Posting opinions, letters and correspondence from far and wide. Even some to/from my elected representatives.

Monday, September 29, 2008

Harping on about Private Equity firms.

I've been saying over and over now. But by crickey, I am gonna say it again. This great nation of ours is swimming in dollars, they just happen to be locked up within private equity firms and as the big investment banks go looking for valuable assets to sell they are going to find more and more private equity firms snapping up those profitable units as fast as the House can say "the sky is falling". And lo and behold, stuck between the notes on the DIJA, NASDAQ and others falling today what should pop out of the financial wires but that:

Lehman Brothers (LEH) reached an agreement to sell its Neuberger-Berman asset management unit and other businesses to private-equity firms Bain Capital and Hellman & Friedman for $2.15 billion. While the deal hands over control of Lehman’s asset management unit and private funds investment group, it doesn’t include the bank’s private equity businesses. Bain and Hellman & Friedman will have equal control of a newly created investment management company that will feature Neuberger as its largest unit.

And also that:

Citi Swallows Wachovia

In the mean time, Wall Street was clearly spooked after Wachovia (WB: 1.84, -8.16, -81.60%) nearly failed and European banks came under fire.

Now on top of that comes this interesting news about Fannie Mae:

Fannie Mae (FNM: 1.56, -0.27, -14.75%) and Freddie Mac (FRE: 1.80, -0.20, -10.00%) disclosed on Monday they were subpoenaed earlier this month by a federal grand jury investigating their accounting. The mortgage giants that were seized by the government also said they are subject to an SEC investigation. Fannie and Freddie said they intend to cooperate with the investigations. Shares of Fannie and Freddie were up sharply on the day.

Now remember how Fannie Mae is the unlucky devil that did what the Government asked it to do? Let me refresh your memory a little. The Congress and in particular Democrats and Republicans (yes both) basically told Fannie "don't say no when handing out loans or being asked to underwrite loans". Well, that kind of executive direction got them into a little trouble. So now, when a federal grand jury decides to subpoena good ol' Fannie their stock price does what? Why, it goes up of course, because finally there will be the harsh light of accountability shed on their shady dealings. Let's not mention the eye popping idea that a quasi private/public institution could pay lobbyists and extend benefits to bank associations as "grants" (see Chuck Schumer/Jesse Jackson HELP program for example).

The main point here is that, the banking sector is NOT failing. It is simply readjusting to the now very well known realities. That is, the banks mismanaged their affairs and now the "predatory buyers" (wait for some Democrat to call them that soon) are buying them up because they will make great assets in the future.

Now the next point, left a message with Christopher Shays this afternoon congratulating him on making the right decision to vote no on this ridiculous socialist program and Bank shakedown of the American people. Now it is up to the house Republicans to reset their agenda to bring forward a stimulus package based on Milton Friedman free market principles. And it is really quite simple.

i) reduce the capital gains tax.
ii) move forward with a program of tax reductions for all American tax payers.
iii) provide short term money to stabilise monetary policy.
iv) move forward with fiscal policy reforms. Uh, shut down wasteful Government programs.
v) Repeal Sarbanes Oxley.
vi) Hey, let's throw in "wind down Fannie Mae and Freddie Mac" within ten years.

Because we ARE going to enter a downturn in the American economy. The only question is: how long and how deep will our Government make it?

UPDATE: Oh dear, it turns out Christopher Shays voted FOR the bail out. Now I have to make sure that he is never able to hold public service office again! Thanks for nothing Chris.

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