Wednesday, April 18, 2012

PEU Lessons from Rahm's Illinois

Illinois state and local institutions have enriched private equity underwriters (PEU's).  The Chicago Sun-Times reported:

The Teachers Retirement System (TRS) of Illinois--which represents thousands of school employees, is financially strapped and concerned about its long-term viability--paid more than $1.3 billion for money managers and brokerage firms to handle its $30 billion-plus in financial assets during a 10-year period ending in fiscal 2010. 
Despite paying big money for high-powered investment expertise, TRS’ 10-year average rate of return during this span was a mere 3.7 percent excluding the cost of fees, far below its 8.5 percent annual target return. 

Including fees, the pension’s return during that period was 3.3 percent, according to TRS, which which is just below the median of 3.4% for public pensions during that period.
The Carlyle Group stood out as the most invested PEU.

Private equity firm Carlyle was by far the largest vendor for TRS during that 10-year period, according to figures TRS provided the BGA. TRS invested in 11 of that firm’s funds, paying Carlyle more than $71 million. In 2010, TRS recorded declines for five of the Carlyle funds in which the pension invested.

What Illinois politician received Carlyle's backing,sitting at #16 on his donor list for the 2008 campaign? It was Congressman Rahm Emanuel.

What did Carlyle get for their Rahm investment in the 2008 campaign?  Nary a vote.

Carlyle got a White House Chief of Staff and now Chicago Mayor, intent on giving private investors a chance to win big on public infrastructure.

Emanuel's predecessor rushed through parking privatization that turned out to be a supremely bad deal for citizens.  Politicians went through 75 years of money in less than five.  Parking rates soared. 

Members of the Government-Corporate Monstrosity, Eisenhower's MIC on trillions in federal steroids, waltz back and forth from public service to private profitization.  Emanuel made his base fortune working for an investment bank.  Back on the government side, Rahm Emanuel has economic development money to dangle.

Chicago's former Chief Financial Officer Dana Levinson led numerous toll road and parking privatizations.  Levinson is now with RBS North America Infrastructure.

Chicago's parking leaseholders read like an Emanuel donor list.  Which ones will win Midway Airport?