Thursday, 26 June 2008

Looking for more victims: Carlyle wants U.S. to ease bank investment rules

NEW YORK, June 26 (Reuters) - The U.S. government should ease regulations on private equity investments in financial services companies to make more money available to the business and help stabilize the economy, two executives at the Carlyle Group wrote in The Wall Street Journal on Thursday.

"We are not contesting the long-standing policy of drawing a line between banking and commerce," Carlyle Managing Directors Olivier Sarkozy and Randal Quarles wrote. "But the limitations on capital investment are far stricter than necessary to maintain these barriers, and can be amended by administrative intervention that is entirely consistent with the existing laws governing the country's depository institutions."

"In addition to increasing the industry's cost of capital, these limitations increase the risk that taxpayers will ultimately be called on to assume some of these burdens," Sarkozy and Quarles wrote, adding that private equity represents about $400 billion in available funds.

Finding money to prop up sagging financial institutions is a looming question these days. Big banks have sustained billions of dollars in losses in a credit crunch after they bulked up on risky mortgages that soured.

Quarles, a former treasury undersecretary in the Bush administration, and Sarkozy said the global financial services industry has sustained $350 billion in losses and cited some economists as saying another $1 trillion in losses could be on the way. Bear Stearns, in a fire sale to JPMorgan Chase (JPM.N: Quote, Profile, Research, Stock Buzz) earlier this year, has been the biggest casualty to date.

The problem for private equity, they wrote, is that "an array of regulations and administrative interpretations limits private equity's ownership and influence in regulated depository institutions. While these measures were largely designed to safeguard the separation of depository institutions from industrial enterprises, the policies underlying these rules have limited applicability to the private equity industry."

Sarkozy and Quarles argue the law limits entities controlling commercial firms from owning more than 25 percent of the voting stock in a banking company, but in practice the limit is often lower if investors seek representation on company boards.

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Dr.Phool Donating Member (1000+ posts) Journal Click to send private message to this author Click to view this author's profile Click to add this author to your buddy list Click to add this author to your Ignore list Thu Jun-26-08 02:21 PM
Original message
The vultures are circling.
Deregulation wasn't bad enough, so remove the rest of the regulations.
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Ghost Dog (1000+ posts) Journal Click to send private message to this author Click to view this author's profile Click to add this author to your buddy list Click to add this author to your Ignore list Thu Jun-26-08 02:57 PM
Response to Reply #50
59. This Sarkozy Half-Brother to the Other Sarkozy (& ex-UBS), BTW:
Carlyle Hires UBS’s Sarkozy for Financial Deals

March 3, 2008, 8:10 am

The Carlyle Group, the private equity firm, said Monday that it had hired Oliver Sarkozy, one of UBS’s top investment bankers for financial services deals, to work as co-head of a similar practice.
Mr. Sarkozy, the joint global head of UBS’s financial institutions group (and half-brother to French president Nicolas Sarkozy), will join Carlyle in April and will remain based in New York.

His group will search for investment opportunities amid today’s global banking and credit crisis.
“Olivier is a remarkable addition to our financial services team,”

David Rubenstein, a Carlyle co-founder and managing director, said in a statement. “He has an incredible track record and network that will help Carlyle capitalize on the dislocation in the financial services sector and extend our record of success to this important and growing part of the global economy.”
Before UBS, Mr. Sarkozy worked at Credit Suisse. Some of the deals he has worked on over the past year include ABN Amro’s sale of LaSalle Bank to Bank of America and Sallie Mae’s attempt to sell itself to a group of investors.

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