Greed and stupidity makes them suckers, one and all:
“For reasons that, at this particular moment in economic time, make little sense—and border on the totally embarrassing—I was in Monaco recently at a business conference that attracted many private-equity types who are still traveling grandly on the 2 percent fees private-equity firms pay themselves on the money they’ve raised. At my table in the ballroom of the Hôtel de Paris, in Monte Carlo, at a dinner hosted by Prince Albert of Monaco, there was a gentleman whose company, backed by private equity, had gone public and risen to $130 a share, but had, through the terrible autumn, dropped to $17. To my left there was a gentleman from K.K.R.—the seminal name in the corporate-buyout business, having survived and profited off a quarter-century’s worth of bubbles and busts. Actually, the gentleman joined K.K.R. after the collapse of Lehman Brothers, where he had been for many years. (By my quick calculation, in all that time of being compensated with Lehman stock, he probably lost between $30 and $120 million in the collapse. Still, he seemed to have homes in London, Dubai, and New York.) I asked, lowering my voice, ‘So … who’s on the brink?’
“‘Carlyle,’ he responded darkly. Indeed, Carlyle Capital Corporation, the arm of the Carlyle Group that invests in mortgage-backed securities, had defaulted last spring on more than $16 billion.”
“And Blackstone, at the top of the market—indeed doing the last big deal of the bull market—paid $26 billion for Hilton Hotels. (Hotels, where private-equity guys spend most of their time, form a big part of the P.E. mythology. Not only has Blackstone become the biggest hotelier in the world, owning at various times mass-market chains such as La Quinta and Extended Stay America as well as Claridge’s, in London—reportedly Mr. Schwarzman’s favorite home away from home—but the Carlyle Group is named after the Carlyle Hotel in New York, David Rubenstein’s favorite hotel.) Actually, Lehman Brothers, Bear Stearns, and a few other banks paid $26 billion for Hilton—they lent Blackstone the money. Or, in fact, because Lehman and Bear have collapsed and their debts have been bailed out by the U.S. government, you’ve paid for the Hilton hotels—with their dramatically devalued real estate on which their empty rooms sit.”
The Ultimate Bubble?, by Michael Wolff, Vanity Fair, February 2009 issue (go read the whole thing, it’s…fascinating)
I hope this is the ultimate bubble and no one ever has to live through this at all. I bet they said that in the Depression, too.
Suckers at the top? Sure, why not? But maybe bushco made us tax-paying, hard working, honest types are the biggest suckers of all with the bailout, the tax cuts, Iraq, and all the other fuck the working and middle class attacks over the past 8 years. Who paid for all that? You and I and generations to come. Unless the U.S. hits the lotto, which I don’t think it even plays. Wait…where did that come from?
So, anyway, good luck, Mr. Obama! You’re gonna need it.