Saturday, June 13, 2009

Just Ahead: Private Equity Buyouts in the Banking Sector

David Rubenstein is about to become a big time banker. Rubenstein is co-founder of the private equity firm, Carlyle Group. You will help him in his banking acquisition effort. Through your tax payments, you will provide him with money to help him buy banks:

FT reports (My emphasis):

US financial regulators are drawing up new rules to facilitate private equity acquisitions of troubled banks in an effort to unlock tens of billions of dollars that could be deployed to recapitalise ailing lenders... Private equity groups have long sought to invest in banks, especially failed ones that can be acquired from regulators at a cut price, often with financial help from the state. But the authorities have traditionally preferred selling troubled financial groups to other banks because of concerns over conflicts of interest created by buy-out funds’ ownership of banks. The Federal Reserve has limited private equity groups to bank stakes of less than 25 per cent.

But the latest crisis has prompted regulators to take a softer stance. The authorities have been concerned that the widespread problems among banks would cause a shortage of buyers for expected failures among regional lenders.

People familiar with the situation said the Federal Deposit Insurance Corporation, the regulator charged with taking over failed lenders, was taking the lead in drawing up the new rules. The FDIC board, which also includes representatives from other banking regulators, is expected to discuss the matter in the next few weeks.

1 comment:

  1. It seems that if PE firms throw in their cash, this keeps the FDIC solvent for a few more months, as the FDIC won't have to cover failed banks' deposits. No wonder they support it.