Writing PEs Future—Why Didn't I Think Of That?
September 25, 2008
I don’t usually take up space here to tout the work of other columnists. I am human after all, and not free of jealousy when someone has a brilliant idea I wish had been mine. Especially when he works for The Wall Street Journal. And looks cocky in his photo.
But I have to admit, Evan Newmark’s Mean Street column on The Journal’s Web site Sept. 24 was pretty brilliant. In case you missed it, Newmark wrote a faux news piece dated Sept. 24, 2011 and set at a glittery champagne gala celebrating Blackstone Group’s success as—guess what?—an investment bank. “Three years ago, they said the investment bank was dead. I guess, we weren’t listening,” Blackstone Chairman Stephen Schwarzman is quoted as saying.
According to the hypothetical article, the series of events that helped catapult Blackstone to its position as “global investment-banking powerhouse” go basically like this:
TARP, the $700 billion Troubled Asset Relief Program approved by Congress in October 2008, created a huge new market for distressed securities, and the buying, selling and trading of distressed debt became enormously profitable. Then, housing rebounded during the summer of 2009, further stimulating activity. By 2010, an estimated 20% of all Wall Street revenue was generated through TARP-related businesses.
Blackstone, as we all know, had already acquired distressed-debt specialist GSO Partners in January 2008. And throughout the year, it hired dozens of credit and mortgage-trading professionals, many from Bear Stearns and Lehman Brothers.
The article goes on to talk about Blackstone’s profits, the rise of its stock price, and its No. 4 spot in the M&A rankings, just behind No. 3 KKR.
Now, just to toot our own horn a bit, we at LeveragedFinanceNews.com have been writing about private equity stepping into the investment bank role when it comes to corporate credit for some time now. But I have to admit, never quite so creatively as Newmark. He took the TARP angle and ran with it. And the result was not only a humorous read, but one that could turn out to be scarily accurate. Someone will manage to make a whole lot of money out of the mess that’s been created. Why not the private equity guys?
My favorite part of the story: Blackstone even endured some criticism when it hired Angelo Mozilo, former CEO of mortgage lender Countrywide Financial in early 2009.
“I was hesitant to come out of retirement,” Mozilo said. “But… I realized what a bonanza this could be. These securities are so complicated only the people who put them together can figure out what they’re worth.”
Sadly, the idea that Wall Street will someday repeat its mistakes doesn’t seem like a faux future at all, does it?
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