Wall Street Folly

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As if Citigroup has just been sooooo successful at investing in hedge funds: it's providing seed money (along with Blackstone) to some former employees for their $200M startup

Given their disastrous forays into investing in hedge funds not to mention their shaky finances, we wonder what Vikram and Co can possibly be thinking with their apparent decision to still help fund a $200 million hedge fund start-up, along with Blackstone, run by a couple of former Citigroup prop trading guys.  Blackstone is sitting on piles of cash, and isn't on government life support, so we have no problem with them ponying up.   But Citi?  We wonder what Barney Frank et al. will have to say about that.   We kind of think it's ridiculous.  They need to get their financial house in order before staking others. 

By the same token, if we were the hedge fund guys, we'd be more than a little nervous that Citi might have to pull their investment (of an undisclosed size) on short notice.   It's not exactly stable money given their own instability.

Excellent Vanity Fair piece: Might some private equity firms be on the financial brink? Carlyle? KKR?; More losing hedge funds going activist "to do something to justify their existence"?; Grabbing control of companies through distressed debt

Blackstone ($BX) merging distressed fund with its GSO Capital; BlackRock loan fund might default; Citi, Old Lane managers splitting ($C); IPO market freeze hitting venture cap and co's that need financing; SEC may charge Reserve Management

• Blackstone to Merge Distressed Fund With GSO Capital
• BlackRock Loan Fund May Default as Prices Tumble
• Old Lane Managers Look for Exit From Citi
• With IPOs at lowest level since 1977, firms run out of options
• Reserve Says SEC May Allege Securities Violations

List of funds potentially caught in the Dreier scandal is a who's who, including Amaranth's Nick Maounis (who as you may recall, started up another fund called Verition)

A list of hedge funds and other investors who may have gotten bamboozled in the Mark Dreier swindle is found in a grand jury subpoena attached to a court filing made by Dreier's court-appointed receiver Mark Pomerantz. The subpoena requires that any documents pertaining to those funds be produced, so while it doesn't necessarily mean that they all lost money, they're presumably somehow involved (and we'll guess that most of them probably did lose). There are some heavy hitters on the list, including Paulson & Co, Elliott Associates, Davidson, Kempner, Baupost, Sandell Asset Management, Fortress, Perella Weinberg, GSO (Blackstone's alternative investment arm) and Eton Park.  Also notable on the list is Verition -- run by Amaranth's iceberg hitting captain, Nick Maounis. Did he step in it again and strike yet another iceberg?

Blackstone's Steve Schwarzman: "I’m not Robert de Niro, but I’m a raging bull on private equity"

Is now the time for a private equity turnaround?  With the market in turmoil, Blackstone CEO Stephen Schwarzman thinks there are tremendous opportunities.  He was the focus of a piece in The Economist:

Steve Schwarzman's seven principles for preventing another global financial mess

If you haven't checked out the WSJ opinion page, Blackstone CEO Steve Schwarzman talks about the financial morass we find ourselves in and and maps out what he thinks are the necessary ingredients for preventing another one.  He cites seven principles that should be part of any global financial regulation and monitoring solution:  They include a common set of accounting principles, the structuring of the world's major markets along the same lines, full transparency for financial statements, full disclosure of all financial instruments to the regulator, the regulator should have oversight of all financial institutions, getting rid of mark to market accounting for hard to value assets, move to a principles based regulatory system rather than a rules based one because the rules can't keep up with the rapidly changes in the financial system.  And wrapping it up, he envisions a "new global organization of regulators".

You can read the piece here.

Blackstone Group's Steve Schwarzman: `This could be the time that breaks the back of the credit crisis''

(click to enlarge)

The Blackstone CEO was quoted at the Super Return Middle East conference in Dubai after the Treasury's huge bank equity injection.  According to Bloomberg:

Blackstone's Steve Schwarzman: "We are in unprecedented territory right now"

Steve Schwarzman commented on the market turmoil:

"We are in unprecedented territory right now," Stephen Schwarzman, asked about the events of the past week, said at a private equity conference organized by Dow Jones.

"Seeing a firm basically evaporate like that is unsettling. It's a tragedy for the people working there and it is a sign that something is amiss with the financial system," he said.

It was "abundantly clear that the current regulatory structure for financial institutions doesn't work well," Schwarzman said.

"It's a whole series of different regulators that were created at different points in times," he said, adding it needed to be simplified and integrated. There should not be "venue-shopping for regulation," he said.

"When you have all of these rules, and companies are in compliance of these rules, and they're going out of business, something isn't right," he said.

Blackstone CEO says financial rules must change - Reuters

Blackstone's Pete Peterson enjoys chinese takeout at the Four Seasons (at a nice mark up)

Some NY restaurants will go to almost any length to make its customers happy.  Take the Four Seasons Grill Room -- they're even happy to fetch food from other restaurants to feed to their own customers -- at a nice mark up:

If you don't want people to come back, you don't take care of them." He takes very good care, however, of ...... Blackstone Group CEO Stephen Schwarzman and Blackstone's co-founder, billionaire Peter Peterson, who likes Chinese food. "If [Peter] wants, I will send someone to a Chinese restaurant down the block" to pick up his favorite dishes, Julian says. "But I'll charge Four Seasons prices, of course.''

Food Fight! - Page Six Magazine