Monday, June 29, 2009
"Now regulators are letting private equity [PE] firms, which invest in all kinds of companies, control banks. The worry: [PE] will pillage the banks' resources to fund their other operations or investments. ... Back then [during the Depression] several banks failed when owners diverted resources to prop up other holdings like retailers and manufacturers. ... Critics fear [PE] firms--which collectively own hundreds of companies--will succumb to the same temptation as bank owners in the '30s. 'If I've got a bank, and I have a business that's going down, where do you think the bank funding is going?' says Rochdale Securities bank analyst Dick Bove", Peter Carbonara at BusinessWeek, 15 June 2009.
We learn nothing. I saw S&Ls prop up real estate investments about 30 years ago. Amazing. That PE firms can buy banks amazes me. As Yves Smith at Naked Capitalism would say, is pillaging bank resources a bug or a feature?