Tuesday, March 31, 2009
Regardless, Geithner won’t let it happen. Not when The Carlyle Group’s David Rubenstein and Arthur Levitt chair international and domestic reform efforts. The PEU boys want a mostly hands off form of regulation. Tim’s sovereign shift keeps global shadow bankers safe. It also protects the "too big to fail" commercial banks with their fingers in other countries.
WIRED’s Danger Room reports a $325 million contract to the Carlyle Group’s ARINC for 22 Mi-17s. That WIRED report raised a number of questions about the deal, beginning with its a cost that could be up to 100% more than other Mi-17 orders around the world. The report also questioned the lack of any competitive solicitation, despite the existence of numerous Mi-17 sources and brokers in North America and abroad.Other elements have ARINC purchasing Russian helicopters and funneling them through a United Arab Emirates firm. How many middlemen are needed? How do multiple hands, each with a profit requirement, impact the final purchase price?
Welcome to American purchasing, buying that enriches friends. The Carlyle Group leverages this at every turn.
When the producer is many steps removed from the final customer, it's a disaster for price and quality. 100% markup on a sale? That should help Carlyle meet their targeted 30% annual return. (It turns out no helicopters have been delivered and the Pentagon approved another $80 million for the purchase. Carlyle's government connections continue to pay off for ARINC, not for the people of Iraq). The Government-Industrial Monstrosity is Eisenhower's Military-Industrial Complex on steroids.
Update 8-4-11: ARINC delivered all 22 premium priced helicopters to Iraq.
Monday, March 30, 2009
The notational amount of derivatives held by insured U.S. commercial banks increased by $25 trillion in the fourth quarter to $200 trillion. The increase resulted from the migration of investment bank derivatives activity into the commercial banking system. Credit derivatives fell 2% to $16 trillion.
Taxpayers now backstop credit bets for the drunk pirates of the investment world. Meanwhile, Treasury's Geithner previewed a public-private partnership treasure chest. "Any of you boys want a 25% rate of return? Arghh!"
“Roads are the single greatest infrastructure element,” said Richard Chang, principle, Infrastructure Fund of Carlyle Group. “The public’s ability to deliver on such infrastructure is constrained, so the key is finding where private capital fits in.”Odd, the public seems fully capable of delivering $13 trillion in financial interventions, including public private partnerships financed 97% with public funding.
Yet, that same government puts off health care reform to 2010 while giving away public capital and revenue streams to PPP's. Horse hockey! The logical fallacies can only be resolved with the lens of Corporafornication.
Carlyle's headquarters are on Pennsylvania Avenue, down the street from the White House. It seems they retained their big money boy influence in the changing of the guard.
Four days after U.S. lawmakers berated Financial Accounting Standards Board Chairman Robert Herz and threatened to take rulemaking out of his hands, FASB proposed an overhaul of fair-value accounting that may improve profits at banks such as Citigroup Inc. by more than 20 percent.
Take this interchange at a March 12 hearing of a House Financial Services subcommittee:
“You do understand the message that we’re sending?” panel chairman Paul Kanjorski, a Pennsylvania Democrat, asked Herz.
“Yes, I absolutely do, sir,” Herz replied.
After hesitating, Herz said he would try to get a new fair- value rule finished within three weeks.
“The financial institutions and their trade groups have been lobbying heavily,” Herz said in an interview after the hearing. “Investors don’t lobby heavily.”
Maybe investors don't lobby, but they do invest, expecting accurate financial information. Between off balance sheet items and relaxing fair value accounting, accuracy remains in question.
Congress produces poor quality outputs, like their Wall Street counterparts who packaged trillions in junk on the Greed & Leverage Express. Lobbyists mobilize money for Congressional campaigns, a.k.a. political greed. Didn't that get combination get the financial system into trouble in the first place?
It's time for some major breaks from the past. Securitization shouldn't restart, nor should Congress accept kajillions from influence buyers. The last thing our ignorant leaders should do is set standards for any professional group based on lobbyists' needs. Criminey, who thought America would act like a third world country?
Sunday, March 29, 2009
15% equity-Uncle Sam will provide up to 80% of equity capital, Private investors 20%
One fifth of 15% is 3%. That's 33 to 1 public money to private funds. Yes, there's a difference between debt and equity, but taxpayers will provide up to 97% of the funding for PPP's. Greed? Investors expect double digit, even a 25% rate of return.
Greed and leverage are back...
With $3 trillion in distressed assets, supply could exceed demand for years. That means rock bottom prices in an elastic market. I guess that's better than no market, but it feels like Tylenol putting the bad stock out through a resale chain.
How much more financial junk will wash through Tim's PPP's? He proposed rules allowing Treasury to wind down nonbanks, hedge funds and private equity underwriters (PEU's). Will it happen under massive investor redemptions or when shadow banks hold too much trash? Can they just hand their problem over to Uncle Sam vs. declaring bankruptcy with a court managing an orderly wind down?
Time will tell if taxpayers continue to fund private sector losses and executive incentive compensation. The trend isn't pretty. Corporafornication is always disturbing to glimpse.
Saturday, March 28, 2009
In 1950, banks' share of financial intermediation was about 50 percent, it fell and then rose to about 48 percent in the mid-1970s, then declined to about 33 percent at the turn of the century. If one adjusts the data to include "credit equivalents" for the off-balance-sheet activities of banks, then the adjusted market share of financial intermediation for banks would remain above 40 percent in recent years.
From a national standpoint, seven percent (1/14) of bank financial intermediation is in credit equivalents and sits off balance sheet. From an institutional perspective (7/40), almost 20% of credit lies off bank balance sheets. Investors have no true idea of the company's exposure.
Add the mark to market change and financial statements may not be worth the paper they occupy. Poor quality killed Wall Street, Congress and the White House, and endangers the accounting profession. None of the aforementioned groups has the citizen's back. They have their hands in each other's pocket. (The graphic above is from CitiGroup.)
When assets grew, everyone liked "mark to market" accounting. The leverage boys borrowed more on an ever increasing asset base. However that leverage knife cuts deep when the underlying asset goes down.
FASB modified mark to market accounting under pressure from Congress. They threatened to write professional standards for the accounting profession. I'd like to know what CPA Mike Conaway thought about it. His West Texas Republican peer threatened, "Don't make us tell you what to do. Just do it. Just get it done." Randy wasn't alone. Rep. Gary L. Ackerman, D-N.Y. added, "If you don't act, we will."
Guess who raised the flag of concern? Arthur Levitt, Senior Adviser for The Carlyle Group and ex-SEC Commissioner. He's concerned about politics impacting professional standards. I'll put it more bluntly. America goes down a dangerous path when ignorant or tainted politicians write professional standards.
FASB should've fixed the off balance sheet problem, the one imploding companies overnight with investors clueless as to why. Credit and other derivative accounting is completely misleading. Forward looking contracts need addressing.
As a result of FASB's action and inaction, the public has little confidence in many balance sheets. Wall Street greed and leverage killed investing. Congress held a gun to FASB's head, as the accounting board threw dirt into the burial plot.
Friday, March 27, 2009
Hedge funds and buyout firms would also fall under the purview of a new regulator that would identify companies deemed “systemically important,” or capable of wreaking havoc on financial markets. Officials would have the authority to seize these firms if they threatened the markets, much as they do now with insolvent banks.
There is a process to unwind "run amok" financial firms. It's called bankruptcy, but that doesn't come with taxpayer bailouts. For the global big money boys to hang on Uncle Sam's bottomless tit, it has to run through the Executive Department. How toothy is Geithner's regulation, the public tough side of getting Uncle Sam cover your backside?
Geithner proposed requiring hedge funds and private-equity firms to register with the U.S. Securities and Exchange Commission and to disclose information about their holdings.
Once registered, the investment firms, including venture capital companies, would have to report information about their trades and counterparties to the SEC. The agency would share the data with the systemic-risk regulator, which could restrict the funds’ reliance on short-term financing and limit how much money they can borrow to maximize trading profits. The disclosures wouldn’t be made public.
Tim's toothless solution doesn't involve breaking up too big to fail, but backstopping it in secrecy. But the PEU boys say their is no risk to their operations. Isn't the government responsible for exploring illegal activity? Let's say The Carlyle Group knows one of its affiliates is approaching bankruptcy. What if they gave the word to a Carlyle European fund investing in distressed debt? A quick credit default swap purchase could lessen the Carlyle wide pain of an affiliate implosion. Who monitors such behavior? Back to original assertion of risk-less private equity firms.
While Rubenstein, who runs Washington-based Carlyle, said more regulation was unavoidable, the U.S. private-equity industry’s main trade group said its members don’t pose a systemic risk.
“Private-equity firms invest in companies, not exotic securities and their investors are long-term investors, eliminating the ‘run-on-the-bank’ type of risk that helped
create the current financial crisis,” Douglas Lowenstein, president of the Washington-based Private Equity Council, said yesterday in a statement.
Eliminating the run on the bank risk? Tell AIG Private Equity, which holds a chunk of an imploding Carlyle investment offering involving Freescale Semiconductor. What if AIG's PEU or another distressed investor needs its money back fast from Carlyle? And what if other investors hear of the run? Then Tim Geithner will step up with public money to make the big boys whole. Feel better? Now how else can Carlyle make money in the current reform environment?
Wednesday, March 25, 2009
Take ManorCare, Carlyle's huge nursing home affiliate purchased in December 2007. They diced that company's 500 facilities into separate business and real estate assets. They did so for liability reasons.
Carlyle has dozens of funds, each segregated. Those funds hold companies, many diced up like ManorCare. The private equity underwriter isn't too big to fail. It's too politically connected to miss out on taxpayer funded corporafornication.
How cheap can it go? Without financing IFLC could issue the dreaded going concern warning. That smacked IFLC's credit default swaps. How much does it cost to "insure" $10 million of their debt?
It takes an upfront payment of $3.35 million and $500,000 a year. Ten year coverage would cost $8.35 million or 83.5% of the principal. That's expensive coverage.
All this should drive the price of IFLC down to where Carlyle and company can make their 30% annual return target. The question is the taxpayer subsidy. How much will be direct vs. indirect in the private auction?
The Carlyle Group likes the insurance sector. They are in talks with Innovation Group PLC, an insurance software and outsourcing firm.
Tuesday, March 24, 2009
Geithner Tempts Investors With Loans, 25% Returns (Update2) March 24 (Bloomberg) --The US government’s plan to rid banks of toxic assets may attract ... - 2009-03-24
It could just be a Bloomberg server problem. (It was.) It's the latest round of White House sponsored Corporafornication. Cheap taxpayer subsidized loans, 25% returns...greed-check, leverage-check
Now Change Means No Change from W.
Already, holders of the lowest-rated CLO tranches are losing their interest income which is being diverted to pay senior noteholders, in what is viewed as a prelude to a wipeout that will ultimately see them lose their money.
Banks, hedge funds, asset managers and insurance companies are the buyers of CLO tranches, with hedge funds and asset managers typically piling in the riskiest tranches and banks in the safer AAA tranches.
Any damage from CLOs would follow on the back of writedowns by banks of more than $700 billion (476.8 billion pounds) from credit-related losses since the credit crunch began.
The number of CLOs in distress is rising as the credit quality of their portfolios continues to decline. Moody's placed 2,600 tranches of U.S. and European CLO obligations totalling $100 billion on review for possible downgrade on March 4.
Bankers expect 25 percent of European CLOs to be in the vulnerable position of having turned junior fees off by April and the number could rise as high as 95 percent by year-end.
Here's the odd part. CLO's were used to finance private equity buyouts from 2005-2007. While the PEU boys renege on these loans, they ponder partnering with Uncle Sam to buy this very junk from banks. If they repurchase CLO debt of affiliates, they get a tax break, one totalling $25 billion in the Obama stimulus package.
Treasury Chief Tim Geithner asked for authority to save nonbank financial firms. Coincidence or response to the CLO implosion? The world's gone flippy floppy.
Did Treasury Chief Geithner think banks would be willing to sell assets that weren't completely marked down?
Geithner danced around the question, but on further probing signalled that Treasury was willing to pump more money into any bank needing further capital--including if it is a result of liquidating assets via the Treasury plan. I took this to me that Treasury is protecting all major banks currently standing, from failure.
So the FDIC and Treasury could pressure banks to sell toxic assets to public-private partnerships on the cheap, with a promise to make up resulting capital shortfalls. That might get Carlyle's David Rubenstein the 20% rate of return his private equity underwriter (PEU) requires.
From Geithner's comments, more regulation of the financial sector coming.
You would think the people in the room (Rubenstein, Soros, Rubin, Levitt, Summers, Volcker, Schwarzman, Whitney, Altman, Binder) will have major input on what the regulations will look like. Geithner also mentioned the upcoming G-20 meetings and the fact that any changes in regulation will have to be global in nature. My thought, the One World financial plan is near.
It seems the lowest global common denominator goes beyond taxes and worker pay/benefits. Regulation is now included. Should this happen, the United States is controlled by global corporatists. The implied threat is big money boys will pack up their capital and flee to less taxed, lower paying, less regulated zones. Might they grab billions in American taxpayer provided capital and bolt?
In all the new talk about regulation, I've yet to hear private equity underwriters (PEU's) or sovereign wealth funds (SWF's) included. Did Tim speak to that? Senator Evan Bayh was present to watch the backs of PEU's & SWF's.
The Board of Directors can change incentive compensation. It's already within their power. The Treasury doesn't need to take over. Justice Department resolution, i.e. bankruptcy, allows all parties to be crammed down.
Treasury's proposal is a shift in power to the Executive Department vs. the Judicial. It's also a sign that "too big to fail" won't be challenged anytime soon. Mega-financial institutions want to be global giga-financial houses. Global shadow bankers (PEU's, SWF's, and hedge funds) are slated to save commercial bankers, with some seriously sweet terms. (PEU = private equity underwriter, SWF is sovereign wealth fund).
Break up the giga-houses, regulate the shadow bankers and let irresponsible financial firms fail via bankruptcy. Stop the endless cycle of taxpayer funded corporafornication.
Monday, March 23, 2009
“This ambitious program is structured in a way to attract private capital and help banks sell distressed or toxic assets,” said David Marchick, head of government and regulatory affairs at Washington-based Carlyle Group, a closely held private-equity firm.
Carlyle raised $1 billion to invest in this sector. They have a goal of $3 billion. While the Carlyle Group expects 30% annualized returns from most investments, it's willing to dial that down for guaranteed returns. Bill Gross from PIMCO cited an expected return in the teens. David Rubenstein, Carlyle Group co-founder told Robert Wenzel of Economic Policy Journal that Carlyle needs a 20% rate of return to participate in Treasury's PPP program.
Bonus fact: David Marchick is one of many Carlyle Group employees from the Clinton White House years. Others include Mack McLarty, Arthur Levitt, Chris Ullman, William Kennard, and Charles Rossotti. Who has more ex-Clinton staffers, Carlyle or the Obama White House?
6 to 1 on debt
That means the government will provide low cost taxpayer, nonrecourse loans for 85% of the partnership. The remaining 15% is equity. The government provides leverage in the form of:
20 to 1 on equity
Public money could comprise 14.25%, while private investment firms pony up 0.75% of equity. Of course, the numbers could be less/more. How likely is that for the greed and leverage boys? They want to restart the old system to generate big profits. The ratio for splitting eventual profits is:
Wow, taxpayers could provide 99.25% of the capital and garner only 50% of the profits. PIMCO's Bill Gross expects returns in the teens, 13% or greater, from this program. Corporafornication is alive and well. America's shadow banking system wins again. (Note: I've seen numerous articles citing varying percentages. The statistics in this piece came from CNBC's coverage this morning. CNBC's afternoon reporting cites a 50/50 split on equity. That makes the private contribution 7% with public funding 93%. Still heavily skewed in favor of the private investment firm.)
Sunday, March 22, 2009
However, those terms aren't attractive enough. What do the private equity underwriters (PEU's), hedge funds and sovereign wealth funds want? The NYT reported:
1. Non or limited disclosure
2. No compensation limits or special tax increases
3. Clear, unchanging governance rules
The Obama team has given the big money boys reason to participate. Another $1 trillion round of corporafornication is in order. Belly up to the bar!
Rebuilding America may be tough on taxpayers. Public financed, big money boy bailouts continue.
Saturday, March 21, 2009
Recall the same shadow bankers produced the junk, choking the life out of large commercial banks. Private equity underwriters (PEU's) are buying back affiliate debt on the cheap, with a $25 billion Obama stimulus tax break to boot. The NYT reported on Uncle Sam's new partners:
Risk-taking institutional investors, like hedge funds and private equity funds, have refused to pay more than about 30 cents on the dollar for many bundles of mortgages, even if most of the borrowers are still current. But banks holding those mortgages, not wanting to book huge losses on their holdings, have often refused to sell for less than 60 cents on the dollar.
Taxpayer money and public private partnership bidding will bridge the gap of this market conundrum. Another sweet deal for PEU's and their shadow friends! FT!
Lehman Brothers $2 billion
Hawaiian Telecom $6 million
Why don't creditors or shareholders deserve a shot at those funds? While the bankruptcy judge makes the final determination, management reveals much with their bonus requests.
Hawaiian Telcom Chairman Walter Dods said in a statement that it is important that the employees be compensated.
Once bankrupt, it's important that all parties be compensated, I mean bonused. Will The Carlyle Group continue to take a management fee from Hawaiian Telecom? Is the bankruptcy a plan to cram down creditors, given the huge debt Carlyle floated to acquire HT? Did any Carlyle distressed debt funds buy HT credit default swaps as the firm approached bankruptcy? HT bonds went from 102.75 cents on the dollar to 0.5 cents. But CDS holders don't have to own the underlying debt instrument. How many ways will Carlyle ring the register on HT's failure?
Friday, March 20, 2009
The insurer tried to settle its credit default swap contracts at a discount -- both before and after it received its first bailout last September. Goldman refused and ultimately secured everything it was owed by AIG.
Recall bankrupt Lehman Brothers credit default swaps settled at a deep discount. Of $72 billion in swaps netted to $21 billion, which turned into a $5.2 billion net funds transfer. Why should Goldman Sachs get "everything it was owed" by AIG? This is a much larger outrage than $165 billion in AIG bonuses. Goldman's $12.9 billion is roughly one tenth of taxpayer payouts to the global big money boys. Did everyone else get full payment on their credit bets through AIG?
I hope someone's keeping a tally on all the ways an imploded Wall Street sucks on the taxpayer wallet. How much has Goldman Sachs gotten? Let me count the ways. Of Goldman's $47 billion market cap, $23 billion came from taxpayers and $21 billion from government sponsored debt. That's $44 billion in corporafornication.
Russia is also planning to propose the creation of a new reserve currency, to be issued by international financial institutions, at the April G20 meeting, according to the text of its proposals published on Monday. It has significantly reduced the dollar's share in its own reserves in recent years.
Guess who just visited Vladimir Putin? Was it former cabinet members? Could it be representatives of the Council on Foreign Relations? Maybe corporate board members and international business consultants? How about private equity underwriters and their close friends? The answer is all of the above, including James A. Baker, III, Henry Kissinger, William Perry and other American dignitaries. Corporacrats are on the move.
UBS agreed to pay a $780 million fine, while AIG ponied up $306 million with the denial of their assertion. AIG is suing for the deduction, thus their money back. It seems nearly $200 billion in taxpayer money isn't enough.
Thursday, March 19, 2009
1. The U.S. government mobilized $13 trillion to address the financial crisis.
2. American citizens lost $13 trillion in wealth, with millions losing jobs.
3. 13 firms (receiving some of the $13 trillion in support) owe back taxes.
Out of 23 firms, 56% welshed Uncle Sam's IRS. Funny, UBS helped 17,000 cheat on their taxes and the firm got over $64 billion in government money.
4. GM received $13 billion in funds and requested up to $17 billion in additional funds.
Treasury announced a $5 billion program to support auto suppliers. It guarantees payment for parts shipped to ailing car companies. One benefactor is The Carlyle Group, with numerous auto supplier firms. Heaven forbid, Carlyle ponies up any of their $40 billion in dry powder. Taxpayers sponsored corporafornication continues! Private equity underwriters (PEU's) win again.
When will Treasury send billions to auto dealers? Carlyle's Mack McLarty and billionaire Bob Johnson may need help. Maybe, Paulson/Geithner already did.
Morris, a longtime Democratic consultant who also worked for Sen. Chuck Schumer, quietly registered as a financial broker just months after Hevesi took office in 2003.
Few people are said to have known of his involvement with Searle & Co., which is located above a Greenwich, Conn.
A Hunt Financial Ventures lawyer said the firm was told before it won $116.7 million in pension business to contact Morris, who instructed it to pay the referral fees to certain companies.
A political consultant pocketed at least $25 million in middleman fees from financial firms garnering pension fund investments. Influence buying Carlyle Group got the largest chunk of pension business. The Government-Industrial Monstrosity churns taxpayer money. Tired of it, yet?
Wednesday, March 18, 2009
The central bank will increase its purchases of mortgage-backed securities by $750 billion, on top of a previously announced $500 billion. It also will double its purchases of debt in Fannie Mae and Freddie Mac to $200 billion. The Fed also said it will buy $300 billion in long-term Treasury bonds.
America kick starts securitization. As for the long term Treasuries, did China quit buying U.S. debt? Maybe Zimbabwe will take their place.
Tuesday, March 17, 2009
It may sound like music to David Rubenstein and company. The Carlyle Group co-founder joins his private equity underwriter (PEU) peers. He snuck in Carlyle Senior Adviser Arthur Levitt. Levitt is identified as an ex-SEC chairman on the guest roster. Funny, both Rubenstein & Levitt chair other efforts to revise the global financial system. I bet they keep PEU's out of the regulatory limelight.
Monday, March 16, 2009
1. Libya's lobbyist, The Livingston Group, pushed the first Gulf War.
2. Six Persian Gulf nations formed the Gulf Cooperation Council, an economic union between Saudi Arabia, Kuwait, the United Arab Emirates, Oman, Qatar and Bahrain.
3. President Gaddafi heads the African Union and wants to create an African economic union.
4. The Carlyle Group hosted a dinner for Gaddafi's son at The Washington Club in November (story reported by The Jamahiriya News Agency). FT has a follow up on Libyan ties to PEU's.
5. The Carlyle Group launched a $500 million Middle East and North Africa fund.
Colonel Gaddafi is a quick study on "democracy and free markets." Allow American branded multinationals or the U.S. military will pave the way.
Update 2-1-14: It turns out Goldman Sach invested $1.2 billion in Libyan Investment Authority funds in six stock bets in March 2008, all of which turned up worthless. It took a lawsuit to get details on the investments Goldman Sachs made on Gadhafi's behalf.
Sunday, March 15, 2009
George H.W. Bush made millions working for the Carlyle Group, a high-powered Washington, D.C. consulting firm.
The Carlyle Group is not a consulting firm. It buys and sells companies as a private equity underwriter (PEU). Carlyle's website says this about the PEU:
The Carlyle Group is one of the world's largest private equity firms, with more than $85.5 billion under management. With 66 funds across four investment disciplines (buyouts, growth capital, real estate and leveraged finance), Carlyle combines global vision with local insight, relying on a top-flight team of 480+ investment professionals operating out of offices in 20 countries to uncover superior opportunities in North America, Europe, Asia, Australia, the Middle East/North Africa and Latin America.
While open to opportunities wherever they can be found, Carlyle focuses on sectors in which it has demonstrated expertise: aerospace & defense, automotive & transportation, consumer & retail, energy & power, financial services, healthcare, industrial, infrastructure, real estate, technology & business services and telecommunications & media.
As part of the shadow banking system, Carlyle used greed and leverage to grow from $12.5 billion to $91.5 billion during the George W. Bush Presidency. Bankruptcies and write downs recently took the number down to $85.5 billion.
However, Carlyle stands to grow that number substantially with the coming Treasury public-private partnerships. They have a $1 billion fund to invest in toxic assets, with a goal of $3 billion. Four of Carlyle's sectors are prime for taxpayer supported growth, energy & power, healthcare, infrastructure and financial services.
Why would CBS describe The Carlyle Group as a high powered consulting firm? They own one, Booz, Allen, Hamilton. Is it poor research? Carlyle's mission sits on their homepage. It states:
Our mission is to be the premier global private equity firm, leveraging the insight of Carlyle's team of investment professionals to generate extraordinary returns across a range of investment choices, while maintaining our good name and the good name of our investors.
"Extraordinary returns" equals greed and "leveraging insight" means using high powered political connections. Affiliate Boston Private Financial Holdings got $153 million in TARP money. This occurred while Carlyle had $40 billion on the sidelines.
"Premier global private equity firm" means Carlyle funds the race to the lowest global common denominator on taxes and worker pay/benefits. Ask Evan Bayh and Rahm Emanuel.
How much will they pay? The Carlyle Group can buy back affiliate debt for 23 cents on the dollar and postpone taxes for four or five years. They'll likely get toxic instruments at deep discounts, using taxpayer financing.
Mr. Goolsbee commented on President Obama's health care reform. Obama is open to taxing employer provided health insurance benefits. This was a George W. Bush strategy. If the employer loses deductibility and the employee retains it, expect a huge dump onto the worker.
The U.S. Chamber of Commerce could finally rid their members of that pesky health insurance benefit. President Obama met with the Business Roundtable last week. They clearly state the unfair burden of health insurance on American companies trying to compete in a global economy.
Corporafornication remains firmly in play. A.I.G.'s $165 million in bonuses for dragging the firm into a $170 billion black hole proves it.
Friday, March 13, 2009
“The Europeans want to use this as a forum to discuss global coordination of regulation, and the Americans are more interested in global coordination of firefighting,” said Randal Quarles, a former U.S. Treasury undersecretary and now a managing director at the Carlyle Group in Washington.
Uncle Sam usually gets his way, thus global regulation can wait. Funny. two Carlyle counterparts lead studies regarding regulatory reform. Cofounder David Rubenstein heads a World Economic Council effort, while Senior Adviser Arthur Levitt heads an industry reform study. How might private equity underwriters fare in a new regulatory framework? Quite well, I imagine. Who will watch our back?
Thursday, March 12, 2009
The three co-founders of The Carlyle Group are down. William Conway, Daniel D'Aniello, and David Rubenstein sat at #522 with $1.4 billion. They fell from #155 and $2.7 billion in 2008.
The fall offs are interesting. R. Allen Stanford of Stanford Financial fraud dropped from the 2009 list. Maurice Greenberg of imploded AIG missed the 2008 cut.
Wednesday, March 11, 2009
Counterparty risk among the world's largest derivative market makers has risen by 75% since the start of the year, with the bulk of the rise coming in the last three weeks.
The perceived risk of failure among the major OTC derivative market makers is in its highest percentile.
Citi and Barclays credit risk worsened, even as their stocks rose in value. Citi traded at 600 bp, the widest of any time in the index.
With credit derivatives worsening, two questions remain. One, credit default swaps signaled the September economic meltdown. What do they portend now? Two, taxpayers funded $50 billion in counterparty unwinding at AIG. How much is left?
Geithner said the Treasury will provide “precise” details of the plan in the next few weeks. “People will see how it’s going to operate and then it will go into place over the following weeks and months.”
Tim sold the program with odd logic:
The leverage increases the potential rewards while reducing the risk, allowing investors to pay a higher price for the toxic assets.
Borrowing may allow a higher price. It also could allow more volume at lower prices. This sounds like a political sales job. If it's a bait and switch, what is Tim hiding?
What additional taxpayer guarantees are included for the private equity underwriter (PEU) boys? They got $25 billion in stimulus for buying back debt for pennies on the dollar. Citizens tapping their IRA's to save their house were ignored. Things are becoming more precise. Corporfornication lives.
Tuesday, March 10, 2009
Bernanke’s reply: “Well, my forecasting record on this recession is about the same as the win-loss record of the Washington Nationals.”
The recession “surprised us in being more severe than anticipated,” he added. So the answer to Rubenstein’s question “depends critically on our ability to get the banking system and the financial system more broadly, not necessarily back to 2005, but back to a situation where…the markets are reasonably stable, and they… can perform their critical function of providing credit to the economy.
“If we can do that,” he said, “then I think that there’s a good chance that the recession will end later this year and that 2010 will be a period of growth.”
The Q & A occurred during Bernanke's address at the Council on Foreign Relations. CFR paves the way for U.S. branded multinationals to garner loads of business in recently transformed economies. They're doing a fine job, according to recent news reports.
Exxon instructed Iraqi's on how to structure their oil markets for investment. Reuters reported:
Exxon Mobil Corp is in constant dialogue with Baghdad to create the investment climate that would allow it to become a significant player in Iraq's energy sector, Exxon's chief executive said on Monday.
American banks shrugged off their ever imploding balance sheets for Iraqi business. The Washington Independent reported:
Representatives of U.S. banks, JP Morgan and Citibank and others came to Baghdad on January 28th, participated in an international banking conference that explored correspondent banking relations that would deepen commercial ties between Iraq and the international community, business community. Citibank has already established correspondent relationship services agreement with Iraq’s Warka Bank.
Rubenstein's Carlyle Group closed a $500 million fund focused on the Middle East and North Africa. BizJournals reported:
The D.C.-based private equity giant said funds will be injected into healthy, growing companies in such sectors as energy, financial services, health care, industrial, infrastructure, technology and transportation in the Middle East and North Africa (MENA) region.
How much will end up invested in Iraqi financial or energy firms? Rubenstein is known for his introductions of Paulson, Bernanke and other high level public/corporate servants. Such interconnections are amazing.
Monday, March 9, 2009
Will Frances share how she jumped on a plane to Saudi Arabia, rather than help with the White House Hurricane Katrina response? Will she share how that crisis became an opportunity for The Carlyle Group and Tenet Health? Neither corporate owner, responsible for Memorial Medical Center's 34 patient deaths, made Townsend's Katrina investigative report. Jeb Bush landed a spot on the Tenet board about a year after Fran's whitewash.
The Carlyle Group purchased LifeCare Hospitals weeks before Katrina sideswiped New Orleans. LifeCare lost 24 patients in the storm's aftermath. Ironically, SunGard changed hands about the same time. SEC filings state:
Sungard was acquired on August 11, 2005 by a consortium of private equity investment funds associated with Bain Capital Partners, The Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co., Providence Equity Partners, Silver Lake Partners and Texas Pacific Group.
Frances Townsend and private equity underwrters (PEU's) make quit the pair.
The D.C.-based private equity giant said funds will be injected into healthy, growing companies in such sectors as energy, financial services, health care, industrial, infrastructure, technology and transportation in the Middle East and North Africa (MENA) region.The November dinner, in honor of Muammar al-Gadhafi's son, paid off. The Carlyle Group hosted the soiree at the Washington Club. The elder Gadhafi was elected Chairman of the African Union. He favors an economic union on the continent. What timing!
Sunday, March 8, 2009
Starting March 17, large investors -- including hedge funds and private-equity firms -- can obtain cheap credit from the Fed and use the money to buy newly issued securities backed by such loans."
Uncle Sam will spend taxpayer money to spark the engine. Who benefits? The WSJ reported:
The TALF effectively turns the Fed into a generous prime brokerage. The central bank lends money for up to three years to investment firms to buy bonds backed by assets like auto or credit-card loans. The Fed needs to lure investors back into the market for these asset-backed securities, or ABS, where new issuance has almost disappeared."
Hedge funds, private equity and sovereign wealth funds are the benefactors of taxpayer largesse. They get cheap credit and guarantees for stepping back into the water.
This same group is slated to be the savior for failing banks, via Treasury sponsored public-private partnerships. Private equity underwriters (PEU's) can garner cheap loans and financial guarantees for buying old toxic assets.
Amerca's shadow banking system rode the greed and leverage engine hard for years. It produced vaporware financial products. When push came to shove, part of the shadow system fled to the safe harbor of commercial banking. Now the rest of the dark boys are slated as Supermen.
The question of the week is who got $50+ billion in counterparty unwinding from AIG, mostly under the Bush administration. Did the shadow boys make out again? What to do with all that green?
Middle Eastern sovereign wealth funds are still fat from your $4 a gallon gas money. The UAE spent $4 billion in two days to buy more war toys.
PEU's, guns and money...Dad, get me out of this.
Update 4-12-11: TALF benefited the wife of Morgan Stanley CEO John Mack and the widow of Morgan's former investment banking head. Rolling Stone states the Fed handed out a trillion dollars to banks and hedge funds, almost interest-free.
Saturday, March 7, 2009
The economic stimulus package, passed by Congress, included $25 billion in tax breaks for companies buying back their debt. This provision was inserted by Senator Max Baucus, D-MT, chair of the Senate Finance Committee. How might this play out? The Peninsula, a Qatar daily reported:
“Private equity firms will spend 70 percent of their time shoring up their investments, 20 percent of their time shoring up their investor base, 5 percent trying to raise new money and 5 percent trying to do new deals,” says David Rubenstein, co-founder of Carlyle. Keeping the companies they own alive through a brutal slowdown is, as Rubenstein implies, practically a full-time job. Firms are attempting to restructure the debt in those companies, buying the debt of their deals either because it is cheap or to have a seat at the table when the companies hit the wall and control goes to the creditors."
The Carlyle Group lost one affiliate, SemGroup, to debt holders. They assure a seat at the bankruptcy table if more fall, like TPG's Aleris and KKR's Masonite International. Currently Carlyle is trying to restructure debt at Freescale Semiconductor and IMO Carwash.
Carlyle co-founder David Rubenstein also noted debt is cheaply priced. How many pennies on the dollar is that? For Carlyle's American Achievement Group it's 23 cents on the dollar. Add in the tax benefits and it becomes more attractive.
But what happens when one offering of Carlyle sells to another? Who's watching to make sure that goes fairly? Irish Stock Exchange Carlyle Capital Corporation sold debt holdings of other Carlyle affiliates at a loss of $30 to 40 million.
If Carlyle has an affiliate approaching bankruptcy, can they buy credit default swaps on that company's debt? Hawaiian Telecom, Edscha, Freescale and IMO are candidates for such a strategy. Recall, one doesn't have to hold the underlying asset to buy credit coverage. Who's watching that?
America's unregulated shadow banking system set up our global financial implosion. Who's ensuring a more sound future foundation? It can't be PEU's and their political lapdogs. They got us in this fix.
The coalition, known as the Healthcare Reform Dialogue, is led by the president of the American Hospital Association, Richard J. Umbdenstock, and includes representatives of doctors and nurses, patients and consumers, insurers, drug companies and employers of all sizes.
Peter S. Adler, president of the Keystone Center, a nonprofit group facilitating the discussions, said the dialogue started with 20 participating organizations and now had 18.
“S.E.I.U. and Afscme have left the table,” Mr. Adler said Friday in an interview. “They have voluntarily pulled out at this moment. We are trying to keep the lines of communication open.”
Things must have gotten tense on who would step up and pay for 48 million people to get health insurance coverage. Possible groups are individuals, unions, employers and the government.
SEIU President Andy Stern already weighed in on trends in paying for coverage. He said the following in summer 2006. Note he is the head of a health care workers
Andrew Stern, president of the Services Employees International Union. "We have to recognize that employer-based heath care is ending. It's dying. It will not return," he said Friday at a forum sponsored by the Brookings Institution, a Washington think tank.
If employer sponsored health insurance is dying, that means other groups need to pick up the slack. Is that what the fight is about? Should one hold onto their wallet or heart? The big one might be coming.
Friday, March 6, 2009
Congress passed a stimulus bill that included $25 billion in tax breaks for firms buying back their own debt. Was that the reason for the sale?
Irish CCC will keep mortgage backed securities issued by Fannie Mae and Freddie Mac. How might they play in the yet to be revealed public-private partnerships (PPP)? Will CCC be able to sell them at a profit to a PPP fund, guaranteed by taxpayers? Stay tuned.
Thursday, March 5, 2009
This follows over a decade of executive stock option backdating, robbing shareholders. Most CEO's returned their profits while not admitting guilt.
The UBS offshore tax haven went on during much the same time as specialist pickpocketing. President Obama's Justice Department went light on UBS. The only executive charged in the widespread, long term illegal scheme lives in Switzerland and is not subject to extradition.
Poor quality killed investing. Off balance sheet items can implode a company overnight. Fringe financial activities can bring a company down. Ask The Carlyle Group about SemGroup. It failed from hedging, forward looking contracts. Investors are on their own. It's buyer beware, nearly everywhere, investing, food, medicine, toys, and politics. What's next? (I gave the SEC a pass on Bernie Madoff and Sir Allen Stanford)
Wednesday, March 4, 2009
Branson said the bank had fulfilled “the summons to the fullest extent possible without subjecting its employees to criminal prosecution in Switzerland.”
Federal authorities are seeking to force UBS, the world’s largest private bank, to disclose tens of thousands of names of wealthy American clients. UBS, which averted indictment last month and reached a $780 million deferred prosecution agreement with the Justice Department, turned over around 250 to 300 names as part of that deal.
Mr. Branson, who is testifying before the Senate Permanent Subcommittee on Investigations, said that “the bank has now done all that it can do to cooperate with the John Doe summons” — the federal effort to obtain the 52,000 names.
Branson told members of the United States Senate that Swiss laws trumped U.S. laws? What Justice Department negotiated for 300 names out of 17,000-20,000? That would be the President Barack Obama, clean up Washington, administration. UBS contributed $513,919 to the Obama campaign and was #3 on Rahm Emanuel's lifetime donor list. They're rubbing our noses in it.