Carlyle Pleads with Investors to Stay

The Carlyle Group recently told its limited partner backers, “Please don’t default. We will try to work with you.” Did the financial position of Carlyle's backers change abruptly, such that they need the money? Or did they watch Carlyle's Blue Wave Partners, SemGroup and Carlyle Capital Corporation implode and are worried about the same for their investment?

The golden age of private equity is just around the corner, according to Carlyle co-founder David Rubenstein. How many of their investors will stay in? And how soon will the turn come? Answers remain to be seen.

Behind TARP's Closed Doors, Hank Lets Hair Hang Down

Mid-September the Bush administration cried "wolf" as the big money boys quit lending to each other. They no longer trusted one another to make good on their debts. Congress rushed to approve a $700 billion bailout bill to buy up toxic assets. Update:

1. Credit hasn't unfrozen, despite use of $290 billion
2. Hank wants to invest in non-bank financial firms
3. Treasury won't buy any toxic assets, the plan 50 days ago

The American taxpayer is recapitalizing sinking financial firms. Now Paulson wants to put our money in firms that securitize auto loans, student loans and credit card debt. We are involuntary investors in America's New Sovereign Debt Fund.

Given that, who's looking out for our interest? No one. No oversight panel has been appointed and the Bush team missed the deadline for their first monitoring report. George W. Bush is a consistent performer on behalf of his business friends. The Corporafornication continues...

Phil Gramm Aloof UBS Vice Chair?

Senior executives at UBS were informed in 2005 of illegal offshore accounts used by wealthy Americans to avoid taxes. This led to the indictment of a UBS senior executive Raoul Weil. Surely, Raoul couldn't have perpetrated the tax evasion plot on his own given the 19,000 offshore accounts.

Plus, what did those executives do once the whistle blower came forward in 2005. Not much. This all points to more UBS top dogs being involved. The New York Times reported:

In a move that could spell bigger trouble for UBS, the indictment also referred to unindicted co-conspirators who “occupied positions of the highest level of management within the Swiss bank.” The individuals, the document said, sat on committees that oversee legal, compliance, tax, risk and other issues. The indictment also referred to unindicted senior bankers and the managers and “desk heads” who oversaw them.

What role did Phil Gramm play in this scheme? I find it hard to believe the Vice Chair of UBS remained uninvolved. American UBS investors sheltered $20 billion in assets. The scheme ran from 2002-2007. The internal whistle blew in 2005. UBS did nothing.

One month ago, Uncle Sam provided $54 billion in capital to Swiss giant UBS. This injection made this taxpayer very upset. The question remains as to Vice Chairman Phil Gramm's role in all of the shenanigans. And I'm whining that I don't yet know.

FRP's New Acronym: TARP shifts to SAGGING

Treasury Chief Hank Paulson proposed America's Financial Recovery Program (FRP) shift its focus. When first proposed to Congress in late September, the Toxic Asset Relief Program (TARP) planned to buy up bad assets. Ironically, the Federal Reserve Bank beat Treasury to the purchase punch by buying a chunk of AIG's junk assets.

Hank wants the bailout money used as "an investment program." In other words, America started a sovereign debt fund of several trillion dollars. Your future taxes fund the FRP. I suggest it be called:

Sovereign American Glorious Goliath Investment in Noncommittal Groups (SAGGING)

Malodorous FRP to Spread Beyond Banks?

Treasury Chief Hank Paulson asked America to pull his finger, when he announced major proposed changes to the financial rescue program (FRP). Two months ago, Hank sounded the alarm on a credit crisis and Congress acted, passing a $700 billion toxic asset relief program (TARP).

Since then, Treasury freewheeled. Rather than buy junk assets, Uncle Sam is recapitalizing financial firms. In some cases, shareholders have been wiped out; not so with others.

Paulson proposed going beyond banks, to issuers of other securitized credit (car loans, student loans and credit card debt), insurance companies, unregulated financial firms (like hedge funds), and the auto industry. He also wants to pave the way for private investment, from firms like The Carlyle Group. William Conway likes an unlevel playing field, one titled towards his private equity underwriter (PEU). How might Uncle Sam and PEU's team up under Hank's proposal? That remains to be seen.

The aim of the FRP was getting credit and lending flowing again. That hasn't happened in any substantive way. It's hard to see anything other than a Three Stooge like home remodeling job. Tell me when the big money boys are done with their Corporafornication of the American taxpayer.

Trick or Treat at Hank's Bank Bailout Window

Two weeks after Halloween, corporations dressed up as banks to get access to the $700 billion TARP program. American Express and their Travel Related division are now banks. The Fed approved the two firm's applications, citing "emergency conditions."

Insurance companies are experiencing urgent conditions. How soon before they become banks? Hedge funds have cratered, do any surviving ones want to become a bank? Who's next? GM, Ford or Chrysler?

How does a CEO turn his company into a bank? Does he walk around holding metal bars asking for deposits from the Fed? If approved, do they get one trip or many? Fannie Mae is close to burning through their first $100 billion and may be back for more. Where does the taxpayer frightmare end? How much corporafornication can American stand?

Carlyle Group Wins U.S. PEU of Year

The Carlyle Group sashayed down the runway with their award, Private Equity Underwriter of the Year-United States. They spent the last year dieting to look good for the bathing suit competition. A dark secret revealed the PEU resorted to gorging and purging to keep their weight down, and investor returns up.

It turns out Carlyle threw up acquired firms' value. Private Equity Analyst had the following headline, "Carlyle: 7 Of 32 U.S. LBO Portfolio Cos. Now Valued Below Cost." The ugly side of competition reared its head, yet again. Greed and leverage are amazingly resilient.