Thursday, December 8, 2011

Corzine & Sarkozy: Neither About Transparency

MF Global's Jon Corzine pretended to be honest and accountable in testifying before Congress on his firm's thievery of customer money.  Like BP's Lord John Browne and Tony Hayward, Corzine implied incompetent underlings caused the disaster.  Dealbook reported:

"In theory, an employee may have misused customer cash after misinterpreting the chief executive’s words."
So one employee pulled $1 billion of customer assets into MF Global's trading money?  That defense is patently laughable.  Jon Corzine testified before Congress to manage his personal risk. The insider suck up included:

One congressman even congratulated the former Goldman executive on achieving considerable wealth.
Corzine's acts caused market dislocation.  Olivier Sarkozy, another insider with The Carlyle Group, offered his assessment as to how private equity underwriters can help in turbulent times:

It is very hard for traditional (debt) issuers to provide enough clarity to the public market investor to allow that investor to make an informed, risk-adjusted decision. The assets are simply too large and the leverage too great to allow those markets to operate efficiently in times of dislocation.
 Olivier says PEUs are the answer:

"That is where private equity can step in and provide that transparency because we can underwrite these balance sheets. It takes a lot of time and effort, but it is possible to do. In that context we become the most efficient source of capital to the industry and that is where the opportunity lies," he said.
Carlyle and company took $2.3 billion in FDIC cash to recapitalize BankUnited. 

BankUnited was floated in February this year and Carlyle made 2.7 times its money on its investment.

Carlyle wasn't transparent.  It wasn't until BankUnited's public offering when Carlyle revealed the extent of FDIC funding in BankUnited's recapitalization.  Carlyle held BankUnited a year before filing for an IPO.

Congress provided a stage for Jon Corzine to offer his bunk and happily ignored the huge public subsidy for PEUs via BankUnited.  The Carlyle Group's IPO revealed the firm to be a virtual nonprofit, given its incredibly low tax burden (a highly symbolic 1%). It's a PEU world for elected and greedy business people.