Friday, March 26, 2010

Carlyle's Rubenstein to Speak at Princeton

Carlyle Group co-founder David Rubenstein will explore the topic "Is America's Global Economic Leadership a Relic of the 20th Century?" on March 31 at Princeton University. Will he clarify his role in shifting economic power overseas? Will he confess to his financial sins as a shadow banker? If past talks are any indication, highly doubtful.

McKinsey Quarterly provided a preview of Rubenstein's message:

All of us on this panel grew up in a world where the US was the dominant economy in the world. Many of you are going to live in a time when the US will not be the dominant economy in the world. And your children are going to be in a time when the US will certainly not be even close to the dominant economy in the world. China will probably be the largest economy in the world by 2030 or 2035, and then India will probably be, not long behind that, number two in the world.

Sobering. While Rubenstein didn't confess to his firm's particular sins, he did note the industry's pattern of undesirable behavior:

The situation, with respect to credit, in my view, is that because our financial institutions in the United States were so levered and that we had so much debt and we really exported that concept more or less to Europe, that as we de-lever—and it’ll take years to do this—the markets that are going to pick up and benefit will be the so-called emerging markets, which were not as levered as we were.

And by the year 2014, the GDP of all the emerging markets, so called, will bypass the GDP of the so-called developed markets. So not only are their GDPs going to be greater than ours, but their balance sheets are going to be much better.

Global shadow bankers made the mess, alongside job exporting U.S. branded multinationals. They did with Uncle Sam's help. Carlyle hired Treasury's Undersecretary for Domestic Finance. Randall Quarles retirement announcement stated:

Mr. Quarles has played a major role in some of the most significant economic policy issues faced by the Treasury during the Bush Administration, including:

The U.S./E.U. financial services dialogue, which he led and which brought the Federal Reserve, the SEC, and the European Commission together to resolve cross-border financial regulatory issues.

Quarles aided the spread of America's most egregious financial practices. He's now helping his politically connected PEU employer buy banks and avoid regulation. Quarles will speak in Utah at the Governor's Solid Growth: Today and Tomorrow conference. Funny, his record contributed to more of a boom and bust.

The American economic engine can run again. Hopefully, it won't take another World War, one that destroys manufacturing capacity across the globe. WWII enabled a Phoenix to rise from the ashes. Rather than quality leaders, America has the "mean & greedy" version.

Greed and fear are always in the balance. And greed will ultimately come back.--David Rubenstein

Near the end of the program David cracked a joke:

You forgot to mention the preservation of carried interest taxation for capital gains to private equity. That’s the most important thing.

Are you laughing?