Monday, June 1, 2009

Can Private Equity Be Muscled Out of Major Bank Acquisitions?

NyPo thinks so.

Ordinarily, I would want to know what NyPo was smoking before it published a story saying the very powerful, very connected Private Equity firms were going to be edged out in the coming bank acquisition grab.

But then NyPo points to the one man that seems to be god in the eyes of the U.S. government, Jamie Dimon. Writes NyPo:

A wave of bank failures this year is expected to create a feeding frenzy among would-be buyers, with private-equity firms likely edged out as relatively healthy banks like JPMorgan Chase swoop in to pick the bones of their battered, smaller brethren.
Dimon is chairman, CEO and President of JPMorgan.

NyPo continues:

While many of the bank failures from this year have been soaked up by private-equity firms like The Blackstone Group and Fortress Investment Group, sources said bank regulators and the FDIC have expressed concern about letting private-equity firms gobble up too many pieces of this vital part of the banking system.

With that in mind, the FDIC, which is typically appointed to oversee liquidations of banks and thrifts, is considering encouraging healthier banks to purchase part or all of a troubled institution's deposits and bank branches.
Given that JPMorgan has already acquired Bear Stearns and Washington Mutual at what appears to be incredibly discounted prices, the FDIC and other regulators "concern" about Private Equity, is like the FDIC and regulators showing concern about the wolves guarding the hen house, so they turn the job over to a fox.

Here's NyPo on what Dimon may be up to:

Indeed, expanding in underrepresented markets such as the Southeast is exactly what Jamie Dimon's JPMorgan may look to do even after having acquired Seattle-based Washington Mutual's deposits and branches last year and investment bank Bear Stearns. [Phil Colaco, a managing director at investment banking firm McColl Partners], noted that Southeastern banks show significant signs of weakness. He estimates that there are 101 troubled banks in Georgia and 91 in Florida on the brink.
. Anyone studying the JPMorgan acquisitions of Bear Stearns and Washington Mutual would have to reach the conclusion that these acquisitions were conducted at prices far below market levels that ended up benefiting JPMorgan to the tune of tens upon tens of billions of dollars.

If JPMorgan can now out muscle the likes of the Carlyle Group in the acquisition of banks, I'll be really impressed. And it will also make me even more curious as to just what is behind the gifting of the financial system, at discount prices, to Jamie Dimon.


  1. There are enough stressed banks in the South for each of the big money boys to get a sweet non-TARP deal from the FDIC.

    JP Morgan can land one of the biggies, with plenty left over for Blackstone, Carlyle, KKR, TPG, and Cerberus.

  2. Arthur Levitt sits in a sweet spot to coordinate the oligarchs dividing up the banking spoils. He now advises Goldman Sachs, is Senior Adviser for the Carlyle Group, and advises the Promontory Group (a banking consultant).

    Goldman and Carlyle were in competing coalitions in the BankUnited shut down.

  3. Looks like Moffet's old boss at U.S. Bancorp, Jerry Grundhofer, is up for the top slot at Citi:

    The first article quotes Ned Kelly, another Carlyle expat. It seems like Citi is to the FDIC as JPM and Goldman are to the Fed. Might Bair be attempting to make Citi the ultimate conduit for PE bank acquisition and a pawn in her power struggle with the Fed?

    Interesting quote from first article: "In a post-Lehman Brothers world, regulators are pushing to give the FDIC authority to unwind failing institutions such as investment banks, insurance behemoths and megasize hedge funds, in a way that limits the collateral damage any implosion of such entities might cause the broader markets. Such authority would be a major expansion of the FDIC's existing mandate -- so much so that Treasury Secretary Timothy Geithner may take away some other FDIC functions, including its role as bank examiner."

    Wondering what RW and PEU Report think about this.