Tue Mar 10, 2009
By Megan Davies and Walden Siew
We provide here some information to set the record straight and to decode the babble-speak employed here.
NEW YORK (Reuters) - Private equity company Blackstone Group LP (BX.N) CEO Stephen Schwarzman said on Tuesday that up to 45 percent of the world's wealth has been destroyed by the global credit crisis.
"Between 40 and 45 percent of the world's wealth has been destroyed in little less than a year and a half," (This is spin that was recently created probably by the White House itself to deflect the fact that the majority of this wealth destruction only occurred after corporations, business executives and investors realized Obama with all of his anti-capitalist campaign promises would indeed be elected as President of the United States) Schwarzman told an audience at the Japan Society. "This is absolutely unprecedented in our lifetime." (It is also unprecedented that in two days five staunchly liberal democrat giants in business and investing have all said Obama is single handedly destroying investing, wealth, and business. [Read this as they are declaring Obama and Pelosi are driving the US economy into a depression, and begging him to stop before he makes things worse with all the spendy socialist entitlements and new layers of regulations he wants to heap on the nations entrepreneurs and corporations])
But the U.S. government is committed to the preservation of financial institutions, (To preventing the mass failure of banks that were forced by laws passed by democrats during the early days of Clintons first term [Written by Chris Dodd and Barney Frank] to allow people with bad credit and did not have the financial means to take out huge bank loans to buy themselves large spendy houses) he said, and will do whatever it takes to restart the economy. (In what people have read in the bloated spending bill the majority of the funds have been set to hit the nation in 2010 just in time for the congressional midterm elections, and in 2011 when Obama begins to run for his 2012 reelection. – in other words the stimulus bill by following the bulk of the money was and is nothing more than reelection swag being spread around to a lot of democrat constituencies like ACORN, like the Unions, etc etc etc to counter the flood of cash they anticipate to put and end to the Democrat checkless, balanceless and debateless rule we see now.)
U.S. Treasury Secretary Timothy Geithner plans to unfreeze credit markets through a new program that will combine public and private capital in a fund that would buy bank toxic assets of up to $1 trillion.
"In all likelihood, that will have the private sector buy troubled assets to clean the banks out in terms of providing leverage ... so that we can get more money back into the banking system," Schwarzman said. (Realize that by all reports these banks leveraged these toxic loans they were legislated to take or face jail or shut down by the then Clinton Administration – are leveraged by 30-1 up to 50-1 – what that means is that for every good dollar in good loans and assets a bank had they took in thirty to fifty bad dollars in these toxic loans so when everything went south the banks became completely bankrupt, and the FDIC and whatever else is out there does not begin to have the money to cover all these toxic loan defaults. So that the idea that one trillion dollars will now make this all go away is pure fantasy. Estimates we have read are more on the order of 100 trillion dollars to buy back all these toxic loans and make banks solvent once more.)
He expects the private sector to end up making "some good money doing that," but added there were complex issues on how to price toxic assets.
He put part of the blame for the financial crisis to credit rating agencies. (This is false and designed to divert blame from the law we already described above that would put this whole mess into the lap it belongs, -- the Congressional Democrats that created all of this in the first place under the deceptive guise of fairness.)
"What's pretty clear is that, if you were looking for one culprit out of the many, many, many culprits, you have to point your finger at the rating agencies," he said.
Rating companies have been the focus of intense criticism for their role in granting top "AAA" ratings for complex bonds that later plummeted in value, resulting in subsequent rating cuts, in many cases to junk status. (Bonds are strangely tied to financial assets when money plummets, when assets plummet strangely enough – wonder of wonders -- bonds stocks and derivatives all – plummet. Who would have thunk?)
"Once you bought into ... the Triple A paper and it turned out to be paper that was in many situations going to end up defaulting, then you really had the makings of a global problem," he said.
Schwarzman said problems were then exacerbated by mark-to- market accounting rules. Those rules ask banks and other financial institutions to price assets at a value related to how they would be sold in the open market. (Values that are used to leverage their value for loans and the sale of them. Speculative prices that only mean something if values continue to rise)
Blackstone reported a quarterly loss in February after writing down the value of its portfolio and eliminated its fourth-quarter dividend.
Asked where was a good place to invest, Schwarzman said it made sense to buy cyclical names, which are less exposed to the economic cycles.
He said investors also may find value in debt products, including "senior layers of certain securitizations," where investors can see 15 percent to 20 percent returns, he said.
Geographically, he said there were "pockets of strength" in China, which is committed to getting to an 8 percent growth level, and in India, where the economy is slowing but banks are in good shape.