-Caveat Lector-
Begin forwarded message:
From: [EMAIL PROTECTED]
Date: June 27, 2007 7:26:40 PM PDT
To: [EMAIL PROTECTED]
Cc: [EMAIL PROTECTED], [EMAIL PROTECTED], [EMAIL PROTECTED]
Subject: Fwd: [corp-focus] Blackstone and Capital's Scam
Blackstone, the cutting edge of high-fallutin' finance, chose to do
its own I.P.O. on the New York Stock Exchange. And it did quite
nicely for itself.
In selling part of itself on the publicly traded markets, the firm
was forced to disclose important financial information. C.E.O.
Steve Schwarzman grabbed $677 million when the company became
publicly traded, and his personal share in the company is valued at
$7.7 billion.
There actually is a looming crisis on Wall Street, but it's the
complete opposite of what Wall Street's elite is claiming. The
last five years have seen the rapid evolution of esoteric financial
instruments that are subject to almost no regulation or even
disclosure requirements. Private equity deals depend on massive
amounts of debt; hedge funds are placing massive bets using
borrowed money; and debt itself is being traded like a commodity as
never before. The assurance coming from Wall Street is: Don't
worry; only sophisticated players are involved in these deals.
Those who trusted these same "sophisticated" players in the '90s
were badly burned by Enron, WorldCom, and a host of other frauds
exposed earlier when the dot-com bubble suddenly burst.
See what's free at AOL.com.
From: "Jim S." <[EMAIL PROTECTED]>
Date: June 27, 2007 3:18:17 PM PDT
Subject: [corp-focus] Blackstone and Capital's Scam
Comment on this and other columns at:
http://www.multinationalmonitor.org/editorsblog
----
*Blackstone and Capital's Scam*
By Robert Weissman
June 27, 2007
Blackstone.
That is the ultimate refutation to the unbelievably brazen campaign
being run by Wall Street hucksters and the knee-jerk oppositionists
to law and order at the U.S. Chamber of Commerce.
Blackstone is the giant private equity firm that, ironically, has
just gone public (at least in part). Private equity firms are
making headlines for making zillions of dollars buying publicly
traded firms and taking them private (and later selling them again
on public stock exchanges).
The Wall Street-Chamber campaign alleges that the U.S. financial
services sector is facing a competitiveness crisis, due to
regulation, litigation and prosecution.
Yes, really.
Here's the Chamber's C.E.O. Tom Donohue, commenting as the House
Committee on Financial Services met yesterday to discuss the role
of the Securities Exchange Commission in protecting investors and
overseeing the capital markets: "A broken securities class action
lawsuit system and an unpredictable and inefficient regulatory
system have created a drag on the competitiveness of our capital
markets," said Donohue.
Go ahead and wipe away the crocodile tears.
You have to work mighty hard to muster sympathy for Wall Street.
Leave aside the very trivial role played by Wall Street firms in
supporting actual investment and innovation. Concede for a moment
the questionable premise that Wall Street firms provide a genuinely
important social function in facilitating development of the real
economy. Forget about the massive financial frauds perpetrated by
Wall Street and corporate C.E.O.s over the last decade.
Just consider the profits and earnings for those who make their
living on Wall Street. The guys in the fancy suits are doing
alright for themselves.
Wall Street bonuses totaled $23.9 billion in 2006, according to the
New York State comptroller, up 17 percent over 2005. It takes top
Wall Street traders about two hours to make as much as the median
U.S. household earns in a year, notes Sam Pizzigati, editor of the
on-line newsletter Too Much.
Profits at Citigroup actually fell in 2006 -- and the company was
still the third most profitable publicly traded corporation in the
United States, according to Fortune. Bank of America saw profits
soar by 28 percent to $21.1 billion, to register the fourth highest
profitability in the United States. J.P. Morgan came in ninth.
Profits at Goldman Sachs were up 90 percent, to $9.5 billion --
good for sixteenth on the Fortune list.
And then there's Blackstone. In selling part of itself on the
publicly traded markets, the firm was forced to disclose important
financial information. C.E.O. Steve Schwarzman made $400 million
in 2006. He grabbed $677 million when the company became publicly
traded. And his share in the company is valued at $7.7 billion.
The phantasmagoria peddled by various blue-ribbon commissions
anointed by Wall Street and the Chamber disregards these riches and
concentrates on one overriding deception: The claim that
regulation and litigation is driving companies to float their
Initial Public Offerings (I.P.O.s, the moment when they initially
sell their stock) on foreign markets.
There has been some diversification of I.P.O.s, but it mostly
reflects the fact that stock markets in other countries are rapidly
developing, and companies in those countries are choosing to list
on their home country exchanges.
Once you take that into account, plus the role of a London-based
market in attracting small-firm I.P.O.s, it turns out there in fact
has not been a shift of I.P.O.s to other national markets. A
devastating January 2007 White Paper from Ernst & Young looking at
every I.P.O. in the first half of 2006 found that 90 percent were
conducted in the launching company's home country. Of the
remaining 10 percent, only a few were "in play" -- most went to
regional markets, or were small-caps that went to the London
Alternative Investment Market. Of the I.P.O.s in play -- a grand
total of 17 for the first six months of 2006 -- about two-thirds
were listed on U.S. exchanges.
And then there's this: Blackstone, the cutting edge of high-
fallutin' finance, chose to do its own I.P.O. on the New York Stock
Exchange. And it did quite nicely for itself.
There actually is a looming crisis on Wall Street, but it is the
opposite of what the Street's elite claim. The last five years has
seen the rapid evolution of esoteric financial instruments that are
subject to almost no regulation or even disclosure requirements.
Private equity deals depend on massive amounts of debt; hedge funds
too are placing massive bets using borrowed money; and debt itself
is being traded like a commodity as never before. The assurance
from Wall Street is: don't worry; only sophisticated players are
involved in these deals, they know what they are doing, and they
can afford to absorb losses.
But those same sophisticated players were badly burned by the
Enron, WorldCom, and related frauds of the 90s' stock market
bubble. These characters can apparently be defrauded without too
much difficulty. Far more importantly, they regularly suspend
their good judgment in pursuit of fads -- which means lots of
institutional players make the same mistakes at the same time.
It's reasonable to ask, so what? If the rich get soaked, that's
their problem.
But the institutional players bought into Wall Street's financial
exotica are investing regular people's pension and retirement
monies, so lots of people stand to get hurt.
Even more importantly, the scope of debt-heavy bets now being
placed on Wall Street are so huge that the market movers and
shakers are doing more than gambling with their own money -- they
are placing the health of the entire financial system at risk.
That raises the prospect of huge potential taxpayer bailouts, or
financial crises with impacts on the real economy that are too
large to be averted by government action.
For their own good, but more crucially for the good of the rest of
us, what Wall Street and the global financial system need is much
more regulation, prosecution and stricter liability rules. Things
are moving far too fast, with far too little acknowledgement of
risk and far too little oversight or disclosure.
~~~
Robert Weissman is editor of the Washington, D.C.-based
"Multinational Monitor": http://www.multinationalmonitor.org and
director of Essential Action:
http://www.essentialaction.org
(c) Robert Weissman
This article is posted at:
http://lists.essential.org/pipermail/corp-focus/
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