Thursday, November 20, 2008

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.