Global stocks tumbled and the dollar fell further Thursday as the effects of Federal Reserve efforts to restore liquidity to financial markets faded and the investment fund Carlyle Capital succumbed to the credit crisis.
The severity of its liquidity problems indicates that the unfolding financial crisis is taking major parts of the US financial and political elite down with it. Carlyle Capital Corp Ltd, a subsidiary of one of the most influential US private equity funds and closely tied to the Bush family, is in default on several of its securities. Carlyle is an offshore subsidiary of the Washington-based Carlyle Group, one of the most politically powerful private equity firms of the past two decades.Among the leading partners of the Carlyle Group in recent years have been George H W Bush, father of President George W Bush; James Baker III, the Bush family's attorney and fixer; and former British prime minister John Major.
[...]
The Carlyle Group already has loaned Carlyle Capital $150 million to cover debt obligations since July 2007. In the past several days it failed to meet margin calls with four banks.
The fear in the market according to informed reports is that its entire portfolio, recently valued at $21 billion, could be sold off in a distress sale, putting major downward pressure on all mortgage bonds globally. Carlyle Capital was a prime example of the financial engineering encouraged during the Federal Reserve's Alan Greenspan era by Washington.
Ah, the Midas touch.
More worrisome is the fact that the Carlyle crisis does not derive from so-called subprime or bad-grade mortgage debt. […] Now Carlyle's lenders have issued margin calls in excess of $400 million. At the onset of the subprime crisis in September 2007, Carlyle was forced to go to Abu Dhabi's sovereign wealth fund to get capital. Mubadala, the arm of Abu Dhabi that has invested in sectors as diverse as Libyan oil exploration and Ferrari, the Italian motor company, paid $1.35 billion for a 10% Carlyle stake.[...]
Carlyle is by no means the only elite US private capital group in serious trouble. Blackstone Group, manager of the world's largest buyout fund, said fourth-quarter profit plunged 89% after a "meltdown" in the credit markets and warned that getting loans for takeovers will be difficult in 2008. Profit declined to $88 million from $808.1 million a year earlier.
Meanwhile, our Treasury Secretary has a keen grasp of the situation.
US Treasury Secretary Henry Paulson said Thursday that a strong dollar "is in our nation's interest" as the US currency slumped to another record low against the euro and fell below 100 yen.[...]
"Our economy like any other has got its ups and downs, but the long term fundamentals are strong and I believe it's going to be reflected in the currency market," he said.
Lately, the ups are not really showing themselves.
But don’t you worry about the Carlyle Group. They’ll be just fine.
The Carlyle Group, one of the world’s largest private equity funds, may soon acquire the $2 billion government contracting business of consulting giant Booz Allen Hamilton, one of the biggest suppliers of technology and personnel to the U.S. government’s spy agencies. Carlyle manages more than $75 billion in assets and has bought and sold a long string of military contractors since the early 1990s. But in recent years it has significantly reduced its investments in that industry. If it goes ahead with the widely reported plan to buy Booz Allen, it will re-emerge as the owner of one of America’s largest private intelligence armies.
In response to the forced liquidation of mortgage-backed assets caused by the Carlyle margin calls and other similar developments in credit markets, on March 11, 2008, the Federal Reserve gave Wall Street's primary dealers the right to post mortgaged-back securities as collateral for loans of up to $200 billion in higher-grade, U.S. government-backed securities. [14] On March 12, 2008, BBC News Online reported that "instead of underpinning the mortgage-backed securities market, it seems to have had the opposite effect, giving lenders an opportunity to dump the risky asset" and that Carlyle Capital Corp. "will collapse if, as expected, its lenders seize its remaining assets."
Something seems wrong here, but I’m so financially inept, and the Nyquil I’ve been taking for the crud I have is making it even more than generally difficult to focus a thought. Nyquil blogging. Not for the timid. Or the fastidious. Perhaps I should stop.
....but hey, do what you want....you will anyway.
Update Hmmm. Here’s an interesting quip that may be related to whatever it is niggling me about this situation.
Despite Barack Obama's claim that his campaign represents a mass "movement" of "average folks," the initial core of his support was largely comprised of rich denizens of Wall Street. Why would the super wealthy want a percieved "black populist" to become the nation's chief executive officer? The "Obama bubble" was nurtured by Wall Street in order to have a friend in the White House when the captains of capital are made to face the legal consequences for deliberately creating current and past economic "bubbles." Wall Street desperately needs a president who will "sweep all the corruption and losses, would-be indictments, perp walks and prosecutions under the rug and get on with an unprecedented taxpayer bailout of Wall Street." Who better to sell this "agenda to the millions of duped mortgage holders and foreclosed homeowners in minority communities across America than our first, beloved, black president of hope and change?"
That may be a little harsh, but there could be something to it as well.
What was bothering me about the Wikipedia information was that Carlyle Group - these are the big cats, people - would invest in mortgage-backed securities in 2006. They would have known where things were headed by then, even if you and I didn't. (I changed my original post to take out that part, because I thought the Nyquil was taking me too far over the conspiracy brink. And I was also thinking about tax-payer bail out of the S&Ls - Neil Bush, anyone?) Go ahead and read this Black Agenda Report, and don't forget the comments.
...but hey, do what you want...you will anyway.
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