the leading managers of Washington’s ongoing bailout of Wall Street

5-5-14    Furthermore, with the Wall Street Journal reporting back in 2011 that $37 of every $100 dollars invested in Blackstone’s investment pool comes from state and local pension plans, it appears that taxpayers are once again being fleeced by the financial oligarch class.  Additionally, it appears to answer a recent question I posed in my piece:  Is the Credit Bubble Popping?  Carlyle Group Warns on Frothiness and Junk Bond Deals Get Pulled.  After reading about a growing pool of insane “dividend deals” and payment-in-kind” notes being issued, I wondered who in their right mind was buying these deals. Well, based on the complete lack of competence and due diligence happening at public pension funds, I think we have solved part of the mystery. 

 The chief villain in this article will be no stranger to readers of this site.  It is Blackstone, the private equity giant who I have criticized many times on these pages for buying up homes all across America in “all cash” deals, making homes unaffordable to average American peasants.  Of course, Blackstone is just one of many, but given its size and influence, highlighting its practices is probably quite representative….
Additionally, I also suggest reading this article from today’s Wall Street JournalBorrowing Cash to Buy Complex Assets Is In Vogue Again, showing how banks are increasingly offering massive leverage to hedge funds so that they will invest in risky assets the banks are no longer able to hold.  Ultimately, public pension funds will turn around and invest in these hedge funds and the typical cycle of putting all the risk on the taxpayer and total muppet fleecing will have once run full circle.  Incredible.  http://www.zerohedge.com/news/2014-05-05/leaked-documents-show-how-blackstone-fleeces-taxpayers-public-pension-funds
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Blackstone is a creation of Schwarzman (now heads Trump’s economic advisory council) and P. Peterson.  Schwarzman wrote an opinion piece on the 2008 bailout; here are some comments to his article:

And he’s certainly not biased with a huge vested interest in having banks around to lend him more money with no questions asked, mainly so he can pay himself special dividends.

The whole system, quazi-public and private, was allowed to go ballistic without a guidance system.  Some regulators, like Born, tried to do their jobs, but if you watch “The Warning,” you see it was Greenspan and the Randers who insisted regulators not even pursue fraud. A large bulk of the markets were opaque as desired by finance.  If you tried to do the job, you soon lost it.  Lobbiests for both sides, quazi and private, got what ever they wanted. Both parties were glad to turn financial regulation into the Department of Circumlocution.

Oh sure . . . the 30,000 foreclosures a month, the people driven into bankruptcy by usurious credit card interest rates that the government allowed Wall Street to implement before “hammering” them with a few corrections to the trap and trick abuses the industry refused to cure itself of over the last 25 years, the lost life savings in pensions, the unemployed unable to continue health care. . .they paid no price for the “mistakes” that led to the crisis.  Oddly, though, the executive managers of the crisis have not had their lifestyles or wealth impinged one bit.  They’re still living on Park Avenue, summering in the Hamptons, driving BMWs, wearing Armani suits, and sending their kids to the best schools. . .

The Special Inspector’s report, issued a couple of weeks ago, made it clear that the bankers are back to high-risk business because they know now that Uncle Sam and the American taxpayer will bail them out – they risk NOTHING.

John Mack, interviewed by Andrew Ross Sorkin for Sorkin’s recent book on the back-stage environment of the meltdown and bailout, said, “What you have to understand about people on Wall Street is that we can’t help ourselves.  This is just the way we are.”

And with all this, another clown comes out and warns us that finally regulating people who have repeatedly shown that they have learned nothing and are unwilling and unable to regulate themselves sensibly, will have dire consequences for us all.

Huh.  Really.  How much more dire than what they did before, Mr. Schwarzman?  And with what consequences?  And to whom?  Or you’ll do what?  Take your marbles and go home?

You people are unbelievable.  By God I hope there is another meltdown due to you and your pals’ continued blind greed and recklessness so I can have the satisfaction of watching a million people on the Mall screaming that this time the Feds have to let you all go down, the way you should have done last year.  They should never, EVER have bailed you out.

And the arguement that regulating them will demand that finance rein in credit further than it already is is another cynical redirect.  What he should have said is regulating them will throw half of them into bankruptcy because they can’t raise sufficient capital much less start to pay into a fund large enough to keep them from hitting us up again.  If they can only persist under their own rules or absence thereof, and we are told under them to expect regular gyrations like we just experienced, then it’s a no-brainer.  Let’s regulate them and see which remarkable pig is left standing.

The world’s highest paid paper shuffler.  Just the man we need to hear from….Blackstones.  Meet the Blackstones.  They’re a modern Wall Street tragedy.
From the town of Debt Shlock, they’re a page right out of leveraged asset history.

Let’s ride with Steve Schwarzman down the street.
Through the courtesy of Greenstone and Bernanke’s monetary feats.  When you’re with the Blackstones, you’ll wait a long time.  A long long long time.  You’ll wait a long long long long time.   https://dealbook.nytimes.com/2010/02/11/schwarzman-defends-bankers/?_r=0

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12-6-16      comment to article:

Since most regulations are from the bureaucracy that’s largely insulated, and since Congress won’t be able to offer much relief without overcoming a Senate filibuster, the idea that we will see significant regulatory reform is wishful thinking from someone who would benefit from an increased ability to rip off customers through reduced regulation.http://www.housingwire.com/articles/38692-blackstone-ceo-leader-of-trumps-advisory-board-expects-substantial-reduction-in-regulations

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3-1-16    PRACTITIONERS OF “DISTRESSED investing” are a special Wall Street breed:  bottom-fishers with steel constitutions and a penchant for rushing into fire sales. Like short-sellers, they are often despised because they prey on the weak–companies and individuals who made bad bets or got in over their heads.  “Distressed investor” is a sanitized version of less flattering terms from bygone Wall Street eras:  vultures, grave dancers, robber barons.

Among the robber barons of the new millennium, few are as secretive–or as loathed or as successful–as John Grayken of Lone Star Funds.  The 59-year-old debuts on the FORBES Billionaires list with a net worth of $6.3 billion, making him the second-wealthiest private equity manager in the world, behind Blackstone’s Stephen Schwarzman.  Lone Star has amassed assets of $64 billion, and since its inception in 1995 its 15 funds have logged average annual net returns of 20%, without a single year in the red.  Schwarzman’s Blackstone, which has assets of $336 billion, has comparable average annual returns of 17%.   http://www.forbes.com/sites/nathanvardi/2016/03/01/the-billionaire-banker-in-the-shadows/#7b88c27c1f4d

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3-2-10   In December, when Fink’s $13.5 billion acquisition of Barclays Global Investors was finalized, BlackRock, the company he founded 22 years ago, officially became the largest money-management firm in the world. A global colossus—with $3.3 trillion in assets under its direct management and another $9 trillion it supports—BlackRock manages about $1 trillion of pension and retirement funds for millions of Americans and oversees the investments of scores of institutions around the world: from state and local governments to college endowments, from Fortune 500 companies to the sovereign-wealth funds of, among others, Abu Dhabi and Singapore.

BlackRock’s vast reach in the global markets is not, however, its only source of influence these days.  That Fink pulled off the Barclays deal in the aftermath of 2008’s financial meltdown is, in itself, impressive, but he did more than merely survive the wreckage unscathed.  Indeed, it is hard to argue that anyone, or any firm on Wall Street, gained as much stature from the economic crisis as did Fink and BlackRock.  At the height of the disaster, when the American economy was on the brink, it was to Fink that Wall Street’s C.E.O.’s—including J. P. Morgan Chase’s Jamie Dimon, Morgan Stanley’s John Mack, and A.I.G.’s Robert Willumstad—turned for help and counsel.  As did the U.S. Treasury and the Federal Reserve Bank of New York, whose top officials turned to Fink for advice on the financial markets and assistance on the $30 billion financing of the sale of Bear Stearns to J. P. Morgan, the $180 billion bailout of A.I.G., the $45 billion rescue of Citigroup, and those of Fannie Mae and Freddie Mac at $112 billion and growing.

Today, through an array of government contracts, BlackRock has effectively become the leading manager of Washington’s bailout of Wall Street.  The firm oversees the $130 billion of toxic assets that the U.S. government took on as part of the Bear Stearns sale and the rescue of A.I.G.; it also monitors the balance sheets of Fannie Mae and Freddie Mac—which together amount to some $5 trillion—and provides daily risk evaluations to the New York Fed on the $1.2 trillion worth of mortgage-backed securities it has purchased in an effort to jump-start the country’s housing market….

Along with Lew Ranieri, of Salomon Brothers, he would be credited with developing the multi-trillion-dollar debt-securitization market that transformed the face of finance.  By 2008 this market—of mortgages, and car and credit-card loans, purchased from banks, sliced into pieces, repackaged, and sold to thousands of investors—would help bring the economy to its knees.  But long before it spiraled out of control, it was considered an incredible innovation….

BlackRock’s “computer farm” could monitor millions of daily trades and scrutinize every single security in its clients’ investment portfolios to see how they would be affected by even the most minor changes in the economy. Churning through 200 million calculations each week, its computers could simulate every imaginable shift in interest rates, every conceivable change in the financial markets, and stress-test the performance of hundreds of thousands of securities in numerous global-crisis scenarios.

Known as Aladdin, the system was effectively a multi-billion-dollar computerized worrywart, searching the markets for anything that could go wrong. And it would become the foundation for a second business that would expand BlackRock’s reach beyond asset management, into the business of advising clients for whom things had gone wrong. Officially formed in 2000, the BlackRock Solutions division now has about 140 clients, the best known of which happens to be the U.S. government….

But when asked by members of Congress to explain what BlackRock was being paid and why it was selected without any competitive bidding, Fed officials, and Geithner in particular, revealed virtually nothing.  Geithner said that there had been no time to solicit bids from other companies and that BlackRock had been chosen because “the interest of the American taxpayer would be best served.”  When Senators Max Baucus and Charles Grassley asked to see BlackRock’s contracts, Geithner responded with a letter telling them they were welcome to do so—if they were willing to come to New York to view them in private.  When pressed both by members of Congress and by the media for details about BlackRock’s fees, the Fed refused, claiming that BlackRock insisted they remain confidential because it had given the government a discount.  But BlackRock claims this was not the case.  “We’ve encouraged the Fed to make them public, from the beginning,” says Hallac.   http://www.vanityfair.com/news/2010/04/fink-201004

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Just days after the potential for more capital injections for Fannie Mae and Freddie Mac (GSEs) are admitted to, we discover another ‘scheme’ to enrich the ‘have-yachts’ on the backs of the ‘have-nots’.

At the behest of the government, apparently to provide ‘affordable’ housing for the least creditworthy individuals – just as they did in the not-so-distant past to such cataclysmic ends, GSE’s “commitment to providing critical financing for multi-family housing in all markets,” has, as Bloomberg reports, enabled billionaires such as Starwood’s Barry Sternlicht and Blackstone’s Stephen Schwarzmann to cheaply finance two transactions totaling more than $10 billion, implicitly subsidized by the US taxpayer.  Even more ironic is that the provision of this ‘cheap debt’ is helping sustain just the unaffordable surges in rents and prices that are forcing Milennials to live with their parents for longer.http://www.zerohedge.com/news/2015-11-06/us-taxpayer-set-bank-roll-biggest-billionaire-builders

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Government buckles, guarantees rental-home mortgage-backed securities for first time ever.  Wall Street wins again.

Invitation Homes, the 2012 buy-to-rent creature of private-equity firm Blackstone, and now owner of 48,431 single-family homes, thus the largest landlord of single-family homes in the US, accomplished another feat: it obtained government guarantees for $1 billion in rental-home mortgage backed securities.    http://wolfstreet.com/2017/01/24/us-government-fannie-mae-guarantees-rental-home-mortgage-backed-securities-blackstone-invitation-homes-win/

 

 

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