Friday, July 25, 2008

Is The Fed About To Change The Rules For Randal Quarles?

As long time readers of EPJ know, Randal Quarles wants his Carlyle Group to be able to buy into banks stocks without additional supervision. Well, ladida, notice this news from Bloomberg. The Fed is considering changing the rules for private equity, i.e. Randal Quarles. Notice the Fed isn't considering changing the rules for everyone, just private equity.

So here's how the play remains. Henry Paulson continues to scare the s#@*t out of bank shareholders, a few bank lines thrown in for good measure, and Randal Quarles wants to buy into the bank stocks Big Time, just him and his private equity cronies. Get it? You aren't going to be able to play in his sandbox, it has gold in it.

Here's the latest from Bloomberg:

The Federal Reserve, looking to spur investment in lenders hit by credit-market losses, is weighing three measures to ease rules for private-equity funds that buy bank stakes, people with knowledge of the deliberations said.
Notice how the change in rules mentions private equity only.

One proposal would permit buyout firms to use ``silo'' funds walled off from their other investments to buy the stakes without subjecting the rest of their holdings to more federal oversight, said the people, who declined to be named because the talks aren't public. Under another scenario, the Fed would let private equity firms exercise more control of banks they invest in. A third plan would encourage firms to team up on bank deals.

So Henry Paulson is talking about giving the Federal Reserve greater authority so the financial industry can be regulated more intensly by the Fed, and simulataneously the Fed is meeting with Randal Quarles so that there is less regulation of private equity funds that buy into banks. Cute.

Buyout firms are ``hesitant to invest in banks because of the various levels of regulation that would apply to them,'' said Thomas Vartanian, a partner at Fried Frank Harris Shriver & Jacobson LLP in Washington who advises buyout funds and lenders. ``The banks need capital, and private equity has it. Necessity is often the mother of invention.''

So Thomas Vartanian is a new front man for Quarles and private equity. Everything he is quoted as saying, Quarles said privately at a luncheon months ago.

Treasury Secretary Henry Paulson has called on banks and brokerages to raise cash as their losses from the collapse of the mortgage market and the ensuing credit-contraction climb to more than $466 billion. Blackstone Group LP and Carlyle Group, the world's two biggest private-equity firms, discussed the topic when they met with Paulson this month, say people briefed on the talks.

They just started talking about this plan in the heat of the crisis this month? Who makes up these movie scripts? Read my report from the Quarles luncheon again and you will know this play has been in motion for months.

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