Wall Street Feeds Itself and Incumbent Politicians While the Economy Starves for Capital

EDITOR’S COMMENT: In a recent article I said that Wall Street no longer provides capital, it consumes it. The earnings reports are a resounding corroboration of the simple fact that big business and big banking is thriving. Those businesses that simply issue new securities and trade them, those companies that buy and sell old companies are getting money at virtually no cost. And that makes up a huge percentage of our GDP.

We now are a country that specializing in doing nothing except shifting money and securities from one pocket to another and calling it commerce. It isn’t. If it was, employment would be higher and the ability of someone to start a new business would be easier. Microsoft borrowed at 7/8%, but a small business loan is scarce and priced quite differently. All economists agree that small business is the backbone of our economy so why are we allowing policies that reverse what is good for the country?

The simple answer is that wall Street has made so much money and still has it that they are the only deep pocket around. They care about themselves, as any free market fundamentalist will tell you — and that is a good thing. The false premise being that it is a free market when the market forces and government controls are held captive to the control of the mega banks and big business.

So you can’t get a mortgage or a small business loan, but you can borrow the money to buy  another company, as long as the deal is big business rather than small business — as long as the money, the profit, the principal and the prospects stay on Wall Street. Yet somehow the American public, our society has fielded an array of candidates that is not only a repeat of the past politics and policies is that drove us into a ditch, but we managed to come up with a less intelligent, less informed, even ignorant group of people running on apathy, fear and intimidation.

I’m not radical by nature when it comes to corrections. I’m radical when it comes to revealing the truth. So being a lawyer who believes very strongly in what is in the Constitution, I looked into the keystone document from which all of our laws emanate. It says that all powers not specifically reserved to the Federal Government and the States, reside in the people. (Right there, 9th Amendment, practically nobody ever mentions it because it contains the nuclear option of putting our current politicians on the unemployment line). Whether it comes from Wall Street, Missouri or Main Street, the simple answer is that the financial system must be forced to change back to providing  capital to people and small businesses.

I’m getting reports from all over the country. Things are about to change in a large way. Don’t let the Tuesday election fool you. The results of the election really don’t matter anymore because the candidates in most cases are useless. And we don’t need a third party. We need people to form their own associations under freedom of assembly and take control of those things that are not specifically enumerated powers of the states or Federal government. There is plenty of room in that statement. Go read it. The whole Constitution is a very short document, easy to read in one sitting, like a news article.People are fed up with the way the system is working and with the people who are running it. People from all sectors are finding innovative ways to leverage off the deficiencies of the our current dysfunctional system. None of these plans include the companies that currently run our lives. I wish them luck and I hope they succeed. I think they will.

 

Cheap Debt Fuels Private Equity Revival

October 28, 2010, 8:51 pm

Stephen A. Schwarzman
David M. Rubenstein

By PETER LATTMAN and MICHAEL J. de la MERCED

The Blackstone Group and the Carlyle Group demonstrated on Thursday that the private equity industry is thriving amid a weak economy — but they did so in nearly opposing ways.

Blackstone, in reporting a 23 percent jump in third-quarter earnings, said it has found the market to buy out companies unappetizing. “There are some good companies being sold, but we just can’t get to the prices that are required,” Hamilton E. James, the company’s president, said Thursday morning.

Carlyle, though, is gobbling up companies. Not long after Mr. James’s bearish comments, Carlyle announced a $2.6 billion deal for Syniverse Technologies, a voice and data services provider for telecommunications companies. On Wednesday, it completed a $3 billion takeover of CommScope, a maker of telecommunications equipment.

The divergent approaches highlight how cheap corporate debt is fueling the recovery of the private equity business. While it remains difficult to get a mortgage to buy a home or to get a loan to fund a small business, yield-starved investors are creating a robust market for corporate bonds and loans.

Private equity firms are seizing upon the corporate-debt boom in myriad ways. For the debt-heavy companies they already own, Blackstone and Carlyle are improving their balance sheets through aggressive refinancing. Corporate loans are now available to do multibillion-dollar buyouts, too, but the easy lending environment has created fierce competition for takeover targets, driving up prices. The corporate loan market “is almost hard to believe,” Mr. James of Blackstone said.

Private equity’s outlook is certainly brighter today than it was one year ago. Buyout firms have made $173 billion worth of deals so far this year, up 95 percent from last year, according to data from Thomson Reuters.

Blackstone, co-founded by Stephen A. Schwarzman, may be reluctant to do deals at the moment, but its earnings report underscored just how favorable the environment has become. The New York-based firm, with $119 billion in assets under management, said its third-quarter profits were bolstered by sharp increases in the value of its real estate holdings.

More than 50 percent of the debt carried by Blackstone companies has either been refinanced at a lower cost or modified with better terms, Mr. James said.

Carlyle, meanwhile, which is based in Washington and whose public face is David M. Rubenstein, is proving that it is unafraid to pay a high price for companies. The buyout firm’s $31-a-share bid for Syniverse is 45 percent higher than the company’s average closing price for the past 30 days. Its $31.50-a-share offer for CommScope, meanwhile, is 39 percent higher than the company’s 30-day average stock price.

Both Carlyle and Blackstone have billions of dollars in investor capital to put to work. Blackstone has invested more than $7.2 billion of investor capital in private equity and real estate deals since the fourth quarter of last year, though it has announced only one major buyout this year: the $4.7 billion takeover of Dynegy, whose purchase price includes the assumption of the energy company’s debt.

Carlyle has invested about $5.8 billion in private equity and real estate this year, more than the $5.2 billion it spent in all of last year. (That figure does not include the Syniverse and CommScope deals.) The firm was behind four of the biggest leveraged buyouts announced this year, including those of Syniverse, CommScope, the vitamin maker NBTY and the Australian hospital operator Healthscope.

Traditionally, Carlyle is not shy about bidding up. In his annual e-mail to employees, William E. Conway Jr., a founder and the firm’s investment chief, hinted that it’s O.K. to pay up for good businesses.

“Of course higher quality assets are never cheap and may initially model at a lower expected” return, he wrote in the message, which was sent in February. “I believe the actual returns will exceed the model returns on these high-quality transactions. The decision to do the deal (or not) will always trump the impact of the final price negotiation. If you do great deals you will get great results.”

Historically, Blackstone has been more averse to pay a premium for its deals, though it did on the buyouts of Equity Office Properties Trust and Hilton Hotels during the equity bubble of 2006 and 2007.

Other buyout firms are also showing some hesitance about jumping headlong into expensive deals. Kohlberg Kravis Roberts is now leaning against making a bid for Seagate Technology, the hard drive maker, alongside TPG, according to a person briefed on the matter.

While they may differ on current buyout opportunities, Blackstone and Carlyle share several investments that they are preparing to take public, including the media company Nielsen. The two firms also joined forces in April 2009 to buy BankUnited, an ailing Florida lender. Eighteen months later, the bank’s results have now stabilized and the firms are prepping an initial public offering to raise $500 million that the bank will use to expand into New York and other locations.

Still, the firms are suffering the effects of having gotten caught up in last decade’s leveraged buyout binge. Blackstone and Carlyle teamed up with two other firms to buy Freescale Semiconductor for $17.6 billion in 2006. Soon after, the chip market collapsed and the deal was widely denounced.

Now, even Freescale is showing signs of life. The value of the investment remains under water, with the firms having it marked down by about 65 percent, according to people with direct knowledge of their valuations. But amid a sharp turnaround in the semiconductor market, Freescale results have improved, recently posting a 29 percent year-over-year revenue increase.

14 Responses

  1. “The results of the election really don’t matter anymore because the candidates in most cases are useless. And we don’t need a third party. We need people to form their own associations under freedom of assembly and take control of those things that are not specifically enumerated powers of the states or Federal government.” Neil

    I’m glad you said that.

  2. OH AND UPON FILING ORDER AND DECLARE ALL LAWS STATE AND FEDERAL SUSPENDED, AND FIRST 8 ARTICLES OF THE US CONSTITUTION & EQUIVALENT STATE CONSTITUTIONS ANNULLED. SO AS TO STRIP THEM OF ALL DELEGATED AUTHORITY, REMOVE ANY NEED FOR THEIR OCCUPATION IN OFFICE AND EXTINGUISH THE JUSTIFICATION FOR ANY COUNTER ACTIONS OF RETALITORY OPPOSITION TO WHAT WE ARE TRYING TO ACCOMPLISH. AS LONG AS WE CAN ORGANIZE, WE CAN ALL AGREE AND COME TO AN UNDERSTANDING THAT THE MAIN FOCUS OF OUR COMBINED EFFORTS IS A SPECIFIC GOAL AND THAT WE CAN’T LET OTHER ISSUES THAT MAY ARISE SERVE AS A DETRACTOR. EDUCATE EACHOTHER TO EXPECT AND BE PREPARED FOR ATTEMPTED INFILTRATION TO CREATE CONFLICT AMONGST THE PEOPLE AND WEAKEN ANY MOMENTUM LIKE MEDIA DID TO THE TEA PARTY WITH THEIR FABRICATED RUMORS AND CHILDISH MOCKERY.

  3. The political system is complicated. The reason there is a Black Caucus was because one representative had no voice with all the other voices and connections that were there, so they had to understand they had a common interest and collect their votes to get a voice.

    Imagine a third party, he will run on certain promises and get in there and be shut out.

    In the movie Evan Almighty, Evan (character) was elected to a political position of power and he was approached for his vote on an unpopular bill, and was told that he would rise in the ranks if he ‘played along’, and at some point it was understood he could write a bill that would be supported by the top players.

    You scratch my back, I’ll scratch yours.

    You’d do better to ‘not’ be in the system, but since you insist on playing, then at least understand the game.

    Some people sound incompetent fussing about things and making suggestions about things that for the lack of knowledge you know they have no clue or they wouldn’t suggest or make statements on such things.

    All contracts have signatures, the Constitution is a contract, and I’m wondering which of the signatures was the representative of any of the readers of this blog, and by what contract or will or trust agreement from your ancestor, did they sign that document on the behalf of you and your kids and your grandkids.
    Can you produce a recorded document of that agreement, trust, contract, or will? Because if you can, then you’d know who to go after and get them to enforce what is your ‘birth right’ by the agreement in the 1700’s that is supposed to be written and enforceable on your behalf.

    We are part of the problem, and our energy is being used as we fight to be in something we don’t belong to, or fight to have something we don’t have a right to, or fight to be a part of something we aren’t a member of.

    Let’s see, fight for a right….or fight for a privilege?
    I see a lot of fighting and fighting just creates more fighting
    and I see a lot of lack of knowledge of what you have a natural born right to have and what you’ve delegated to another and are waiting on them to give it back to you as a privilege.

    Hmm. Stop and think of who you are, and what you know about yourself and what you know about the agreements you’ve put in place or your parents put in place or their parents, and see what evidence you have that shows they’ve ‘failed to perform’ in your contract…You can either enforce the contract with your enforcement powers or declare the contract void and cancel it with your cancellation powers.

    Many will sit in Church on Sunday and not putting to practical use what they know inside they should be doing when dealing with their brother or sister who’s job it is to trespass against you.

    You return love for your brother and sister and through that action you teach them how to treat you…but when they fight you and you fight back, you leave a different legacy for yourself and your kids, and there is never peace because one side has to be the first to put down the sword and forgive.

    Trespass Unwanted, alive, allodial, life, live born, born alive, corporeal, free, freeman, whole blood, spiritual affinity within the first degree with all life and creatures of the universe.

  4. LIKE I’VE BEEN SAYING, FORGET ABOUT THE ELECTIONS(SELECTIONS). THE PEOPLE WHO CONTROL CONGRESS, JUDGES AND NETANYAHU’S WIFE ARE PAYING THEM TO INTENTIONALLY MAKE THEMSELVES LOOK HORRIBLY GUILTY OF ABUSE SO AMERICANS WILL BE MORE RECEPTIVE TO UNITED NATIONS’ INTERVENTION AND ULTIMATE CONTROL OVER THE U.S. EFFECTIVELY DESTROYING ANY SOVEREIGNTY WE HAVE LEFT.

    WE NEED TO COMBINE ALL OUR, MAN(&WOMAN)POWER, STRENGTH AND MOTIVATION THEN DIRECT IT ALL INTO SOMETHING LIKE A HUGE COMPLAINT & PETITION FOR REDRESS FOR GRIEVANCES WITH THE SUPREME COURT IN THE NAME OF “THE PEOPLE”(& START GATHERING AS MANY SIGNATURES OF CITIZENS’ AUTHORIZATION OPTING TO ALTER & ABOLISH) AND WE GO UP AGAINST ALL 50 STATES(THEY’LL HAVE NO 11TH AMENDMENT IMMUNITY BECAUSE WE’RE GOING AGAINST MORE THAN “ONE”), THEIR LEGISLATIVE & JUDICIAL BRANCHES(AGs TOO), THE HOUSE OF REPRESENTATIVES, SENATE & FEDERAL JUDICIAL BRANCHES, THE FED, FRB & TREASURY. WE CHARGE THEM ALL WITH TREASON, CONSPIRACY, SUBVERSION, FORCED SLAVERY, FACILITATING FOREIGN GOVERNMENT OCCUPATION OF AMERICA, OBSTRUCTING JUSTICE, VIOLATING JUST ABOUT THE ENTIRE CONSTITUTION (AND EVEN THE DECLARATION OF INDEPENDENCE) AND WE DEMAND THAT THEY STEP ASIDE BECAUSE OF THEIR TREACHERY, VOTER FRAUD, VIOLATIONS OF LIBERTY, UNLAWFUL PROPERTY SEIZURES, CORRUPTION AND SYSTEMIC COLLUSION TO COMMIT CRIMES AGAINST THE PEOPLE. IF THEY WON’T STEP ASIDE THEN “WE THE PEOPLE” PEACABLY ASSEMBLE THEN PUSH THEM ASIDE SO THAT WE MAY RECLAIM OUR BIRTHRIGHTS OF INHERITANCE AND FULFILL OUR DUTIES AS CITIZENS OF OUR SOVEREIGNTY IN THESE SEVERAL STATES.

  5. Hey frankielee, you are spot on.

  6. Neil:

    As you so-well stated, the problem’s solution is not in the parties. It’s our common belief that these party politicians have the right to take away the 20,000 personal decisions that I am normally going to make over the next four years – and replace them with one ‘lesser of evil’ party choice, who is going to create reams of 1000’s of unconstitutional “rules” and ‘laws’ to pre-make and criminalize these 20,000 decisions for me. As you noted, the ‘radicial truth’ of the 9th & 10th amendments allow none of this.

    All the parties stink.

    I consider third parties for two uses: 1. To make an ever-increasing sized protest vote, & 2. As a bully pulpit to share new innovative ideas quickly around with our neighbors, which are not permitted as not yet ‘serious’ in the bank-owned ‘mainstream’ media & parties.

    Your hidden discoveries here for the last three years are a perfect example.

    The Bill of Rights are the supreme law of the land. Obviously, Rep., Dem., Congress, Judicial, & the Executive branch, are all lawless….. while they try to rein us in with ‘laws” that are not laws because of their disobedience to the Constitution.

    “If, then, the courts are to regard the Constitution, and the Constitution is superior to any ordinary act of the legislature, the Constitution, and not such ordinary act, must govern the case to which they both apply.” – Marbury v. Madison (1803).

    I know you sincerely say you are not into ‘radical’ solutions, but I believe this fraud has gone too far, too deep, and wholly without mercy against us, to negotiate some ‘principle’ settlement with.

    The top echelons must be held accountable if that is radical or not, as they have completely introduced an ugly, corrupting, Bernie Madoff-style moral-hazard into the producing classes, entire society, and financial worlds.

    No negotiation with out-right criminals. Unfortunately, that is what they mostly are, even though they are wearing suits and congressional lapel pins.

    A ‘radical’ turn-around is the only way to correct the childrens’ future long-term. A Nixon-type outing is the only way to the whole bunch.

    No Pardons this time. Restitution instead!

  7. Great post, Neil! You said the “C Word”: Constitution. It’s the elephant in the room. I had my CA UD case removed to the US District Court on constitutional grounds — violation of due process and equal protection under the law [5th and 14the amendments] — and yet it STILL got remanded because Plaintiff’s counsel objected to Diversity/$ Amount — which was NOT EVEN MENTIONED in our removal because we did not cite this as ground for Removal. The Judge read their pithy document and rules in favor of Plaintiff WITHOUT A HEARING even though there’s a December 13 hearing date RIGHT ON THE FRONT OF THE MOTION. The Judge didn’t even to bother to read our Memorandum and Points of Authority before ruling — even though it was filed BEFORE the Judge issued the Removal. Plaintiff’s pleadings were so lame that they mentioned another party — from another pleading.

    In your post you said:
    “We need people to form their own associations under freedom of assembly and take control of those things that are not specifically enumerated powers of the states or Federal government. ”

    I wholeheartedly agree. Where do I sign up? I MEAN IT. Time is of the essence for all of us and we need not waste another moment. We have to mobilize and really get in the public’s face, close up! We tell them WE’RE MAD AS HELL AND WE’RE NOT GONNA TAKE IT ANYMORE!

    Carrie

  8. MORE ANGELO ASHES FOR BOFA
    -from Origination News
    by Paul Muolo
    Oct. 28, 2010

    Recent news reports that bond investors — including the Federal Reserve Bank of New York and PIMCO — may sue Bank of America because Countrywide Financial Corp. did a bad job of servicing loans that went into ABS/MBS have been a bit misleading. Attorneys working for these investors are not looking at the residential servicing practices on whole loans per se, but the “master servicing” on the end product — the MBS. According to a letter sent out by Gibbs & Bruns LP (the law firm hired by investors), Countrywide, as master servicer, failed to go after the original funder of the loan as a way to cure deficiencies on defaulted mortgages. (Read between the lines: CFC was not demanding buybacks of these loan sellers. And do you know why? Oftentimes, CFC was the original funder.) The MBS investor complaint list goes on and on. B of A inherited this mess because it was unlucky enough to pay $4 billion for CFC back in mid-2008. Well, at least the Charlotte bank isn’t on the hook for Angelo Mozilo’s legal settlement with the Securities and Exchange Commission

  9. MENTALITY CHANGING ON MORTGAGE PAYMENTS
    -from the Mortgage Bankers Association annual convention in Atlanta this week.

    The panel also addressed how credit score modeling technology accounts for foreclosures, short sales and other real estate defaults.

    GO HERE TO READ

    http://www.scribd.com/doc/40431743/PEOPLE-PAYING-CREDIT-CARD-DEBT-OVER-THEIR-MORTGAGES

  10. The banksters are Canibals

    Now they are going after Elizabeth Warren

    http://www.huffingtonpost.com/zach-carter/are-treasurys-knives-comi_b_776052.html

    We need to fight for our rights

    Be Strong and Courageous.

  11. The banks are suddenly interested in sitting down with the AG’s to talk. Isn’t that nice. They’ve seen the error of their ways….NOT! They obviously realize that they’re better off trying to manipulate their way through their fraud. And don’t hold your breath waiting for the 50 AG’s to do anything of value in their negotiations with the so called lenders.

    ~~”“The 50-state investigation is not seeking a nationwide moratorium on all foreclosures,” said Washington Attorney General Rob McKenna, who is also on the task force’s executive committee. “At the same time, foreclosures done improperly have to be corrected. It’s not permissible to violate state law to expedite a foreclosure.” ~~

    I ask again, how does one correct fraud? Are they allowed back into the recorder’s office, or to the court rooms to sift through their falsified docs and replace them with fresh ones? This is an illegality in itself. Re-dos don’t work in legal documents.

    ~~”The states may push for better loan-modification procedures to address consumer complaints,”~~

    Yeah, that’ll show ’em! Instead of ordering up a few thousand sets of handcuffs, the AGs will simply ask, very nicely, for a modification that slightly reduces the interest only, puts the terms out to 40 years — so that the banks will get the house eventually anyway….while at the same time replaces the original fraud filled agreements with new, squeaky clean docs indemnifying all criminalities, past, present, and future.

    There…all better now.

    http://www.bloomberg.com/news/2010-10-27/mortgage-lenders-may-meet-with-states-over-foreclosure-probes-this-week.html

  12. I found your article practically flawless. I do think a third party would allow people to really show both the democrats and republicans how unhappy they are.

    http://www.mythirdparty.com

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