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Sent: Fri, 4 Apr 2008 4:39 pm
Subject: Who Did Bush Have in Mind When Proposing an "Economic Czar"?
To Keep Markets Stable,
President
Bush Proposes?"Economic
Czar"?
March 28, 2008 6:08 pm
New York Times
Edmund L.
Andrews
http://www.nytimes.com/2008/03/29/business/29regulate.html?_r=1&oref=slogin
?
Carlyle Group's Plan for [Hostile]
Takeover of the Banking System
http://www.economicanalyticsgroup.com/2008/04/carlyle-groups-plan-to-take-over.html
?
So what's Treasury Secretary Henry Paulson's call
for changes in regulation of the financial markets all about? A clue may have
been revealed today by Randal Quarles, former Under Secretary of the Treasury
who led the Treasury Department's effort in the coordination of the President's
Working Group on Financial Markets and is a current Managing Director at
Carlyle
Group.
Quarles spoke at a luncheon meeting of the Washington DC-based
National Economists Club. His topic: "Restructuring Financial Regulation".
Quarles told the luncheon group that he chose the topic in January. Hmmm.
Didn't
Treasury Paulson just make the proposal to restructure the financial regulatory
agencies last week? How did Quarles pick this topic back in January?
Short-answer, Quarles is a major insider and his comments should be monitored
to
get a sense for what insiders are thinking.
In his talk, Quarles said
that estimates go into the hundreds of billions in terms of capital that will
be
required by the financial industry because of losses sustained as a result of
the current crisis. He said there will be more financial institutions that will
go under in coming months.
He said that public markets will not supply
the necessary funds because they don't have the capabilities to study in detail
the risks and potential rewards of the complex financials of financial
institutions. He said private equity firms have the capabilities to do so and
to
supply the necessary funds. (N.B. Carlyle Group is a private equity
firm).
Quarles stated that some changes in the structure of regulations
that Paulson proposed were necessary but would take time to develop. He
specifically stated that one regulation that needed to be changed is the
limitation on the size of positions that non-banks can take in banks. (Note:
Limitations in the size of non-banks positions in banks now limits Carlyle
Group
from taking large positions in banks).
During the Q & A session, one
questioner summarized Quarles talk this way:
So what you said here
today is that you would like to see regulatory changes to make it easier for
private equity to take major positions in banks? And private equity, through
various entities on and offshore gets its money from banks. So what you want is
an environment where private equity can borrow from banks to takeover
banks?
In response, Quarles laughed.
We might add this
private equity acquisition of financial institutions will go on as the general
public is scared off from investing in the financial institutions by scare
headlines, or as Quarles would put it, "Public markets just don't have the
capabilities to judge the risks and rewards of the various financial
institutions." Translation: The public is not clued in on which firms the
insiders have decided to let survive, like JPMorgan, and which they are going
to
takedown, like Bear Stearns.
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