Saturday, February 28, 2009

Carlyle Group to Have Luck of the Irish?

The Carlyle Group is in a consortium looking to acquire Anglo Irish Bank. The group of investors might put $5 billion into the flagging nationalized bank. Other Irish banks aren't keen on having a deep pocketed competitor with significant government guarantees. The Irish Independent reported:

Other banks fear that the consortium could have an unfair advantage with such guarantees from the Government. They fear a private equity-owned Anglo could withdraw support from some developers, sending them into bankruptcy. This could result in massive losses at other banks exposed to these borrowers, but who do not enjoy the same Government indemnity. Analysts also point out that the proposal in its current form sees taxpayers sharing the risk but none of the upside if Anglo comes out well on the other side of the downturn.

Sources close to the consortium insist that the investors plan to hold onto Anglo for seven to 10 years, rather than try and make a quick buck.

Government guarantees and large private ownership stakes for an ethically challenged financial firm? Is this a preview for Tim Geithner's public-private partnerships? Stay tuned.

Update 8-27-11:  Anglo Irish unloaded nearly $10 billion in U.S. real estate loans to JPMorgan, Wells Fargo and PEU Lone Star.   Winning bids for the loans averaged about 80 cents on the dollar.  How much did the subperforming and nonperforming loans go for?  Is there a PPIP in their future?  Meanwhile, Anglo Irish looks at a 2020 wind down, while Bank of Ireland and Education Savings Bank live to loan another day.  Wilbur Ross is connected to both surviving institutions.  He's part of a group that bought 35% of Bank of Ireland but was rebuffed by ESB, which sold out to Allied Irish Banks.

Converting Citizen Holdings in CitiSkank to Common: No Preferred Dividends

U.S. taxpayers held $25 billion in CitiBank preferred shares. They paid 5% a year for the first five years and 9% thereafter. Uncle Sam got not one dividend payment before converting their capital to common shares, with no dividend. Over a ten year period Citi would've paid $17.5 billion in dividends.

No new capital doesn't mean it's a good deal for taxpayers. The future stock price will determine its success or failure. Treasury paid $3.25 a share for Citi. It closed at $1.50. Corporafornication remains alive and well.

Friday, February 27, 2009

Obama's National Infrastructure Bank to Loan to PEU's?

President Obama included $5 billion in his budget for a National Infrastructure Bank. It will provide $25.2 billion through 2019. The budget document states:

"The mission of this entity will be to not only provide direct federal investment but also to help foster coordination through state, municipal and private co-investment in our nation's most challenging infrastructure needs."

Public-private partnerships will be funded by the NIB. Numerous private equity underwriters have billions ready to invest in infrastructure, using Uncle Sam's levered capital.

The Carlyle Group--$1.35 billion

Blackstone Group-$2 billion

KKR-$5 billion

Macquarie-$12.4 billion

In 2008 $34.9 billion was raised for infrastructure by 18 firms. That grew to an expected $94 billion in 2009. The Obama bank supplies the leverage for the next round of PEU profits.

Carlyle's UAE Connections a Flying Carpet

The Carlyle Group has airy connections to the United Arab Emirates and their sovereign wealth funds. Here they are:

1. Mubadala Development Co. purchased 7.5% of The Carlyle Group

2. Carlyle sold Landmark Aviation and Standard Aero to Dubai Aerospace. This received no media attention, despite occurring between the Dubai Ports World outrage and the NASDAQ/Bourse uproar.

3. Mubdala signed a joint venture agreement with Sikorsky Aerospace Services. It establishes a military aviation MRO joint venture in Abu Dhabi. It will support the UAE Armed Forces and other military aircraft in the Middle East and North Africa.

Other military aircraft in the Middle East and North Africa? That wouldn't be the U.S. military? The Carlyle Group leverages political contacts to make big money on government work. Did they teach Mubdala their tricks?

Thursday, February 26, 2009

Obama Proposes Taxing Carried Interest as Income in 2011

Private equity underwriters (PEU's) have at least two more years of preferred taxation on investment earnings. That assumes Congress passes President Obama's budget proposal. The big money boys bankroll many Democrats and most Republicans.

The provision could fall by the wayside anytime between now and 2011. Watch for the PEU boys to throw a fit, unless they already reformed compensation knowing the rule change was coming?

This could be as effective as George W. Bush's lecturing Wall Street traders for Board approved CEO pay abuses. Stay tuned.

Wednesday, February 25, 2009

Bush's Nursing Home Rule Change Benefits Carlyle Group

President Bush designated nursing home state inspectors and Medicare/Medicaid contractors as federal employees. That gives them liability coverage, courtesy of Uncle Sam. It also makes it more difficult to get information from state officials.

The same President Bush approved The Carlyle Group's purchase of ManorCare in December 2007. ManorCare has 500 facilities, most are nursing homes. WaPo reported:

The new rule, which was issued in September, generally prohibits state health departments and contractors from participating in private lawsuits involving facilities that are in the federal assistance program without approval by the head of the Department of Health and Human Services.

Does it also provide Federal Tort Claims Liability Act coverage? That's sweet corporafornication, either way.

Did Tom Scully lobby for the Bush rule change? Scully lobbies for the long term health care industry in his Alston & Bird role. He's also a fellow PEU, private equity underwriter at Welsh, Carson, Anderson & Stowe. Tom was once Bush's Medicare/Medicaid chief. Hmmmm....

Every Picture Tells a Story

BBC News reported.

David Rubenstein Garbage Disposer

The Carlyle Group plans to make big money off America's banking crisis. It has three funds dedicated to distressed debt and the financial sector. The Council on Foreign Relations directs the race to the lowest global common denominator on taxes and worker pay/benefits. CFR interviewed Carlyle co-founder David Rubenstein. He said:

The Carlyle Group's David Rubenstein, in a recent interview with, said the U.S. government's strategy is best understood as a "kitchen-sink approach." Washington doesn't "really know what will be necessary to make it work," Rubenstein said, "but they're willing to try almost anything."

Does that anything include billions in taxpayer funding for public-private partnerships? Maybe it includes taxpayer backed guaranteed returns for America's shadow banking system? I smell a politically connected PEU, private equity underwriter.

Tuesday, February 24, 2009

Pentagon Chief Weapons Buyer Ashton Carter: PEU

President Obama's new Pentagon weapons purchaser is a private equity underwriter (PEU). Ashton Carter is a Senior Partner with Global Technology Partners, LLC, an investment firm specializing in defense firms. GTP held interests in defense firms during Carter's tenure. Pension & Investments reported:

Behrman Capital sold its majority stake in Condor Systems for $134 million to an investor group led by Global Technology Partners and DLJ Merchant Banking Partners II. Behrman will now become an investor in the privately held defense electronics firm.

Condor Systems made false statements and incurred a $1 million fine for trying to sell defense electronics to Sweden. Carter was with GTP during this fiasco.

Carlyle's Quarles Supports Geithner Plan

Treasury Chief Tim Geithner has at least one supporter, Randall Quarles of The Carlyle Group. Geithner's plan involves stress testing banks (another irritating health care analogy). Toxic assets poison balance sheets and clog America's credit arteries. Tim wants to move the poisonous plaque to a public-private partnership. That's what has Carlyle and other private equity underwriters salivating. Quarles told Bloomberg:

“You have to remove the uncertainty about asset values, and Geithner’s plan is an efficient way of jump-starting private- sector price discovery of those values,” said Randal Quarles, a former Treasury undersecretary of domestic finance who is now a managing director at the Carlyle Group in Washington.

I thought the private sector could conduct price discovery on its own. America's sovereign debt fund is needed to bankroll PEU's. Taxpayers are needed to guarantee PEU returns. This warrants a Rick Santelli rant, but that's reserved for individual welfare. Corporafornication merits little reaction.

Obama Appoints PEU for Pentagon Purchasing Role

President Obama appointed Ashton Carter to oversee Pentagon weapons purchasing. Politico tried to paint his choice as puzzling, claiming Dr. Carter is an outsider to the defense industry. Funny, his bio says:
Dr. Carter is currently Senior Partner for Global Technology Partners, a defense oriented investment firm. He is also a member of the Board of Trustees of the MITRE Corporation, and the Advisory Boards of MIT's Lincoln Laboratories and the Draper Laboratory. He is a consultant to Goldman, Sachs, Inc. and Mitretek Systems, Inc. on international affairs and technology matters, and speaks frequently to business and policy audiences. Dr. Carter is also a member of the Aspen Strategy Group, the Council on Foreign Relations, the American Physical Society, the International Institute of Strategic Studies, and the National Committee on U.S., China Relations.
Dr. Carter knows how to advise corporations wanting to make money off the Pentagon. What about his defense industry knowledge? The same bio notes:
A longtime member of the Defense Science Board and the Defense Policy Board, the principal advisory bodies to the Secretary of Defense, Dr. Carter continues to advise the U.S. government as a member of Secretary of State Condoleezza Rice's International Security Advisory Board, co-chair of the Senate Foreign Relations Committee's Policy Advisory Group, a consultant to the Defense Science Board, a member of the National Missile Defense White Team, and a member of the National Academy of Sciences Committee on International Security and Arms Control.

From 1993 to 1996, Dr. Carter served as Assistant Secretary of Defense for International Security Policy, where he was responsible for the national security policy on arms control in the states of the former Soviet Union, for countering arms proliferation worldwide, and for overseeing the U.S. nuclear arsenal and missile defense programs. He was twice awarded the Department of Defense's Distinguished Service Medal, the highest award given by the Pentagon, and was also awarded the Defense Intelligence Medal.
The Pentagon has corporatists in key purchasing positions. Global Technology Partners has Ashton Carter in a plum spot, Under Secretary of Defense for Acquisition, Technology and Logistics. The Carlyle Group had Dov Zakheim in the Commission on Wartime Contracting on Afghanistan and Iraq. Dov works for Booz, Allen, Hamilton, a Carlyle affiliate. I smell a PEU, private equity underwriter.

Now Change Means No Change from W. The Blue team can send immense chunks of business to their corporate friends. No wonder the Reds are so spitting mad.

Monday, February 23, 2009

Credit Coverage for AIG's IFLC is 35.7%

Anyone wanting credit "insurance" on AIG's aircraft leasing division debt will pay stratospheric rates. Reuters reported:

The cost to insure $10 million of ILFC debt for five years rose on Friday to $1.57 million up front, plus annual payments of $500,000, according to Markit Intraday. The up-front cost was $1.42 million on Thursday.

The cost to insure $10 million of AIG debt for five years rose to $685,000 annually from $610,000, Markit Intraday data shows.

The five year total for ILFC coverage is $3.57 million, or 35.7%. ILFC's credit default swaps are higher than the week of September 15, when George W. Bush pulled the emergency stop and saved AIG. History repeats, as AIG approaches the feds for another huge handout.

ILFC is up for sale and The Carlyle Group is one of the balls in the air. What will their purchase do to ILFC's cds rates? What kind of sweeteners will Treasury offer? Stay tuned...

Pro-Cyclical Conaway Supports Fair Tax Bill

Representative Mike Conaway (R-TX) signed on as cosponsor of the Fair Tax Act of 2009. The bill is described as:

To promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the States.

I find it odd that CPA Conaway would adopt a pro-cyclical tax plan. As the economy booms or busts, the federal cash window could swing wildly.

Mark to market accounting is criticized for being pro-cyclical. When assets increased in value, mark to market accounting primed the leverage pump. It fueled additional borrowing.

So what's the underlying logic to stopping mark to market accounting and dropping income. capital gains, and carried interest in favor of a national sales tax? Both plans favor robber barons, corporations and the wealthy.

Republicans aren't the party of no, they're the party of greed. Democrats conducted a fine imitation the last two decades. The suck up to corporations and the wealthy continues. America races to the lowest common denominator on worker pay/benefits and taxes.

Sunday, February 22, 2009

San Angelo's Frothy Deals-Town & Country, SACMC

While home prices never soared in West Texas, several 2007 corporate acquisitions look pricey in hindsight. Just as a homeowner pays a higher mortgage when they buy a bigger home, business combinations add to a firm's debt and interest load.

Susser Holdings Corporation purchased Town & Country Food Stores

Interest expense
2007 $17.2 million
2008 $40 million (estimated from 9 months data)

Long term debt
2007 $120 million
2008 $410 million

Susser's mortgage went up almost $300 million. Their monthly house payment increased $2.75 million. That's alot of folks milk and gas money, especially in tough times. But that didn't deter Lord Abbett from buying 1.7 million and and Fidelity 2.2 million shares of Susser.

Community Health Systems bought San Angelo Community Medical Center

Interest expense
2006 $104 million
2008 $650 million

Long term debt
2006 $1.9 billion
2007 $9.1 billion

CHS's mortgage went up $7.2 billion. Their monthly house payment increased $45.5 million. That has to be a hard pill to swallow in the current economic environment. Fidelity purchased 7.1 million shares of CHS. A Ronald Baron bought 8.8 million shares. Good thing he isn't named Robert. It's a bad sign when Robber Baron holds 10% of your shares.

While West Texas claims immunity from America's excesses, San Angelo landmarks bear the weight of additional debt. I don't know how all this will play out, but we are not immune.

Thursday, February 19, 2009

America's Sovereign Debt Fund Marks $1 Trillion for PEU's

Treasury Chief Tim Geithner and Fed Chief Ben Bernanke plan $1 trillion in funding for public-private partnerships. The NYT reported:

The Treasury Department and the Federal Reserve plan to spend as much as $1 trillion to provide low-cost loans and guarantees to hedge funds and private equity firms that buy securities backed by consumer and business loans.

The Fed is expected to start the first phase of the program, which will provide $200 billion in loans to investors, in early March.

America's shadow banking system caused much of the global financial meltdown. Now they get taxpayer subsidies to buy banks? How far down the rabbit hole will America go? The Carlyle Group and their PEU brethren win again. (PEU-private equity underwriter)

Carlyle Group Welshes on Debt

Forget about the Carlyle Group's bankruptcies leaving creditors with pennies on the dollar. Two affiliates, Freescale Semiconductor and IMO Carwash plan to cram down creditors.

Recall the Treasury Department wants firms like Carlyle to save banks. The stimulus package provided tax breaks for companies buying back debt on the cheap. Rule changes may keep Carlyle a winner. Blue corporafornicates almost as well as Red.

UBS Gets Double Break in Justice Department Settlement

Phil Gramm's UBS walked away from muti-year, widespread criminal behavior with a settlement. The firm helped 17,000 Americans cheat Uncle Sam. They illegally offshored $20 billion in assets. UBS did so despite a 2001 deal to provide names of account holders to the IRS.

The settlement did not make the Obama team's transparency list. It sits under seal. Bloomberg reported 250 names will be revealed. That leaves 16,750 unnamed. The $780 million settlement came in well under the expected $1 billion amount. What else did Obama's Justice Department do to help UBS? WaPo reported:

The settlement allows UBS to delay for up to four years a big chunk of its promised payment to the U.S. government.

Does UBS deserve a break?

Executives "at the highest levels of management," as well as lower-ranking managers and employees, are unindicted co-conspirators, according to yesterday's filings.

In 2006, executives rejected an internal recommendation that UBS stop providing Swiss accounts to U.S. clients, the government alleged. UBS executives considered that step too costly, the government charged.

That business generated annual revenue of up to $200
million for UBS, according to estimates in yesterday's court

The fine wipes out less than four years of profit on the illegal activity. The only person indicted is a Swiss citizen, who is legally protected from extradition. It seems Phil Gramm got his cake and got to eat it to. American justice for the big money boys.

Tuesday, February 17, 2009

China's SWF May Bid on AIG's ILFC

China's sovereign wealth fund may partner with Chinese banks for a bid on AIG's aircraft leasing unit. AIG is owned by America's sovereign debt fund. China's investments in the U.S. fared badly to date. Reuters reported on Chinese Investment Corp's returns:

CIC's two highest-profile investments, stakes in U.S. financial firms Morgan Stanley and Blackstone Group, have incurred substantial paper losses.

Why might they bid on ILFC?

China is making and buying more airplanes and industrial and telecommunications equipment on the back of economic growth and rising consumption. Leasing can be used as an alternative to lending to finance big-ticket purchases by Chinese companies.

China may need roughly 3,000 new airplanes, worth about $300 billion, over the next 20 years, Airbus has forecast.

CIC may want the Carlyle Group's advice on moving aircraft related companies without public outrage. They sold Standard Aero and Landmark Aviation to Dubai Aerospace. Carlyle worked their magic between the Dubai Ports World uproar and the Dubai Borse-NASDAQ concern.

Sunday, February 15, 2009

Geithner Sells PPP to G-7

U.S. Treasury Chief Tim Geithner proposed public-private partnerships as the solution to ongoing bank implosions. The Washington Post reported on Tim's emphasis at the G-7 meeting.

Geithner is considering a strategy using public and private funds to tailor solutions for specific banks, the officials said. In one case, government guarantees would be provided to protect a bank from future losses caused by the toxic assets. In another case, the government would buy the assets outright from a bank.

Speaking from a few pages of notes that he had quickly scribbled in a small notebook, Geithner laid out for finance ministers the thinking behind the $787 billion economic stimulus and the U.S. financial rescue, which could contain more than $2 trillion in public and private spending. The initiatives, Geithner told the officials, were designed to be massive enough to address the depth of the U.S. crisis and last long enough to stimulate the economy for the duration of the recession.

Public-private partnerships aren't just for failing banks. They figure strongly in the stimulus plan. One firm is ready to profit. The Carlyle Group has a $1.15 billion infrastructure fund, a $1.35 billion distressed debt fund, and is raising $3 billion for bank investments. The politically connected private equity underwriter (PEU) benefits from Obama's corporafornication.

Saturday, February 14, 2009

Carlyle Group Banks on Obama: From Dry Hole to Gusher

The Carlyle Group couldn't own but a small chunk of a bank, not without having to convert to a bank holding company. With the stroke of a pen, Bush's Fed Chief Ben Bernanke wiped that out. President Barack Obama turned the pen into a drill bit. Private equity underwriters (PEU's) will factor large in Treasury's public-private partnerships to save banks. The nation saw how well private lifeguards worked during Hurricane Katrina.

Bloomberg reported on Carlyle's efforts to raise $3 billion for bank investments. The golden age of private equity is ahead, only they're using taxpayer's gold and government guarantees. Carlyle never liked a level playing field. It remains tilted in the PEU boys favor, with Sarkozy and Quarles about to hit their Santa Rita. Watch out boys, it's raining money! Corporafornication continues.

Friday, February 13, 2009

Carlyle Group's Micro Office in the Cayman Islands

The Carlyle Group runs a $230 million offshore investment firm from the Cayman Islands. They pay a Swiss Bank to handle TCG Ventures' correspondence. Would their office be located in the Ugland House? The building houses 18,857 offshore corporations.

Would UBS, the other offshore tax cheating facilitator, be the Swiss Bank? UBS illegally sheltered income for 18,000 Americans. The IRS responded not by investigating the names on their list. Instead, they had UBS send a letter to the tax cheats. It basically said, if you claim this account, you'll be turned over to the IRS. How much free money did Phil Gramm's company garner?

Back to the Carlyle Group, the latest offshore tax cheats. Sixty seven wealthy companies and individuals ponied up the $230 million. The Guardian reported many of the owners were concealed behind corporate names and other offshore accounts.

Note that Carlyle co-chairs two international study groups reforming the global financial system. David Rubenstein chairs the World Economic Forum effort, while Arthur Levitt chairs another industry study group. I bet they retain their preferred status.

Thursday, February 12, 2009

Carlyle's David Rubenstein Gets His Own Bill

The U.S. Senate devoted a bill to Carlyle co-founder David Rubenstein. S.J.Res.8 honors Mr. Rubenstein with appointment as a citizen regent of the Board of Regents for the Smithsonian Institute. When will they dedicate a real bill to the Carlyle co-founder? Taxpayers send his corporate monstrosity enough money to warrant such a thing.

Another Carlyle Co-Chair to Revise Financial System

As governments reorganize the failed global financial system, the Carlyle Group has more than a seat at the table. They hold the chairman's gavel. Carlyle co-founder David Rubenstein headed the World Economic Forum's effort. He shared the gavel with Merrill Lynch's John Thain, until Thain followed Wall Street with his personal implosion.

Dow Jones reported Arthur Levitt, Carlye Senior Adviser, will chair a working group. They'll make recommendations for overhauling the way financial markets are regulated.

What are the odds private equity keeps its preferred status?

Tuesday, February 10, 2009

Geithner-Obama's Bank Rescue Plan to Finance Shadow Banking System

Treasury Chief Tim Geithner dropped an egg on stock markets with his broad policy announcement. The market expected specifics. They plummeted.

Tim stressed Uncle Sam would loan to private firms and guarantee their returns. Would the loans occur at below market rates? What level of returns is guaranteed for private firms accessing cheap debt, 10%, 15%?

Six months ago, private equity and hedge funds couldn't own banks. Today they can. The Carlyle Group is considering a bid on BankUnited, a Florida bank.

In Senate testimony, Geithner said financial markets are complex and fragile. Guess what he wants to restart ASAP? Securitization, a complex and fragile investment vehicle. More hair of the dog tonic for badly hungover Wall Street.

Public-private partnerships sounds like more corporafornication. Pppppffttt!

Saturday, February 7, 2009

David Rubenstein: Asset Bubble Burst Wasn't Balloon, but a Condom

Carlyle Group co-founder David Rubenstein joked with students at Harvard Business School about the credit/asset bubble. FT reported:

In trying to keep the attention of students in a talk on asset price bubbles, he said: "I analogise it to sex. You realise there were certain things you shouldn't do, but the urge is there, and you can't resist."

So the big money boys corporafornicated, stressing the reservoir end. They pounded away for profits, which maximized their executive incentive compensation. Hundreds of CEO's threw quality to the wind. They rode the siren of greed and leverage until their protection failed. The condom burst, drowning Wall Street in their years of greedy seed.

Only the big boys haven't stopped corporafornicating. They still can't resist and Uncle Sam facilities the financial orgy. With a failed condom, the taxpayer is at risk from their spent bodily fluids.

Friday, February 6, 2009

Carlyle Group Knotted to U.S. Government

The U.S. and the Carlyle Group are intertwined in a massive Gordian knot. The latest bulge in that tangle is Louis J. Giuliano's election to Vice Chairman of the U.S. Postal Service Board. Mr. Guiliano is a Senior Advisor to The Carlyle Group. He sits alongside Arthur Leavitt (SEC), Mack McLarty (Clinton Chief of Staff), John Jumper (Air Force Chief), and Charles Rossotti (IRS). One level down sits William Kennard (FCC), David Marchick (Clinton White House), Olivier Sarkozy (half brother of French President), and Randall Quarles (Treasury).

And Carlyle co-founder David Rubenstein whined at the SuperReturn conference that he might have to do more lobbying. I bet Carlyle's $16,000 to Representative Rahm Emanuel and their $28,000 speaking fee to Leon Panetta get them phone access. Emanuel is Obama's Chief of Staff and Panetta the CIA nominee. Huge intelligence provider Booz, Allen, Hamilton needs to service billions in debt. BAH can't join the Carlyle fallen.

Carlyle Capital Corporation
Blue Wave Partners
Hawaiian Telecom

Will President Obama save the private equity underwriters (PEU's) and their SuperReturns? Stay tuned.

Thursday, February 5, 2009

Mike Conaway Hesitant to Ban Naked CDS

What risk is managed when an investor buys a credit default swap but doesn't own the underlying debt? None. It's a Vegas style wager. However, it does generate fees and commissions for the issuers.

Wall Street needs revenue in the worst way. Even Representative Mike Conaway's (R-TX) $700 billion in TARP money isn't enough. He came through again for the big money boys, favoring naked credit default swaps.

(Conaway) suspects that with capital requirements and other regulatory changes, those products (naked credit default swaps) could still be traded without creating systemic risk. "I think that would drop the scale of these things back and still allow them to do it."

More evidence he should turn in his CPA. My grandfather was a CPA for Price Waterhouse. He would be horrified by any peer encouraging off balance sheet items and vaporware financial products.

Carlyle Group's Rubenstein Wines at SuperReturn

Carlyle Group co-founder David Rubenstein has as much contempt for the public as his purchased politicians. He lamented treatment of private equity at the SuperReturn meeting in Berlin. He was there to bury Edscha, Carlyle's bankrupt German auto parts maker After the memorial service, Mr. Rubenstein answered questions for Rhea Wessel of the New York Times.

On protectionism: The most protectionist country in the world is the United States, he declared. “It says something, and then you have a situation like Dubai Ports, which is very embarrassing.”

Does Mr. Rubenstein not remember Carlyle's sale of fifty North American airport operations to Dubai Aerospace? He sold Landmark Aviation and Standard Aero to a Dubai firm with no embarrassing media coverage or political attention. One failure of a theory requires its modification.

On private equity’s relationship with the government: Mr. Rubenstein, whose firm is based in Washington, said he tried to stay away from lobbying for many years, but it might have been a mistake given the lack of goodwill toward the industry. Private equity is “behind the eight ball” in its effort to convince governments that it does something good, he said, adding that he has now hired a team to conduct government affairs for his company.

Carlyle needs lobbying? It's a Pennsylvania Avenue revolving door. There's plenty of goodwill in the Capital and White House for Mr. Rubenstein's firm. The connections are many. CIA nominee Leon Panetta spoke at Carlyle's 2008 annual investors meeting. He netted $28,000.

The public doesn't like private equity's insider influence and politicians catering to the big money boys. While the Senate Finance Committee loads up $25 billion in tax breaks for private equity, there's no sign of Obama's waiving IRA interest penalties for citizens trying to save their house.

What's the cure for private equity underwriters (PEU's) during this difficult time? The Wall Street Journal says it's an essay and a deal. Both are bribes. Mr. Rubenstein clearly knows how to purchase influence, but he's supremely bad at selling PEU's to people outside the beltway.

Monday, February 2, 2009

Trading Nightmares: The Carlyle Group & GTCR Golder Rauner

Consider two horrific nightmares. First, you find yourself acutely ill in a hospital bed. Rain pelts against the window. You feel the high rise facility rocking in hurricance force winds. Power goes out. Nurses manually perform the functions of life saving machines. The room gets hotter and hotter and hotter. Toilets don't flush, the smell of sewage permeates the oppressively humid air. You sit in that environment for five days before rescue. Thirty four of your fellow patients expire during the wait, including the sweet lady in the bed next to you.

Second, someone nabbed you off the street. You don't know who kidnapped you, as your head is under a black bag. Breathing is difficult. Your wrists hurt from the plastic restraints, given an extra cinching by your sadistic captors. A sharp pain in your upper arm is followed by a burning sensation. What was in the shot someone just injected? You hear plane engines roaring and the floor bumps beneath you. The landing gear just retracted. The stewardess says, "our flight destination today is Syria, land of the thousand beatings." You've been renditioned.

The above situations happened to real people. American corporations were involved, more than one. Even misery can be horse traded.

The dead hospital scenario occurred in New Orleans after Hurricane Katrina. GTCR Golder Rauner sold LifeCare Hospitals to The Carlyle Group in August 2005. Katrina struck weeks later. The LifeCare unit in Memorial Medical Center lost 24 patients. Tenet Health's Memorial lost another 10. The hospital with the highest death toll warranted not one mention in George W. Bush's Lessons Learned report.

Landmark Aviation, a flight based operation company, is rumored to provide rendition flights for Uncle Sam. People are snatched from the street, airport, or bus station and flown to other countries for interrogation, usually beatings. This occurs in secrecy, the kidnapped have no rights. The Carlyle Group sold Landmark Aviation to an intermediary, Dubai Aerospace, which later sold it to GTCR Golder Rauner. The media raised heck over Dubai Ports World, but couldn't utter a peep over fifty some North American airport operations.

Nightmares were delivered and horse traded by two private equity firms. What if Carlyle used Landmark's fleet of private jets to save LifeCare patients after Hurricane Katrina? Twenty four patients might not have died. The bad dreams seem to compound. What's next from GTCR Golder Rauner and The Carlyle Group? Will they get together for SAW 7? Will Rahm Emanuel star in the twisted production? Golder Rauner's Chairman is Rahm's career mentor and The Carlyle Group his political sponsor. Stay tuned.

Rupert Murdoch Hawks Facebook at WEF

Does Rupert Murdoch ever stop selling? He hawked internet snake oil to the landed gentry at the World Economic Forum in Davos, Switzerland. Murdoch's NewsCorp owns Facebook. WaPo reported:

(Facebook CEO) Zuckerberg arranged for Facebook polls to be conducted during twelve key sessions. In one poll, during a session called Advice to the US President on Competitiveness, Facebook users were asked if the stimulus package is on target. 120,000 responses were recorded in twenty minutes. 59% of respondents said "no," 15% said "yes" and 26% said unsure.

The poll results were displayed prominently above the panelists, including Rupert Murdoch (CEO News Corp.), Ellen Kullman (CEO DuPont), Duncan Niederauer (CEO NYSE Euronext), David Rubenstein (Managing Director, Carlyle Group) and Ronald Williams (CEO Aetna).

While the big money boys demand never ending, billion dollar government handouts, the public is enraged.

When is a poll not a poll? When it's on the internet. What are the demographics of Facebook users? How many senior citizens are in that population? Don't our elders have wisdom as many lived through the Great Depression?

When the rich can no longer control the masses, what does that portend? So many questions, so few true answers. But whatever Rupert Murdoch is selling, I'm not buying.

Sunday, February 1, 2009

Carlyle Group's Rubenstein Speaks, Obama Follows

Will Carlyle Group co-founder David Rubenstein go 3 for 3 from the foul line? He swished the "mother of all stimulus packages" with his October 23rd prediction from Seward's Folly. His second shot rattles around the rim. It's his opinion that "Buy American" steel restrictions won't hold, as the bill snakes through the Capital. Maybe President Obama will tip it in for Rubenstein. Press Secretary Gibbs tried, but he's too short.

Rubenstein's third free throw was launched in Davos, Switzerland at the World Economic Forum. He heads their committee redesigning the global financial system, likely favoring private equity. Bloomberg reported on David's latest call:

Carlyle Group co-founder David Rubenstein said he expected the U.S. government to seek a better understanding of private- equity transactions and operations. What form those efforts will take remains unclear, he said.

“It’s very likely that transparency will be sought, but maybe not required,” Rubenstein said in an interview. “It’s very likely governments will try and do something to restrain leverage and taxation will be modified.”

Oversight to detect unethical financial manipulation, not required? Modified taxation, as in corporate tax cuts? Eight years of Bush tax cuts produced a flagging economy, which later imploded. The Carlyle Group grew from $12.5 billion in assets managed to $91.5 billion. Corporafornication remains alive and well.