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The smart money

By Owen Paine on Thursday March 13, 2008 01:37 PM

This is the face of the credit crisis in action: David M. Rubenstein co-founder of The Carlyle Group, private equity personified and prolly still making it at both ends.


Well, read here how he's dumping his stale leverage play on mortgaged-backed securities. The downward cascade proceeds apace. Basics of all these fandangos:

"The fund was set up in August 2006 with roughly $670 million in cash from Carlyle's owners and other investors, and about $300 million in additional capital raised from a public stock sale. The capital allowed the fund to go to banks and borrow far more, leveraging its cash investment some 20 times into the portfolio."
I.e., they bought $20 billion in securities, with only one bil of their own money in the pot. Now comes the drop and the margin call:
"As the market value of the Fannie Mae and Freddie Mac securities has dropped, Carlyle Capital's lenders asked it to increase its cash equity from what was 1 percent to as much as 5 percent"
Their answer:
"In a statement, Carlyle Capital said that it had been unable to meet margin calls in excess of $400 million over the past week and that it expected its lenders to take control of its remaining assets."
Now for the dump, aka "let's all join the cascade":
"The lenders, headed by Deutsche Bank and J.P. Morgan Chase, began selling the securities last night..."

Comments (3)


Selling them to whom? . . . Never mind, I already know the answer to that.


on a lesser note

consider the link
a carnal metaphor
for the high god of capitalism
sort of like a foundering bovine
iz a market jesus



to the mendell tendency

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