III significantly expanded its Middle East operations according to a company press release. It stated:

Client demand for legal services in the Middle East continues to fuel expansion for Baker Botts L.L.P., prompting the firm to increase its commitment to the region by opening an office in Abu Dhabi — its third in the Middle East — and upgrading and expanding the firm’s current offices in Dubai and Riyadh.

Abu Dhabi is a natural fit for Baker Botts given the firm’s extensive background in energy-related matters. The growth of office space corresponds with the increase of Baker Botts lawyers in the region. During the past five years, the firm has more than tripled the number of lawyers based in the Middle East.
James Baker has longtime connections to The Carlyle Group, a private equity underwriter (PEU). Baker and Carlyle hosted the son of Libyan leader Muammar al-Ghadafi in Washington, D.C. Carlyle started a $500 million Middle East/North Africa fund. Surely they need lawyers to do the deals. It helps to have attorneys who understand the PEU business, those with close ties to their shadowy financial world. Here's how the boys at Baker Botts stand ready to help Carlyle & company.

During the past year, Baker Botts lawyers have worked on significant representations from Middle East offices as the firm builds a strong footprint in the region. These representations include a major independent power project program, a number of key merger and acquisition matters, projects relating to the development of Iraq’s oil and gas fields, and the financing of expansion plans for a number of chemical plants.

Seeding the Middle East with attorneys? It's a necessary first step for Western economic expansion. Recall President Obama's promise to develop the Middle Eastern economy? I bet Baker Botts isn't doing any volunteer work. Baker Botts' newest partner recently visited the Middle East. What did Frances Fragos Townsend sell in her meeting with kings? Soldiers are out, financial barbarians and their army of lawyers are in.

Friday, July 3, 2009

Carlyle Group's Repco Home Finance Gets More Government Money

SiliconIndia reported:

The Overseas Private Investment (Opic), a U.S. agency, which mainly helps American companies invest abroad and promotes the development of emerging markets, has decided to lend $80 million (Rs.382.4 crore) to a Chennai based finance company Repco Home Finance (RHFL) in 2009.

In December'07, the Carlyle Group, one of the world's largest private equity firms acquired 14 percent stake in RHFL and increased it to 46 percent in April 2009, by converting preference shares into equity. RHFL did not disclose the conversion price.

OPIC made another $50 million commitment for Repco's microfinance arm. That means U.S. government support of $130 million for Indian mortgages.

"Under the terms of the agreement with Opic, all mortgages arising from its loan will be assigned to Opic."

How lovely! Add $153 million in TARP funds for Carlyle's Boston Private Financial Holdings and a $4.9 billion FDIC subsidy for BankUnited and the private equity underwriter garners serious taxpayer funds. How much government financing did Carlyle get for auto supplier Metaldyne?

It's "the mother" of financial rescue and stimulus packages, just as Carlyle's David Rubenstein predicted. Don't forget the $25 billion in tax breaks for PEU's buying back affiliate debt. I smell Bush quality Corporafornication. The Obama team is a quick study.

Wednesday, July 1, 2009

Boeing in Talks to Buy Carlyle Group's Vought Aircraft (South Carolina Operations Only)

Boeing recently announced another delay in 787 Dreamliner production. Again? Oddly, it's also in talks with Vought Aircraft Industries, a key link in the delay chain. Boeing may purchase the Charleston, South Carolina facility doing fuselage assembly. The WSJ reported:

Boeing Co. is in negotiations to purchase operations from one its main suppliers, as part of an effort to gain more control over the supply chain of its troubled 787 Dreamliner program, according to a person familiar with the matter. Boeing is close to announcing that it will buy a facility from Vought Aircraft Industries that makes sections of the 787 fuselage.

Last year, Boeing bought a joint venture near the same facility, one partially owned by Carlyle's Vought.

Last year, Boeing also moved to roll up another supplier operation owned by Vought. In March 2008, it announced it was acquiring Vought's share of Global Aeronautica LLC, also in South Carolina, which does fuselage sub-assembly.

Vought's CEO blamed the Global Aeronautica start up delay on an "internal liquidity" crisis. Isn't access to capital Carlyle's speciality? Didn't Carlyle earn their $2 million annual management fee?

Regardless of poor performance, SEC filings show Vought earned $47.1 million on the sale of their interest in the joint venture.

The Carlyle Group's reputation as an operator could take another hit, but they're quite skilled at keeping their good name out of the news. There are many unshared stories: LifeCare Hospitals, SemGroup, Hawaiian Telecom, Edscha, Carlyle Capital Corporation, BlueWave Partners, IMO Carwash, ManorCare, Landmark Aviation, Standard Aero, and Booz, Allen, Hamilton. There's more than one Vought story, as the firm paid $1.5 million to settle a discrimination lawsuit.

Don't forget about Carlyle's buying their way out of a New York pension "pay to play" investigation. It cost $50 million to release Carlyle and their joint venture energy holding, Riverstone. Anybody see a U.S. Mint green pattern?

Watch for some Texas Hold 'Em slight of hand over Vought's $35 million promise to add 3,000 jobs in Grand Prarie by 2009. These greased PEU's are hard to nail down. (PEU stands for private equity underwriter.)

(Update: The Seattle Post Intelligencer says it is a done deal)

Oligarchs Train Democratic Governments

Two government bids for highly attractive investment areas, oil field service and toll road infrastructure, met with little response from huge oligarchs. How will the government react to their failure to bid? Will they conduct a "make or buy" assessment, considering not contracting out the service? Hardly, not with the religion that "government can't do anything competently."

The projects will be rebid, making things more attractive for the infallible private sector, literally a handful of energy and private equity oligarchs. CBS News reported:

Chevron Corp., the second-largest U.S. oil company behind Exxon Mobil Corp., said it decided not to submit a bid in the opening round, but didn't rule out doing so in future auctions.

It said it opted out after a "careful evaluation of the opportunities against Chevron's standard investment criteria and our inventory of investment projects worldwide."

It's the big money boys way of training the government. Sit and beg...