When Real Bankers = Shadow

Five banks failed this weekend. The FDIC transitioned assets from four to an existing bank. One they gave to brand new entity. The AP reported:

Miami-based Premier American Bank, N.A., a new bank with a national charter set up last week, is buying the deposits and $499.1 million of the assets of Florida Community Bank. The FDIC will retain the remaining assets for later sale. In addition, the FDIC and Premier American Bank – owned by the investment firm Bond Street Holdings – agreed to share losses on $305.4 million of Florida Community Bank's loans and other assets.

Who is behind Premier American Bank's corporate sponsor? Bond Street wrote the FDIC on the subject of failed bank acquisitions. The letter was signed Stuart I. Oren. Mr. Oren is a shadow banker, who sits on a number of corporate boards. One proxy filing describes Stuart as:

He is the Managing Member of Roxbury Capital Group LLC, a New York based merchant banking firm that he founded in April 2002. Since May 2009, Mr. Oran has also been a Senior Managing Director of FTI Consulting, a global business advisory firm.

Stuart saw the handwriting on the wall, i.e. there's money to be made from Uncle Sam. Did he watch The Carlyle Group et al's takeover of BankUnited? It became one of the best capitalized banks in America, virtually overnight. BankUnited announced an emphasis on commercial lending. One might think $4.9 billion in subsidies from Uncle Sam would be enough for Carlyle and company, but Obama could add more green to the trough.

In his State of the Union address this week, President Barack Obama said he will initiate a $30 billion program to provide money to community banks at low rates, if they boost lending to small businesses.

America's shadow bankers are now "real bankers." That the gifts keep coming from Uncle Sam should be no surprise. Now if we could just get bankers to lend.

Update: Private equity has $1 trillion in dry powder.

Update 2: Real bankers are going after PEU like returns with short term loans at 120% interest. Profits win over customer service, nearly every time.

Update 3: The Carlyle Group invested $150 million in a Bermuda bank. Yet affiliate Boston Private still owes Uncle Sam $153 million in TARP funds.

Chaos in Davos

The WEF event deteriorated after the cage match between "Dr. Doom" Nouriel Roubini, "The Founder" David Rubenstein of The Carlyle Group, and "The Chief" Rajan, an economist with the International Monetary Fund. Reuters reported:

It was a private, five-minute, expletive-filled tirade against the U.S. President for this reporter's benefit. Welcome to one aspect of the World Economic Forum's annual schmoozefest.

This unique event -- a gathering of several thousand of the members of the world's business and political elites for debate, dealmaking and a fair amount of partying in a ski resort in the Alps -- is in many ways an annual celebration for capitalists.

But this is a very dysfunctional family.

Rather than look in the mirror and accept responsibility, banksters pointed fingers from the World Economic Forum:

When executives talked about a recovery, they also used words like "fragile" and then mumbled about whether the battle between bankers and politicians could upset it all.

These same leaders said politicians would not collaborate on a new global infrastructure. Therefore, they can continue pitting one country against another.

The God's work meme, floated by Goldman Sachs CEO Lloyd Blankfein and his cronies, arose. Obama's "Chrysler speculator" had a comment:

"I think the industry had better wake up before they get the wrath of God on them," said Joseph Perella, a veteran dealmaker and chairman of U.S. investment bank Perella Weinberg Partners.

Wrath is here. If this were the 1700's a few politicians and banksters would be tarred and feathered. In 2010 they make their feather bed, while blaming others.

White House March of the For-Profits

In prior posts I noted Nancy-Ann DeParle's for-profit health care background. The White House Health Czar was a private equity underwriter (PEU) for CCMP Capital Advisers when President Obama tapped her to lead health care reform.

As The White House revealed 75,000 visitor names, I did a little For-Profiteer fishing. Here's what I found:

Tom Scully visited 10-10-09. Mr. Scully is general partner with Welsh, Carson, Anderson & Stowe, a PEU with a distinctive health care focus. Scully also lobbies for health care clients for Alston & Bird, a DC firm that employed Tom Daschle, Bob Dole and numerous White House visitors.

James Shelton visited 10-21-09. Shelton is the former CEO of Triad Hospitals, which had Nancy-Ann Deparle and Uwe Reinhardt, a Princeton health economist, on their board. All made millions from Triad's sale. Nancy-Ann & Uwe also served together on Boston Scientific's board. Shelton is now head of Legacy Health Partners, an affiliate of CCMP Capital Advisers (Nancy's old PEU).

Jack Bovender visited 9-22-09. Bovender is the former Chair and CEO of HCA, an affiliate of KKR, a huge PEU. HCA will pay $1.75 billion in special dividends to its PEU owners. Part of the dividend is debt financed.

Daniel Moen visited 9-23-09. Moen is the CEO of CCMP owned Legacy Hospital Partners.

Robert Bracken visited 9-23-09. His father is Richard M. Bracken, the man who replaced Bovender as HCA's CEO. Did Tulane clean up Robert nicely for a White House visit?

Charles Kahn visited 3-06-09 Chip is CEO of the Federation of American Hospitals, the for-profit hospital lobby. He succeeded in renaming nonprofit community hospitals. The last Senate bill called them "private tax-exempt facilities," enough to chill the heart out of health care.

David Bernd visited 4-03-09 . Bernd served as CEO of Sentara Healthcare, a private tax exempt system in Tidewater, Virginia. He sits on the board of Legacy Health Partners and Old Point Financial Corporation.

Funny, none of Nancy's friends visited her. They spent time with Ezekiel Emanuel or took day long White House tours. Knowing this crowd, they had to be private tours. Who was their escort?

The parties could meet again at the Federation's upcoming Public Policy Conference and Business Expo. As the meeting is in downtown D.C., Nancy-Ann could swing by and see her friends without any White House record. It's been done before.

PEU Tom Daschle's White House Health Reform Thread

Ex-Senator Tom Daschle stumbled before reaching the health reform starting line. Who can fault him for not seeing those cracks in the pavement like:

1. Not paying his taxes. He failed to claim the value of his driver, a benefit from InterMedia Advisers, a private equity underwriter (PEU). It's not a golf club driver, but a human being, a chaffeur.

2. Not declaring his work for Alston & Bird as lobbying. See Tom doesn't "advocate" for his firm's clients, despite their paying huge money. He needs only rub up against people on the hill to provide value. Apparently, friction accomplishes much. He'll now "not lobby" for DLA Piper, employer of Dick Armey, the man who lowered America's political bar with the Tea Party movement.

The forgiving, forgetful public won't hold it against influence peddler Tom. He marches onward, sometimes up White House stairs. He visited twelve times in 2009, according to White House records. Tom saw the following people:

President Barack Obama
Vice President Joe Biden
Rahm Emanuel
Larry Summers
Peter R. Orzag

Are any Daschle contacts in the White House?

Senior Adviser Pete Rouse-served as chief of staff to former Senate Democratic Leader Tom Daschle (D-SD) for 19 years. After working for Senator Obama, Pete made the President's top advisers.

How about the White House visitor lists?

Laura Petrou-Chief of Staff Health & Human Services. Laura served on the Daschle staff for 20 years. She had 12 White House visits, mostly to Nancy-Ann DeParle and Peter Orzag.

Jeanne Lambrew-coauthored Tom Daschle's health care policy book. Jeanne had 28 White House visits, eleven with White House Health Czar Nancy-Ann DeParle, one with David Axelrod and the rest with Phil Schiliro.

Elinor Hiller-Health care lobbyist at Daschle's Alston & Bird. Her clients are mostly health care, but she represents Safeway Stores, which has an innovative program for employee health coverage. Safeway's CEO Steven Burd also visited the White House.

Marilyn Yager-Senior Policy Adviser for Alston & Bird.

Paul Tewes-Formerly of Hillebrand-Tewes Consulting which did major work for the Obama campaign. The principals split with Hillebrand forming Hillebrand Strategies, while Tewes started New Partners Inc. Tewes spent time as the political director of the Democratic Senate Campaign Committee while Tom Daschle served as Senate Majority leader. Paul Tewes had four White House visits, split between Jim Messina (Deputy Chief of Staff) and Kristin Sheehy.

Mark Childress-Appointed HHS Chief of Staff, expecting Tom Daschle to be approved by the Senate. When Daschle withdrew, Childress resigned to work as an adviser for Ted Kennedy. Mark is a longtime Daschle confident. He visited the White House three times, twice with Pete Rouse and once with Rahm Emanuel.

Linda Daschle-Wife and lobbyist for a string of firms, including her own. She lobbied on behalf of General Electric. Two visits to the White House.

Lindsay Daschle-USDA Secretary Tom Vilsack's confidential secretary. Four visits to the White House.

I'm sure the Daschle thread is much deeper and dirtier than the pulling I've done thus far. Isn't that the way things work in Washington?

PEU's Tap HCA for $1.75 Billion

HCA will pay a special dividend of $1.75 billion to its private equity owners, KKR, Bain Capital and Merrill Lynch Private Equity. The Frist family will get a chunk of the dividend, paid from cash and a credit facility.

Private equity underwriters (PEU's) ponied up $5.5 billion in cash when it bought HCA in 2006. A 32% return from a special dividend? Not too shabby, especially since it includes borrowed money. Using credit to finance dividends renews an old practice. The big money boys have 2010 to load up on special dividends, before a potential change in "carried interest" taxation.

PEU's borrowed heavily to finance the HCA deal, nearly tripling interest expense. No new hospital was built, no new bed added, and no new high tech imaging device installed. Borrowing alone increased health care costs by $1.5 billion.

As for the Frist family split, how much will go to Tommy and how much to Dr. Bill? Oddly, Senator Frist's son Harrison works for The Carlyle Group. PEU's have targeted health care. HCA's latest move shows why. There's big money to be made.

Update: KKR shops an IPO for HCA, valuing the company at twice its cost. Also, Vanguard Health System paid a $300 million dividend to owners, including The Blackstone Group.

Longhorn Budget under Perry's Butcher Knife

The Houston Chronicle reported:

The University of Texas is putting together a proposal for a 5 percent cut that could trim about $29 million from the state-funded portion of its budget.

It seems UT could use most of the $35 million owed to Texas taxpayers by Vought Aircraft Industries, an affiliate of The Carlyle Group. Vought failed to provide 3,000 new jobs at its Dallas area facilities by 2009.

Governor Rick Perry amended the agreement with Vought and another Carlyle affiliate, Authentix. He failed to provide details on the changes. Texas taxpayers deserve $35 million with interest, based on Vought's miserable performance under the Texas Enterprise Fund grant. Vought eliminated 35 full time jobs from 2004-2009. Perry gave the company $1 million per job lost.

High Frequency Trading: Next House of Cards

High frequency trading (HFT) comprises 60 to 73% of U.S. trading volume, according to estimates. The new winner in the fast money game is Goldman Sachs. It supplanted JPMorgan. Bloomberg reported:

Goldman’s technology and its access to a large pool of potential buyers and sellers help it to search for -- and find -- liquidity at the best price for customers.

This golden egg might not last. Talk of a trading tax has stock flippers worried. Who knew it would become passe to hold a stock for 5 days? Apparently stocks don't get better with age, like cheese, wine or cognac.

Update: May 6, 2010. ZeroHedge writes "The Day The Market Almost Died (Courtesy of High Frequency Trading)