Category: Carlyle Group

"Council on Foreign Relations Fund" collapses

As bailout fever spreads like wildfire we are hit with the shocker of 2008: “Carlyle Capital (aka the Council on Foreign Relations Fund) Nears Collapse as Rescue Talks Fail.”

Carlyle Group said creditors plan to seize the assets of its mortgage-bond fund after it failed to meet more than $400 million of margin calls on mortgage- backed collateral that plunged in value.

Carlyle Capital Corp., which began to buckle a week ago from the strain of shrinking home-loan assets, said in a statement it defaulted on about $16.6 billion of debt as of yesterday. The fund fell 87 percent in Amsterdam trading. Carlyle Group, co-founded by David Rubenstein, tapped public markets for $300 million in July to fuel the fund just as rising foreclosures caused credit markets to seize up.

One of Carlyle Group’s talking heads – I’m sorry, “advisor” – was also the head of that incredibly efficient SEC which sat idle during the last mania. Here are a few of his brilliant comments:

The fund’s losses were caused by “excessive leverage,” said Arthur Levitt, a senior Carlyle adviser, in a Bloomberg Radio interview today. “This did not affect the overall Carlyle enterprise,” said Levitt, former chairman of the Securities and Exchange Commission and a board member of Bloomberg LP, the parent of Bloomberg News. ”This was a single fund, and I suspect as this plays out, you are going to see a lot of other private-equity companies, a lot of banks, going down the same road,” he said.

My comments: Why would someone like Arthur Levitt watch one of his funds, which he advises, take leverage to 32-1? Additionally, where was Carlyle Group’s Chairman Lou Gerstner during this irresponsible behavior? If the most politically-connected private equity group in the world can’t be saved by the Fed, remaining credit fund managers may want to order some sleeping pills.

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