Henry
Doug Henwood wrote:
> Wojtek Sokolowski wrote:
>
> >So yeah, the welfare system in the US is alive and well, it just underwent
> >*gentrification* lately.
>
> E.g., Long-Term Capital Management, bailed out last fall by its Wall Street
> colleagues & the New York Fed, is up 20% and trying to raise fresh money.
>
> Doug
>
> ----
>
> Financial Times - April 20 1999
>
> Corzine and Meriwether to explore LTCM buy-out
> By William Lewis in New York
>
> Jon Corzine, current co-chairman of Goldman Sachs, has linked up with John
> Meriwether and other original partners of Long-Term Capital Management to
> explore ways of buying out the financial services consortium controlling
> the hedge fund.
>
> In recent weeks Mr Corzine, Mr Meriwether and the partners have been
> approaching potential backers about raising funds for a buy-out of LTCM,
> whose near bankruptcy brought turmoil to the world's equity and bond
> markets last year.
>
> The fund raising moves are said to be at an early stage but follow a strong
> improvement in LTCM's investment performance since the $3.625bn bail-out
> organised by a Wall Street consortium last October. Mr Corzine, who played
> a key role in organising the bail-out, is due to leave Goldman once it has
> become a publicly quoted company this year.
>
> Mr Corzine declined to comment, as did a spokesman for LTCM's original
> partners. No spokesman for the consortium could be reached for comment.
>
> Mr Corzine and the LTCM partners are thought to be considering setting up a
> new organisation to raise the money to buy out the consortium. "They are
> quietly going around asking a few people their reaction to it," said one
> individual approached.
>
> The new organisation would be run jointly by Mr Meriwether and Mr Corzine.
> LTCM specialises in so-called convergence investing, and the new
> organisation is likely to continue with that style of investing. Before he
> became the senior partner of Goldman Mr Corzine ran the firm's fixed income
> business.
>
> Members of the consortium are said to have been told about the fund raising
> efforts through a letter from Goldman making clear that Mr Corzine is
> acting in a personal capacity.
>
> Mr Corzine is also known to be considering running for the US Senate and
> has been approached by Democratic leaders in New Jersey, where he lives.
> They want him to replace Sen Frank Lautenberg, who is due to retire.
>
> Mr Corzine lost out in a power struggle at Goldman this year, moving aside
> to enable Hank Paulson to become the bank's sole chairman. Last month LTCM
> disclosed that it had halved its risk and balance sheet exposure and
> boosted returns since being rescued. At the time the consortium declined to
> give specific details about the fund's total continuing exposure or what
> types of trades they had carried out to reduce its risk and balance sheet
> positions. It also declined to give the current net asset value.
>
> ---
>
> Wall Street Journal - April 20, 1999
>
> Goldman Sachs's Corzine Explores Role
> In Raising Funds for Long-Term Capital
>
> By RANDALL SMITH, MITCHELL PACELLE and GREGORY ZUCKERMAN
> Staff Reporters of THE WALL STREET JOURNAL
>
> Jon Corzine, co-chairman and senior partner of Goldman, Sachs & Co., is
> exploring a role in raising funds to invest in Long-Term Capital
> Management, the hedge fund that nearly collapsed last fall, according to
> people familiar with the situation.
>
> Mr. Corzine, these people said, has been working with Long-Term Capital
> founder John Meriwether for a few weeks about raising funds to buy out a
> consortium of Wall Street securities firms that rescued the fund in
> September with a $3.625 billion equity infusion.
>
> Mr. Corzine has yet to make a formal proposal to the consortium, though he
> has initiated informal discussions with some members of the group,
> according to one person familiar with the talks. Mr. Corzine, who built his
> career at Goldman as a savvy bond trader, is trying to organize a group
> that would include Mr. Meriwether to make the investment.
>
> Messrs. Corzine and Meriwether would jointly be co-heads of the company
> that would assume control of the hedge fund, according to one person
> familiar with their plans, which remain at a preliminary stage. The
> 52-year-old Mr. Corzine, whose stake in Goldman could have a value of more
> than $200 million, may also be considering a race for a U.S. Senate seat up
> for grabs in his home state of New Jersey.
>
> The irony of Mr. Corzine's possible involvement is that his strong backing
> of the Long-Term Capital rescue cost him politically at Goldman, where he
> was ousted as co-chief executive officer in January. He was criticized
> internally when Goldman suffered steep losses last fall in the same market
> turmoil that hurt Long-Term Capital. He was also criticized for taking a
> leading role in the rescue, after a separate, unsuccessful effort to buy
> the fund's portfolio by a group including Berkshire Hathaway Inc., American
> International Group Inc., and Goldman.
>
> The bond-market losses stung Goldman all the more because they helped
> derail an effort for the firm to go public that Mr. Corzine had personally
> championed. After Mr. Corzine was replaced, Goldman revived its
> going-public move in March, and the firm hopes to complete that offering of
> roughly $3 billion in early May. Mr. Corzine is scheduled to relinquish his
> active role at the firm once the initial public offering is completed.
> Goldman has written a letter attempting to make clear that Mr. Corzine
> wouldn't be acting for the firm in his possible role with Long-Term Capital.
>
> Before any new money is raised by Mr. Meriwether, the 14 financial
> institutions involved in the rescue of the Greenwich, Conn., hedge fund
> will likely insist on repayment of at least some of their investment,
> according to people close to the group. A payout of more than $1 billion
> may be required by the group before it gives the green light on any new
> investments.
>
> "There have been requests from partners to be allowed to start to market"
> the fund, a person familiar with the group's planning said. "We've
> discouraged that." Between the September bailout and the end of February,
> the fund returned slightly more than 20%, compared with 18% for the
> Standard & Poor's 500 stock index, as prices of risky bonds improved
> dramatically.
>
> Long-Term Capital ran into trouble in the aftermath of August's Russian
> debt default, when markets for bonds with risk attached froze up, crippling
> leveraged bond portfolios like those of Long-Term Capital and requiring the
> consortium of securities firms to step in and engineer a bailout.
>
> The bailout took place under the auspices of the Federal Reserve. While
> these markets have recovered a great deal of their losses, they haven't yet
> returned to their prior stability, making the securities firms wary of
> holding their investment in Long-Term Capital's portfolio, despite efforts
> in recent months to reduce the hedge fund's risk exposure.