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.