Fortune Forgot About BankUnited

Fortune reported private equity underwriters (PEU) are circling the carcass of Silicon Valley Bank and Signature.

Should the FDIC fail (again) to find a white knight to buy the whole bank, it will be forced to sell it off piecemeal, and that's where private equity comes in, a group of investors the FDIC does not look upon favorably. Several alternative asset managers including Blackstone, Ares and Carlyle Group are interested in the $74 billion loan book and are evaluating whether or not to bid, several sources familiar with the sale process said.

The FDIC had no problem subsidizing Carlyle, Blackstone, Centerbridge and WL Ross to the tune of nearly $6 billion on BankUnited.   

U.S Presidents of both political parties host PEU founders regularly at the White House.  Those same founders are known as "policy making billionaires" in D.C. circles due to their outsized influence on government actions.

The FDIC saved SVB which catered to private equity CFOs and venture capitalists.  It did not have to guarantee uninsured deposits from wealthy risk takers, but it did.

Politicians Red and Blue love PEU, and increasingly, more are one.

SVB Bankruptcy: Bob Rubin and Larry Summers

"The Committee to Save the World" eliminated bank protections in the late 1990's.  Two of the three men pictured on the cover of Time are connected to Silicon Valley Bank's failure, Robert Rubin and Larry Summers.  

Summers was front and center calling for SVB depositors to be made whole.  He did not disclose his advisor role with NYCA Partners, a venture capital and advisory firm focusing on financial technology.  Was Larry Summers arguing his personal financial book or that of NYCA in his calls to save depositors?

Bob Rubin's Centerview Partners has been hired by bankrupt SVB for investment banking services.  It's ironic that Rubin might help clean up a mess he created decades ago by loosening bank regulations.

An opinion piece noted:

SVB’s meteoric rise and fall serves as a reminder that many of the guardrails erected after the last crisis have since been dismantled – at the behest of banks like SVB, and with the help of lawmakers from both parties beholden to entrenched finance and tech lobbies.

Former Clinton Labor Secretary used SVB's bankruptcy as a history lesson.  He omitted his former Cabinet peers Bob Rubin and Larry Summers in his assessment.  To me that's part of the deeper story.

SVB's Boston Private Rescued Again

Uncle Sam saved  Boston Private during the 2008 financial crisis such that The Carlyle Group could more than double its investment in the wealth management firm/bank.  

Boston Private received the 82nd-largest amount from TARP out of 822 recipients

Silicon Valley Bank bought Boston Private in July 2021.  A major BP investor opposed the deal citing conflicted management and a non-existent sales process.

Boston Private is giving itself another week to win enough shareholder votes to secure approval for its sale to Silicon Valley Bank. An activist shareholder slammed the delay as a "shameless maneuver ... to manipulate the voting process."

Over this past weekend the government saved SVB's Boston Private yet again.  Axios reported:

By 2022, SVB had become the 16th-largest bank in the nation, and the 10th-largest in Massachusetts by deposits.

...what would happen to the Boston area's emerging startups if the SVB holding company doesn't get bought, or if a buyer shifts focus away from the innovation economy?

Many powerful people pushed for SVB's rescue.  Boston Private may be sold with SVB or separately.

“Boston Private will be a high priority because their clients are likely in panic mode and demanding answers. No doubt there will be plenty of interested parties knocking on the door, so I wouldn’t expect it to go for bargain-basement pricing like the Lehman assets.”

History sometimes repeats, as in the case of Uncle Sam saving Boston Private.  

....private equity firms are looking to bid on all the components of SVB.

Will it repeat in another round of Carlyle Group ownership?  Can the current FDIC Chair offer a sweeter deal to Carlyle and company than BankUnited?   That was most generous.

Another history repeat is Randall Quarles.  Carlyle Group Managing Director Quarles commented on the investment stake in Boston Private summer 2008:

Randal Quarles, a managing director on Carlyle's financial services team, adds: 'In these challenging economic times, we have looked at many investment opportunities in the financial services sector and have seen few that we have found as attractive. We are attracted to Boston Private's strong history of growth and their diversified business structure that derives revenues not only from the private banking business but from strong fee-based businesses.'

Quarles later joined the Fed as Chair of Supervision.  BIG by Matt Stoller reported:

...Fed Governor Randy Quarles, pushed to get rid of these stress tests. As Quarles said in 2019, “I think we’ve moved not too quickly, but quite quickly, in adjusting — again, with an eye toward efficiency — some aspects of post-crisis regulation.”

Quarles rejoined The Cynosure Group after leaving the Fed.  Cynosure has a number of former Carlyle Group executives.

A European bank regulator offered on the SVB rescue:

“At the end of the day, this is a bailout paid for by the ordinary people and it’s a bailout of the rich venture capitalists which is really wrong.”

Don't forget the greed and leverage boys.  SVB had a whole department dedicated to private equity underwriters (PEU).

Uncle Sam backstops the super wealthy so they can have yet another profit-gasm while keeping their preferred taxation.  It's that way because politicians Red and Blue love PEU and increasingly, more are one.

Update:  A Guardian opinion piece stated:

SVB’s meteoric rise and fall serves as a reminder that many of the guardrails erected after the last crisis have since been dismantled – at the behest of banks like SVB, and with the help of lawmakers from both parties beholden to entrenched finance and tech lobbies.

Mr. Silicon Valley Deployed Political Network to Save Deposits

NBC News reported on non-lobbying lobbying around Silicon Valley Bank's implosion:

Ron Conway, a prominent San Francisco venture capitalist, said in an email that his investment firm “was able to deploy its business and policy/government relationship network to pursue a positive outcome to help thousands of small business clients of SVB resume business with normalcy.” 

At a dinner Friday in San Francisco, he had pressed his case to former House Speaker Nancy Pelosi and former President Barack Obama, according to the news website Puck, which labeled the rescue “The Ron Conway Bailout.”

Conway's SV Angel funds had $200 million in SVB.

Obama let widespread financial fraud go unprosecuted after the 2008 financial crisis.   It's hardly a surprise billionaire insiders sought him out for help saving SVB uninsured deposits.

Tech firms worried about a blow to their Hollywood villain image.

A general partner at the venture capital firm Andreessen Horowitz, said on Twitter that he had realized in the past few days that people didn’t appreciate the tech industry’s value. “We need to do a better job of telling our story or our enemies will do it for us."

For decades private equity underwriters (PEU) have lamented the public's inability to appreciate all the good they do.  That's likely because most Americans have worked for a PEU affiliate at some point in their career and seen the damage done.

Are disruptors misunderstood or does the public actually get it?  Here's a clue:  Libertarian greed kings needed government rescue for disrupting their bank holdings.

Underwater assets (worth less today than when purchased) exist well beyond Silicon Valley Bank.  How far are the Reds and Blues willing to do to backstop the policy making billionaire class?

Fed Advisor Rubenstein Predicts Fed Course Amid Bank Blowups

Carlyle Group co-founder David Rubenstein suggested a 25 basis point rate hike at next week's Fed meeting.  Rubenstein is a member of the Fed's Investor Advisory Committee on Financial Markets and former employer of Fed Chief Jay Powell.

Rubenstein didn't mention the removal of "mark to market" requirement for bank assets.  Private equity underwriters utilize "mark to model."  These practices have resulted in private equity valuations (often highly levered) being much less volatile than public equity.  Levered private equity should swing more than less levered public equity.  It does not.

Banks face the prospect of increased operating costs as they have to pay more to depositors to keep their accounts.  Private equity underwriters (PEU) face a wall of debt refinancings that will dramatically increase interest expenses.  There are predictions that many PEU affiliates will fail.

Rubenstein said monetary policy makers during this tightening cycle were focused on tamping down inflation and likely didn't spend much time worrying about the ability of banks to survive the surge in borrowing rates. 

 He suggested the Fed can't walk and chew gum at the same time.

At the New York Fed, our mission is to make the U.S. economy stronger and the financial system more stable for all segments of society. We do this by executing monetary policy, providing financial services, supervising banks and providing thought leadership on issues that impact the nation and communities we serve.

The Fed was not alone in failing to warn the investing public about SVB.  Debt rating agencies and certified public accountants provided zero warning.

Moody’s had given the lender an ‘A’ rating prior to its collapse.  Accounting giant KPMG signed off on the now-beleaguered bank’s audit just 14 days before it went bust.

President Joe Biden had no sympathy for SVB shareholders which included large pension funds from California, Ohio, Illinois, North Carolina, Colorado New York and twenty other states.

Biden saved SVB depositors which included billionaire and PEU Peter Thiel while shafting public pensions.  

Should the American people trust the system partially built by insider David Rubenstein?   Rubenstein and his PEU brethren ensured preferred "carried interest" taxation, generous valuation models and affiliates' long term access to Uncle Sam's wallet.

Politicians Red and Blue love PEU and increasingly, more are one.

Update:  SVB's executive team was loaded with former KPMG.  Bloomberg Law reported:

CEO, CFO, some board members, risk officer all worked for KPMG

Update 3-19-23:   With the Fed meeting looming Insider put together predictions from connected persons, including Carlyle's Rubenstein.

Premiering April 26th:

Iconic America: Our Symbols and Stories with David Rubenstein (PBS, new documentary series)

Barr to Lead Fed SVB Investigation

Michael S. Barr is leading the review of Fed supervision of failed Silicon Valley Bank.  Barr is a former Treasury official under the Obama administration.  He became an advisory board member for Ripple Labs in 2015.  That usually comes with compensation, often in the form of equity.

Ripple had funds in SVB bank.

Does Michael S. Barr hold stock in Ripple?  If so, he may not be the best person to lead an investigation.

Update:  Barr's 4-9-22 financial disclosure form indicates no equity holdings in Ripple.  It does show stock options and warrants for a number of fintech companies (82 in all).  He indicated he would divest those.

It turns out Barr served as advisor and limited partner for NYCA Management LLC beginning in early 2017.   NYCA Investment made a nearly $10,000 distribution to Barr.  He showed carried interest from two NYCA investment funds.  That means Barr is a private equity underwriter (PEU).

NYCA Partners lists Larry Summers as part of its network.  Summers may have been pushing his own book with his recommendations to bail out SVB depositors.

Saving PEU Depositors

Over the weekend the federal government declared "systemic risk" in order to fully back depositors at two banks, Silicon Valley Bank and Signature.  

Silicon Valley Bank catered to private equity underwriters (PEU).  The Biden White House is chock full of former PEUs.  The just retired Chief of Staff Ron Klain worked for Revolution LLC.  

PEU Peter Thiel put out the word last week to pull funds from SVB.  It's ironic a billionaire helped kick off last week's bank run.

Signature Bank served the crypto world and held $250 million of Paxos funds.  That money is fully guaranteed to the relief of Paxos board member Sheila Bair (former FDIC chair) and major investor David Rubenstein (Carlyle Group).  Paxos has a bank, Paxos Trust.  Might they benefit from crypto firms seeking a banking home?

"The Big Short's" Michael Burry called SVB "Enron" and anticipates a soon to fall "Worldcom."

"People full of hubris and greed take stupid risks, and fail."

This weekend's government action could be the biggest PEU boon since FDIC Chair Sheila Bair gifted BankUnited to Carlyle et al in the aftermath of the 2008 financial crisis.

PEU presents all around!  Politicians Red and Blue love PEU and increasingly, more are one. 

Update 3-14-23:  The greed and leverage boys are circling SVB Bank and the other parts of SVB Financial

Bloomberg reported that Apollo Global and Blackstone have expressed interest in snapping up a book of loans held by Silicon Valley Bank.

SVB Securities may end up independent if CEO Leerink can find financing.  The Carlyle Group used SVB Securities for Accelerate Learning and TriNetX.  It predicted Carlyle would partner with UnitedHealth to buy Magellan Health.

Signature Bank Possessed, Depositors Saved

Fortune reported: 

On Sunday, two days after the stunning failure of Silicon Valley Bank, the New York Department of Financial Services announced it had taken possession of Signature, which has deposits totaling $88.59 billion.

In a joint statement, the Treasury, Federal Reserve, and FDIC announced a systemic risk exception for Signature, guaranteeing that all depositors to the institution would be made whole, with no losses incurred by taxpayers.

Was Paxos' systemic risk designation aided by former FDIC Chair Sheila Bair (Paxos board member).  Add that Carlyle Group co-founder David Rubenstein's family office participated in several Paxos fundraising rounds.

A Paxos spokesperson told Fortune that the crypto firm currently holds $250 million at Signature as well as private deposit insurance, adding that it was always looking to expand its network of banks. 

 Flashback to 2021 when Barron's ran a piece on crypto co-authored by Sheila Bair.

If investors lose confidence in a stablecoin’s ability to redeem funds at par, as they have before, they could run, causing the token’s value to drop meaningfully below $1. Were a large stablecoin to “break the buck,” it could induce additional runs in other stablecoins. And if stablecoins continue to grow at their current pace, a panic could precipitate instability in the broader financial system.

Paxos is the only issuer to publicly support regulations making such limits mandatory. It also believes stablecoin issuers should be subject to comprehensive prudential regulation. It has always been subject to oversight by the New York Department of Financial Services and has received conditional approval for a national trust charter overseen by the Office of the Comptroller of the Currency. 

Barron's disclosed Bair's board slot at Paxos.

Back to bank failure weekend.  It helps when other powerful insiders call for action

The weekend saw many in the tech industry, as well as financial luminaries such as former Treasury Secretary Larry Summers, calling for depositors at SVB to be made whole to avoid further spreading panic.

Will Mrs. Bair or Mr. Rubenstein be on CNBC in the morning?  If so, I doubt Rubenstein will reiterate his "titillating" view of crypto.

Update 3-13-23:  Paxos put out a statement:

Statement from Paxos: The protection and safety of customer assets is Paxos’ top priority, which is why we always take active measures to safeguard customers’ funds.

 In other words Paxos Trust is ready to take your money.

Update 3-14-23:  Rubenstein spoke at the New Orleans book festival.  He compared cryptocurrency to Las Vegas casinos.  He told Tulane students:

“I want everybody to think about what they can do to give back to society by giving time or energy to ideas in a way that will make the country better.” 

That does not include paying his fair share of taxes.

SVB CEO and CFO Sell Stock Before Implosion

Bloomberg reported:

Silicon Valley Bank Chief Executive Officer Greg Becker sold $3.6 million of company stock under a trading plan less than two weeks before the firm disclosed extensive losses that led to its failure.

On Friday, Silicon Valley Bank failed after a week of tumult fueled by a letter the firm sent to shareholders that it would try to raise more than $2 billion in capital after taking losses.

SEC filings indicate SVB's CFO sold company stock grossing $575,000 in late February.

SVB executives know how to get theirs before the equity pot evaporates.  That's the PEU way.  

SVB Financial targets private equity underwriters (PEU), offering private equity fund banking.

SVB has the back of PEU CFO's:

Time will indicate if the greed and leverage boys use any of their ample dry powder to support SVB Financial.   I'm sure it's been a busy weekend for all parties, examining the fallout from SVB's failure on the PEU greedosystem.

Update:  As for irony: 

Bank Runs Sink Silicon Valley Bank, Silvergate

Time will reveal the significance of two bank failures, Silicon Valley Bank and Silvergate.  Pittsburg Post Gazetter reported:

VC firms ranging from Peter Thiel's Founders Fund to Union Square Ventures had told portfolio companies to pull their money from Silicon Valley Bank.

At Silvergate, which caters to cryptocurrency clients, customers yanked their money in the panic that followed the 2022 collapse of cryptocurrency exchange FTX.  

Bank runs mean massive withdrawals requiring forced asset sales.  Forced asset sales in a down valuation market means losses.  Peter Thiel knows this, as does every venture capitalist and private equity underwriter (PEU).  

How did this supposedly "patient money" in an FDIC insured bank became an instant "got to have."  Disrupters did the disrupting. 

The article raised questions like:

....how a financial institution pushing so deeply into crypto didn’t prompt action on the part of its regulators.

“Where were the regulators on Silvergate?” asked Jerry Comizio, an adjunct law professor at American University and a former U.S. Treasury Department official. “In a real sense, they missed Silvergate.”

Not only were the regulators absent but the Federal Home Loan Bank propped up Silvergate with billions.

Did it help that a former FDIC Chair is on the board of crypto infrastructure firm Paxos?  Did it help that Carlyle Group co-founder David Rubenstein personally invested in Paxos and kept D.C. regulators at bay?  Rubenstein considered FTX's Sam Bankman-Fried his peer in August 2022 and pushed crypto as "titillating."

Crypto infrastructure company Paxos said in a statement that the company “has virtually no exposure to Silvergate.”

That's because Paxos has its own bank.  Former FDIC Chair Sheila Bair minimized Silvergate's fall:

“Silvergate’s troubles are as much if not more about traditional banking risks — lack of diversification, maturity mismatches — as it is about its exposure to crypto,” said Sheila Bair, who headed the FDIC during the global financial crisis.

Did she do so to stem a Paxos bank run?  Turn over a rock and one may find a PEU or conflicted former member of government doing what's best for them.  They don't even pretend to care about you.

Update 3-15-23:  Silicon Valley Bridge Bank put quite the spin on its emergence from insolvency:

Silicon Valley Bank is now marketing themselves as the single safest "place to keep or transfer your deposits (fully insured with no limits or caps)."

Social Security SWF is PEU Trojan Horse

Negotiations are underway to extend the life of Social Security another 75 years.   Insider reported:

 ..... a group of bipartisan lawmakers may have come up with a compromise in the form of a sovereign wealth fund (SWF) — something that the United States does not currently have at the federal level. SWFs are typically investment funds owned by the government.

Sovereign Wealth Funds invest capital with the goal of making returns.   Arabian Business reported real estate and private equity as the two largest holdings of Middle Eastern SWFs.

....favour private equity, allocating an average 21 percent of the portfolio to asset class.

 Institutional Investors reported:

State-owned investors, including sovereign wealth and public pension funds, have increased their private market allocations to an average 22 percent this year, up from 10 percent in 2008.

“The largest proportionate changes were observed for private equity, which more than tripled between 2008 and 2020” for public pension and sovereign wealth funds, the researchers said. 

 Wharton@Work has advice on SWFs investing in private equity underwriters (PEU):

Sovereign wealth fund managers must be increasingly adept when adjusting the investments in their portfolio, and particularly when considering investing in private equity. Making the right choices requires skill in analyzing whether their returns will beat the realized return (after fees) offered by venture capital and private equity (PE) firms, and whether to take a more direct role in their investments.

Their main strategies are:

1. Direct investments, effectively competing with private equity funds
2. Co-investments, in which the sovereign wealth fund (SWF) invests alongside a private equity partner; this offers enormous potential as an SWF does not pay the high fees generally assessed the limited partner, and the private equity firms — or general partner (GP) — have deep resources to pursue larger assets
3. More passive and traditional investment as a limited partner
4. Investment in the secondary market

The greed and leverage boys must be salivating over the prospect of Social Security dollars going into their various PEU fund offerings.  They're already on tap for addition to 401(k) plans.

PEUs could get retirement funds from the new Social Security SWF (top down) and from individuals through their 401(k)s (bottom up).  Sweet!

This is the result of decades of political investment by policy making billionaires.  

Politicians Red and Blue love PEU and increasingly, more are one.  It's no surprise the PEU solution is the tonic for all our nation's ills.  

Update:   Carlyle offered investors in a 2018 fund the opportunity to cash in for 81 cents on the dollar in order to use the money toward a new Carlyle fund.

Big Frauds Everywhere

The news has been full of big frauds in various sectors of the economy.  Frauds have been revealed from finance to media to higher education to healthcare.  

JP Morgan is a serial ethics violator.  The storied Wall Street firm doesn’t want CEO Jamie Dimon questioned under oath in Jeffrey Epstein case.  

Too many have something to hide.  

Update 3-7-23:  Wall Street on Parade reported on the Virgin Islands complaint against JP Morgan Chase regarding Jeffrey Epstein:

....charges that the bank sat on a pile of evidence that Jeffrey Epstein was running a child sex trafficking ring as it continued to keep him as a client; accept his lucrative referrals of wealthy clients; and provided him with large sums of cash and wire transfers to pay off victims – one of whom was a “14-year old sex slave.”

Update 3-8-23:   The Perth Mint sold diluted or doped gold to China and then covered it up.

Update 3-12-23:  Reuters reported:

JPMorgan Chase & Co has sued Jes Staley, its former private banking head and later Barclays Plc's chief executive, accusing him of entangling it with sex offender Jeffrey Epstein, and saying Staley himself had been accused of sexual assault.

Two Stories on PEU Junk

 

Private equity firms are increasingly financing each other's deals, according to Bloomberg.  

...Apollo Global Management Inc., Blackstone Inc., HPS Investment Partners and Ares Management Corp. Direct lenders, already among the largest players in leveraged buyout financing, see an extraordinary opening to grab market share — and hang onto it for the long haul.

The four are among the shops offering $5.5 billion to fund Carlyle Group Inc.’s purchase of a 50% stake in Cotiviti Inc., according to people familiar with the matter.

Will they refinance each other's affiliates when their debt comes due?  Dividend recaps are back in vogue.

Private equity firms are using some of their companies as automated teller machines again.  The firms are piling more debt onto companies they own to fund payouts to themselves.

It may be the only way to keep "mark to fantasy" valuations from imploding.   

Update:  Oaktree entered the "I'll fund yours if you'll fund mine" with a new $10 billion PEU lending fund.

Condi Rice PEU Strategist

Face the Nation interviewed former Secretary of State Condi Rice this past weekend.  I wondered if she had any private equity underwriter (PEU) ties. 

In 2012 WaPo questioned if Rice would be the new face of venture capital after her deal with Khosla Ventures.  Private Equity News reported on that same development.  Vinod Khosla is the billionaire who refuses to allow access to a public beach.

In 2016 Rice struck a deal with RWC Partners.  RWC rebranded to Redwheel in 2022.

Politicians Red and Blue love PEU and increasingly, more are one.

PEU Pendulum's Second Fund

Pendulum Holdings is offering its second private equity fund according to SEC filings.  Pendulum Opportunities Program Vehicle II hopes to raise $350 million with a minimum $10 million investment.  

Related parties include:

Founder Elbert (Robbie) Robinson, financial advisor to former President Barack Obama.

Pendulum Opportunities PV II GP LLC

Pendulum Opportunities LLC

D'Rita Robinson (of same address as Founder Robbie)

Sales compensation will go to:

Pendulum Securities, LLC (same address as Founder Robbie)

BDT & Company, LLC (Chicago)

Pendulum offered their first private equity fund in 2021.  That $250 million fund required a minimum $1 million investment.

The pendulum stuck in favor of the greed and leverage boys since 2000.  President Obama did his part to keep the profit spigot wide open for Blackstone, Carlyle and their PEU brethren.  There are few signs that the pendulum will swing back in favor of the common person.  

Politicians Red and Blue love PEU and increasingly, more are one.

Peter Clare Taps Out at Carlyle

The Carlyle Group's Peter Clare announced his retirement effective April 30th.  The 57 year old Clare recently was mentioned as a possible CEO candidate for the politically connected private equity underwriter (PEU).

Carlyle hired "streetfighter" Harvey Schwartz for the CEO position.  Schwartz has been in that role for twelve days.

Clare will stop serving as an executive officer and will step down from the board effective immediately.

How did Schwartz get Clare to tap out so quickly?  

Mr. Clare formerly was the Chief Investment Officer of Corporate Private Equity, Chairman of the Americas and Chair of the US Buyout and Growth Investment committees. Mr. Clare also previously served as the Co-Head of the US Buyout and Growth team and as Deputy Chief Investment Officer of the Company’s CPE segment and previously was a member of Carlyle’s Board of Directors from January 2018-February 2023.

It's still February.  Who's next on the list?  

Power disruption and consolidation...it's the PEU way.

Update:  FT's piece on Clare's retirement echoes some of the same themes:

On a call the firm hosted a day after Schwartz’s hiring, Clare ... assured investors in Carlyle funds that they would support the new CEO.

Schwarzman's $1.26 Billion Pay from Blackstone

Reuters reported Blackstone Group co-founder Stephen Schwarzman received over $1 billion in pay and dividends in 2022.

Forbes pegged Schwarzman's wealth at $2.5 billion in 2006.  They cited his wealth at $28.1 billion in 2023.  Forbes didn't say how the Trump tax cuts helped boost his wealth over 11x. 

That thumb's up is a bipartisan one for the Red and Blue political teams keeping private equity's preferred taxation in place over that period.  Elected officials did so in direct opposition to public opinion.

Update 3-1-23:   For more on how Schwarzman shafts the little people.  He can do it directly by increasing rents nearly double the national average, evicting renters or indirectly through pension investment fees.

Fellow PEUs Support Banga for World Bank

The club for greed is rallying on behalf of President Biden's World Bank nominee Ajay Banga.  Former Carlyle Group managing director Afsaneh Beschloss expressed her support for fellow private equity underwriter (PEU) Banga.  At the time of her hiring at Carlyle Beschloss was treasurer and chief investment officer of the World Bank.  Beschloss left Carlyle to start Rock Creek Group in 2003.  

The firm is a leading global investment and advisory firm, active in emerging markets, alternatives, private equity and impact investing. 

Beschloss bio can be found under a number of global tampering organizations that cater to the PEU crowd.  

Banga is Vice Chairman of General Atlantic, a leading global PEU.  Prior to that he served as CEO for MasterCard.  At MasterCard Banga's helped Egypt go cashless as part of his public private partnership experience.

If confirmed Banga will replace David Malpass, who ran macroeconomic research firm Encima Global prior to his appointment by President Trump.  Malpass was Trump's Presidential Campaign manager for the 2016 election.

Carlyle could have used Beschloss' expertise with affiliate ARINC which earned a World Bank ban for "procurement violations" on an Egyptian airport project.

President Biden's cabinet is chock full of PEUs.  Having another greed and leverage boy at the World Bank is par for the course and portends misery for the common person the bank is supposed to help.

Update 3-12-23:  NYPo reported:

As its financial condition declined Silicon Valley Bank reached a deal with investment firm General Atlantic to sell $500 million of common stock, but that deal was dependent on the completion of its initial share sale.

PEU Legend Thomas H. Lee Ends HIs Life

Private equity pioneer Thomas H. Lee died of a self inflicted gunshot wound yesterday morning.  He was 78.  Lee founded the PE firm that bore his name in 1974.  He formed Lee Equity Partners in 2006.

I do not know the burdens Mr. Lee faced but his firm invested in Summit Behavioral Health and Bradford Health Services.

Summit - Provider of residential and outpatient substance use disorder treatment  services and acute psychiatric care.

Bradford - A substance use disorder (“SUD”) treatment provider in the Southeast. Bradford Health is a regional leader in the Southeast with a strong market presence in Alabama, Tennessee, Mississippi, North Carolina, and Arkansas.

Lee's $2 billion will not follow him.  It remains on this earthly plane.  

May his family and friends find solace in their memories of Mr. Lee.  Life is challenging, even for a politically connected private equity underwriter.

World Bank: Biden's Latest PEU Nomination

President Biden nominated yet another private equity underwriter (PEU) to a major position.  Reuters reported:

U.S. President Joe Biden on Thursday nominated business executive Ajay Banga to become president of the World Bank, lauding his experience forging public-private partnerships to address financial inclusion and climate change.

Banga retired from MasterCard in December 2021 and joined General Atlantic, a private equity powerhouse, on January 1, 2022.  

Also with General Atlantic is Managing Director Lord John Browne.  As BP's CEO Lord John Browne cut maintenance budget at its Texas City refinery.  That resulted in an explosion that killed fifteen in injured hundreds.

Browne joined General Atlantic before Banga.  I'm sure Lord John Browne and the General Atlantic team would be happy to consult with Banga should any World Bank projects blow up or get held for ransom.

Update 3-7-23:  Bloomberg reported:

General Atlantic is partnering with Abu Dhabi wealth fund ADQ and International Holding Co., the biggest listed company in the emirate, on a new venture that will invest in alternative assets.

A sovereign wealth fund is under consideration for "saving" Social Security.  Greed. fees and leverage are apparently the solution to all the world's ills.

Update 3-12-23:  NYPo reported:

As its financial condition declined Silicon Valley Bank reached a deal with investment firm General Atlantic to sell $500 million of common stock, but that deal was dependent on the completion of its initial share sale.

Glenn Youngkin Learned from Power and Money Hungry

Before Glenn Youngkin became Virginia's Governor he monitored rush hour traffic in Beijing as co-CEO of The Carlyle Group.  Carlyle is a politically connected private equity underwriter (PEU).

 

Youngkin's firm sent thousands of U.S. jobs to China during his time with Carlyle.  Yet, he turned down high paying jobs for rural Virginians in a poor region of the state because Ford Motor Company was licensing Chinese battery technology.  

Youngkin told reporters that his prior experience as the CEO of the Carlyle Group, a private equity firm, makes him "uniquely positioned to understand how the Chinese Communist Party works."

The Governor missed his chance to inform the public as to how The Carlyle Group works.   It infiltrates governments for the purpose of outsized profits.  Also, Youngkin was co-CEO, not the CEO.

Carlyle Asia Growth Group’s investment philosophy is sector-agnostic, with investments across more than ten industries, including energy, consumer, technology, business services, education, industrial, healthcare, real estate and media. Eighty percent of these investments have been made in China or India.

"In China Carlyle has demonstrated a deep understanding of local businesses and an ability to work well with Chinese companies. The Carlyle brand will also help attract senior management talent to help expand both our domestic and overseas business."

Monitoring Beijing rush hour traffic takes big data.  Youngkin wants Virginia law enforcement to have access to a woman's menstrual cycle information, frequently stored on cell phone apps.  That sounds Chinese authoritarian like.

Youngkin learned his obsession with money and power from the best, Carlyle and China.    Virginia citizens would do well to watch the power and money flows.  Glenn Youngkin's kind avoids the sunlight.

The state may want your data but hands off his.

Beware the PEU Pushers

A Goldman Sachs podcast recently featured David Rubenstein.  Business Insider reported:

The billionaire investor and Carlyle cofounder also forecast superior returns in private markets than public ones.

 "Almost every year for the last 30 years or so, private equity has outperformed public-market indexes, by anywhere from 200 to 500 basis points on average. I suspect that will continue, and it will happen in part because the economic incentives are incredible. You get 20% of the profits on somebody else's money if you do well, above a minimum return in some cases. As a result, I think people are highly motivated to do well, and they're very careful."

Careful?  This is the same David Rubenstein who called buying crypto "titillating" and interviewed FTX CEO Sam Bankman-Fried as his peer for Bloomberg in September.  

Carlyle gets to calculate their outperformace data as there are no standard measures.  Did Rubenstein include the implosion of Carlyle Capital Corporation in those figures?    Carlyle ran away from CCC's stinking carcass after it entered bankruptcy.  Rubenstein sold Carlyle Capital Corporation as a low risk, safe investment and for that he was sued.  

Another safe investment, pipeline operator SemGroup, entered bankruptcy after executives there rang up over $4 billion in energy trading losses.   After shareholders sued Carlyle pleaded "puffery" as their defense.

Defendants also contend many of the alleged statements are immaterial as a matter of law because they are "simply immeasurable or incapable of verification." [Doc. No. 211, pp. 28-29].^{[ 5 ]} Vague statements of corporate optimism or "puffery" cannot be materially misleading because "generalized statements of optimism are not capable of objective verification and reasonable investors do not rely on them in making investment decisions."

Note Rubenstein's use of figures in his sales talk but when sued for same, Carlyle stated they aren't real measures and no one would use them as a basis for investment.  This double talk should be front and center as investment professionals push private equity for individual unaccredited investors.

CNBC interviewed the CEO Matt Brown of CAIS, an alternative investment platform for financial advisors.  CAIS provides those advisors access to hedge funds, private equity, private credit, real estate and other alternatives.  Brown recommends small investors devote 20% of their funds toward alternatives.  

He said "due diligence" is critical for small investors concerned about funds not marked to market, which is the case for private equity.   As private equity is opaque and there are no standard measures it is nearly impossible for anyone to conduct due diligence.  

"We have seen a number of proposals from private equity funds where the returns are really not calculated in a manner that I would regard as honest," Mr. Buffett said Saturday at Berkshire Hathaway's annual meeting. 

How can one devote 20% of their portfolio to an area where due diligence is nearly impossible?  That's the ask.  

Levered equity should have more risk, not less.  Small investors should be wary of the impervious blob of private equity and not get lured by the David Rubensteins and Matt Browns of the PEU world.

Update:  Grant Williams posted a warning about private equity.

House Committee Targets PEU Hunter

NYPo reported on Hunter Biden's role with Rosemont, a private equity underwriter (PEU):

Rosemont described themselves as “a $2.4 billion private equity firm co-owned by Hunter Biden and Chris Heinz,” with Devon Archer as “Managing Partner.”

The partners attached several branches to the Rosemont Capital trunk, including Rosemont Seneca Partners, LLC, Rosemont Seneca Technology Partners, and Rosemont Realty.

Rosemont Seneca and the Bank of China created a $1 billion investment fund called Bohai Harvest RST (BHR).

The piece was written in 2018.  PEUReport did stories on Hunter's PEU roles in 2012, 2014 and 2016.   I am all for Congress exposing political insiders' work on behalf of the PEU boys.

Fox News reported:

Julianna Smoot in 2014 became an advisory board member of Rosemont Seneca Technology Partners (RSTP), an affiliate of Rosemont Seneca Partners, the fund co-founded by Hunter Biden.

Smoot held key positions in the Obama administration. In addition to her Rosemont advisory board compensation:

Smoot went on to become co-founder of the Blue Lake Strategies public affairs consulting firm, which received more than $500,000 from Unite the Country in less than three years.

Unite the Country is a Blue Team/pro Biden PAC.  This is an example of the ways political insiders funnel huge sums to one another. 

Rosemont Seneca Technology Partners invested in reproductive testing company Counsyl in 2014.  Myriad Genetics purchased Counsyl for $375 million in 2018.  

Burnham Financial Group bought Rosemont Seneca Partners.  It's not clear how much founders Hunter Biden and Chris Heinz made from the sale.

Rosemont Realty made ABC News last year:

Rosemont Realty received a $40 million investment from the widow of a former Moscow mayor.

Rosemont located in Washington, D.C. following The Carlyle Group's lead.  Carlyle employed legions of political leaders to employ non-lobbying influence over tax laws, financial regulations and Uncle Sam's fat wallet.

I'd rather Congress employ a true PEU hunter to act on behalf of citizens.  Expose the lot.  The rot exists on both sides of the aisle.

It will take copious amounts of sunlight as a PEU resides under nearly every rock.

Jared Kushner — who worked on Middle East policy under former President Donald Trump — was able to secure over $2 billion in funds for his PEU Affinity Partners.

Politicians Red and Blue love PEU and increasingly, more are one. 

Choosing PEUs over Elderly

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NYTimes conservative columnist Ross Douthat wants government entitlements redistributed from the elderly to young people.  

Who is paying far less in taxes that could be used to support the elderly?  America's super wealthy, many of whom founded storied private equity firms.  

 

Workers know the harms of private equity ownership.  Bain Capital's ownership of Toys R Us resulted in bankruptcy with 33,000 jobs lost.

Politicians Red and Blue love PEU and increasingly, more are one.  One might expect the media to see the connection between political funders and government policy.  The "billionaire policy maker" has been a bug of democracy for decades.  More like a parasite.

SOTU PEU Faceoff: Santos vs. Romney

I'd wondered how threatened private equity underwriters (PEU) have been by the presence of fraudster George Santos in Congress. 

At last night's State of the Union Address Senator Mitt Romney (Bain Capital founder) and Rep. George Santos (Harbor City Capital) took turns calling each other an "ass."  Many consider "ass" a synonym for private equity.

The public becomes aware of dysfunction when the system pushes too far.  George Santos personifies that dysfunction.  He went from being late on rent to a salary of $750,000.  That money came from a sponsor(s).

Romney's early sponsors at Bain Capital came from Panama shell corporations.  Those investors made huge returns on the backs of portfolio company workers.

Mother Jones reported the experience of one worker at a Bain Capital owned furniture company:

We’ll walk into a room and there’ll be a big poster that says like, “We only had five reviews yesterday. Obviously, you people don’t care enough. You don’t try.” It’s all in angry red markers. They’ll say, “I don’t know when you guys stopped caring.” They’re insane. They’re screaming in your face. They have no problem saying these things on the floor in front of customers. It’s coming from above and trickling down.

I think they’re a sinking ship. If you’ve been there long enough, you know what it was like before. Now there aren’t any fresh-baked cookies. There aren’t any ponds left in the stores. Bain is going to suck every penny out of it and then discard it once they’ve completely ruined it. All of us salespeople, that’s how we feel. Once the last penny is out of the jar, they’ll sell it.

Enough voters have worked for a company acquired by private equity and are familiar with management cutting core service elements, crapifying the workplace and yelling at employees for not meeting greed inspired targets.

I believe the public is able to internalize the incredible offensiveness of George Santos' fraud.   It's tangible, seen in everything the man does.  Romney's PEU greed is more aloof, alien and flourishes out of the sunlight.  Is this in part why the senior Senator evaluated the new Congressman's seat selection?

Santos is too out front, too self promotional, and rose too quickly without paying his PEU dues.  He may be the prism through which the public can see:

Politicians Red and Blue love PEU and increasingly, more are one. 

And they will know who they serve.

Update 2-11-23:  The man who lied that he met the job requirements to land a position blames the employer for his illicit act.  Daily News reported:

Rep. George Santos says he only said he went to college because Long Island Republicans would never have endorsed his candidacy if they knew he had just a high school diploma.

“I would have never gotten the nomination from Nassau County GOP if I had not concluded college,” he told Newsmax. “To say that I deceived, and (ran) a campaign of deception is just not fair. That’s just a political spin.”

No, George Santos.  You ran a campaign of deception and are now deflecting it with political spin.  Deception is the PEU way and its exposure should concern many in Congress.