Beware Bair's Naming to Bank Board

Former FDIC Chair Sheila Bair gifted BankUnited to a consortium of private equity underwriters (PEU's) in the midst of the financial crisis.  After getting $2.4 billion in cash from the FDIC, BankUnited's PEU owners took the bank public a mere year after "saving it."  They stand ready to cash in further.  South Florida Business Journal reported:

BankUnited announced that its largest shareholders would sell a combined 8 million shares to the public in a secondary stock offering.

The Miami Lakes-based company (NYSE: BKU), the owner of the largest bank based in South Florida, said it would not receive any proceeds from the sale of its stock by the Blackstone Group, The Carlyle Group, WL Ross & Co. LLC and Centerbridge Partners.

Oddly, she dinged Tim Geithner's decision to cash in big as a PEU.

Former FDIC Chair Sheila Bair on Wednesday defended ex-Treasury Secretary Timothy Geithner's move to the private equity firm Warburg Pincus, but delivered a backhanded compliment to Geithner in the process.

When asked about the revolving door between Washington and Wall Street during an interview with HuffPost Live, Bair said that some people are actually better suited for the banking world than for policymaking -- and Geithner might be one of them.

"I don't think people should go work for entities they regulated, and Tim didn't, and I have not criticized Tim for that," Bair said.

After making this statement Sheila Bair accepted a board position with Banco Santander. (She already serves on the Host Hotels Board, think Marriott).

Santander values Bair’s experience and knowledge of financial markets in the U.S. where the bank runs retail banking and auto-loan businesses.

Apparently Bair's mirror offers little reflection.  Santander USA's largest shareholders is its Spanish parent and a number of PEU's, including Tim Geithner's Warburg Pincus Private Equity, KKR and Centerbridge (amply enriched in Bair's BankUnited gifting).

The little spat between Bair and Geithner is for public consumption.  Bair enriched PEU's as FDIC Chair and its time for PEU's to return the favor.  

Update 3-16-14:  FT mentioned Warburg's ownership stake in Santander

Update 3-27-14:  Sheila Bair's Banco Santander failed the latest round of Federal Reserve stress tests, as did Citigroup. 

State of the PEUnion

The American History Association approved the nomination of David Rubenstein, Founder, Carlyle Group, as the recipient of the 2013 Roosevelt–Wilson Award. I find it odd that Teddy Roosevelt and Woodrow Wilson took on Robber Barons of their day. Rubenstein certainly fits the modern day Robber Baron as a private equity underwriter (PEU).

An interest in the Declaration of Independence led Rubenstein in early 2013 to Monticello, home of the Declaration’s principal author, Thomas Jefferson. Inspired by his visit, Rubenstein donated $10 million to the Thomas Jefferson Foundation to support projects at the site that could better tell Jefferson’s story.

Rubenstein and Jefferson shared early career idealism and a later obsession with money over those very ideals.   The winners get to write history and that means our times will be PEU authored.

PEU Jobs Suck Life Out of Youth

Captains of finance can get snarky with one another.  Take Randall Dillard, managing director and chief investment officer at Liongate Capital Management, a fund of hedge funds.  Speaking to students at the London School of Economics Dillard offered advice on working long hours in investment banking.  Dealbook reported:

But he was rather dour on the private equity sector. “Trust me, after eight or nine years you will want to commit suicide,” he said, calling it the “roughest business to do well in.” He managed $22 billion in private equity assets, he said. “I couldn’t go to the movies without feeling guilty.”

I would venture most investment banking, hedge fund and PEU jobs are largely soulless.  There aren't enough extrinsic rewards in the world to fill an empty soul.  It always needs more.  

Carlyle's Rubenstein Quoted from Davos

While America's Congressional delegation remained mostly silent in Davos, Switzerland, Carlyle Group co-founder David Rubenstein was finally quoted. Bloomberg did a double team on Rubenstein.

Q:  Rubenstein on whether philanthropy is the answer to inequality:

A.  “No. Philanthropy is — we have to remember, philanthropy isn’t going to solve all the world’s problems.  Right now, philanthropy in the United States, people give away roughly — about 2 percent of GDP, so it’s a small percentage of GDP that’s involved in philanthropy.  It’s important, but a small percentage.

Interesting that small philanthropy is an important part of the solution, while "small" taxes from elimination of carried interest is absurd.  Note how Bloomberg reporters help Rubenstein recruit talent away from Wall Street:

Q.  Rubenstein on income inequality and whether it’s fair that talent move from Wall Street banks to Carlyle because of higher compensation, when that money could go to those who have important jobs, like teachers, but get paid less:

A.  “You can always cite examples of how the world would be better off if teachers got paid more money, and teachers should get paid more money.  Probably teachers deserve more money than private equity deserve money, but the system is what it is.  I can’t overnight change the system.  Probably the highest paid people should be interviewers on Bloomberg." 

Score one PEU pander point.

The interviewers returned the love to the great philanthropist:

Q.  Could Carlyle be a $500 billion firm?  Are there enough valuable assets to invest in if Carlyle did get to $300 billion, $500 billion?

And visions of billionaire sugar-daddies danced through their heads, especially those sporting North Face or Moncler.

 
But quotable billionaire Rubenstein wasn't done. Dealbook reported:

“You shouldn’t enter college worried about what you will do when you exit,” said Mr. Rubenstein, who majored in political science.  

But the reasoning skills that come with a well-rounded humanities education actually result in higher-paying jobs over time, Mr. Rubenstein said. 

“H=MC. Humanities equals more cash,” Mr. Rubenstein said.

The PEU billionaire speaketh.  Just as he made a fortune from Alaskan natives in the "Great Eskimo Tax Scam," Rubenstein now has his sights set on Africa.

Carlyle did their second African deal, which was announced in the midst of Davos.

J&J Africa is a transport company that also provides warehouses for bulk and container cargo.

Rubenstein went on to offer the next day:

Over the last couple of years people have gotten a lot less worried, but there are always things like black swans that come around,” Rubenstein said in an interview. “I just wanted to make sure everybody remembers that and that we are likely to have some bumps along the road.” 

People have gotten a lot less worried?  The table has been reset to December 2007.  How long before President Obama says "Wall Street got drunk?"

Bonus:  Davos Central site links are below for those wanting to find more Rubenstein:

Bloomberg
Guardian
FT
Reuters
Reuters Davos Live
NYT
Dealbook

For business reporters, no pander - no access to PEU legends. 

PEU's Harpoon Middle Class in Global Race to the Bottom

Business Insider revealed an essential globalist truth, one repeatedly cited on PEUReport:

Google Chairman Eric Schmidt just gave a "fireside chat" in Davos, Switzerland, at the World Economic Forum.

In the context of talking about global inequality, which Schmidt thinks is partly the result of technology and is going to get worse before it gets better, Schmidt revealed a critical truth about the economy that few other successful investors and executives appear to understand (or at least admit):

The stagnation in middle-class wages is not just a middle-class problem. It's an economic problem. And it's one of the main reasons that global economic growth is so lousy.

Right now, companies are so focused on cutting wages — by paying their employees as little as possible and replacing them with technology whenever possible 

I've written many times about the global race to the lowest common denominator on employee wages and benefits, as well as taxes (another priority from the Davos crowd.)  This is from July 2011:

I have seen so many people -- particularly those in their 50s - 70s -- taken apart by what has happened in their industry as greed has hollowed out the economy. These are people took pride in their jobs and held themselves to this invisible standard that we all just took for granted, but is being wiped out. 

The Carlyle Group scares me more than anything I've ever seen on Wall Street. It seems to exist to corrupt politicians and it's hard to know who they even represent. 

I watched a video interview of (David) Rubenstein and his arrogance is really beyond tolerance. He was going on about the debt ceiling problem and how there would need to be cuts in services and higher taxes. When the reporter asked him about tax on carried interest he turned really disdainful and said that this "only" amounted to $22 billion over some number of years and this was not serious money. Boy, nothing like everybody doing their small part to save the country from oblivion!

Private equity underwriters (PEU's) like The Carlyle Group own thousands of companies.  PEU's are so focused on affiliates cutting wages, by employing as few as possible at rates as low as possible, and replacing them with technology (with public subsidies).  Take Brintons, a British carpet maker Carlyle repossessed in 2011.  Carlyle fired seventy people, threatening to move jobs to China.  This was after Carlyle cleaved the employee pension, dumping it on British taxpayers.

Carlyle's billionaires make public policy in our PEU world.  Who thought we'd made progress in the last 238 years?  

A short trip back in time had President George W. Bush and Secretary of State Condi Rice stating democracies require a rising middle class.

Davos is the new Philadelphia, but rest assured, this crew is not leading on my behalf.

Update 3-1-14:  Regional airlines are deep into the race to the lowest common denominator on employee pay.

Update 4-13-14:  Executive compensation is inverse to employee pay.  It continues to grow in super-sized fashion.

Update 8-3-14:  Heaven forbid someone has to live off safety net programs, where the holes get bigger and bigger

WEF Sightings: The Blair Stair

Not every global profiteer is on the official invitation list.  Tony Blair makes huge money speaking at private equity underwriter (PEU) gatherings.  Davos 2014 has its usual high number of PEU attendees.  They need people like Tony to garner political access.

“The bottom half of the world’s population owns the same as the richest 85 people in the world.”

Tony works for the 85. 

They need protection. 

Davos 2014's Grand Opening

Carlyle Group co-founder David Rubenstein went from Michelle Obama's 50th birthday party to the World Economic Forum in Davos, Switzerland.  In between many in the U.S. celebrated Reverend Martin Luther King Day.

Descending on Davos are Bloomberg's Eleven, the Congressional Thirteen and PEU's galore.  Let the all nighters begin!