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| User Info | Where Will U.S. Banks Beg Next entered at 2008-06-08 21:59:44 | |||
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Canadaman Posts: 1375 Registered: 2007-08-10 Charlotte, NC 
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uh-oh looks like some journalists are starting to ask the question we all have been asking.........WTF would you give wall street your money for? http://online.wsj.com/article/SB12129697.... Where Will U.S. Banks Beg Next? By KAREN RICHARDSON June 9, 2008 An all-star lineup of private-equity and sovereign-wealth funds opened their wallets when U.S. financial institutions needed capital during the early throes of the credit crunch. Who's going to help next? The pummeling Friday of National City and Washington Mutual shares knocked the respective investments of U.S. private-equity firms Corsair Capital and TPG well below the discounted prices at which they bought in. They're just the latest examples on a long list of high-profile bets that don't look as if they're working so far. Last December, Singapore's Temasek Holdings said it would invest $4.4 billion in Merrill Lynch at $48 a share, with an option to buy an additional $600 million. Friday, Merrill shares closed at $39.02. The Abu Dhabi Investment Authority struck a convertible-stock deal with Citigroup in November to pump $7.5 billion into the bank when Citi shares were trading above $30 a share. Now they're treading water at $20. China Investment Corp.'s $5 billion investment in Morgan Stanley last December in exchange for a nearly 10% stake is also out of the money; the shares are off nearly 20% this year. Then there was Warburg Pincus's bet on beleaguered bond-insurer MBIA. Even with its purchase of shares in January at around $12 designed to "average down" its initial investment at $31 a share, Warburg's investors are now proud owners of MBIA shares valued at $5.44 each, with a couple of board seats added in for good measure. Private-equity and government funds argue that they're long-term investors who've successfully weathered rocky periods before. At a conference last week, TPG co-founder Jim Coulter analogized such wagers to renovating a home, saying that however long you think it will take for your investment to recover, it will take "double the time, double the money." Yet, the credit crunch doesn't appear to be over. The Federal Reserve in March tossed out a lifeline to Wall Street banks in the form of easier access to short-term credit. But losses are still piling up on bad loans, and the economy is slowing, meaning more capital is already needed. Lehman Brothers Holdings is next on the list, in the process of raising $5 billion of capital. Much of it will come from inside the U.S. Given the performance of these investments so far, how much worse does it have to get before pension trustees and university endowments and the top-tier private-equity firms they back ask whether it makes sense to keep doing this? How long before rich overseas funds stop giving cash to Wall Street firms that lose their money? Wall Street could bang its cups in dicier places. State investment funds are taking root in places like Algeria, Angola, Libya and Zimbabwe. Kazakhstan has a National Fund, bulking up thanks to soaring oil and gas revenue. Selling stakes to funds of authoritarian or unstable regimes in frontier markets doesn't quite mesh with Wall Street's lofty image of itself. But it created this mess, and beggars can't be choosers. | |||