Democrats claim they’re for Main Street, not Wall Street. Yet only Wall Street has thrived under President Obama’s job-killing policies, freezing unemployment a t 8 percent while Wall Street has soared on corporate earnings. On Tuesday, the bulls were running again to a new high (as Obama punished Main Street with his mindless sequester cuts) – but a closer look at the numbers reveals another irony.
The president’s demon private equity industry is making out like bandits in the Obamaconomy.
While the president roasted private equity firms like Mitt Romney’s Bain Capital as evildoers, 2012 brought them a mountain of money. Dividend payments alone topped $100 million apiece for Blackstone, KKR, and Apollo executives.
Why? Because while Obama’s regulatory juggernaut flattened job growth, Ben Bernanke’s Fed has tried to keep the economy alive on a drip feed of low interest rates. Cheap money is honey for private equity which has gone on a debt-fueled buying binge.
“It makes financing leveraged buyouts much less costly,” reports Forbes, “and thus potentially much more lucrative.” For example, Carlyle Group private equity poured $6 billion into takeovers in the third quarter alone, bidding up companies like King Collision Repair Centers, TCW Group, and Getty Images.
The buyout feeding frenzy has driven up stock prices and fattened One Percenter paychecks (KKR’s twin CEOs took home a total of $208 million in dividends last year – up 62 percent from 2011).
Viva La Obama!
The Fed’s extraordinary stimulus, however, has many fearing a financial bubble. In a market driven by debt, what happens when interest rates rise again? “Carlyle and its peers have generated healthy earnings because of the amount of leverage they are able to pile on to the companies they acquire,” continues Forbes. “Make that debt more costly, and the tailwind becomes a headwind.”
Uh-oh. Warren Buffett – an Obama booster – worries, saying markets are on a “hair trigger” because ”an awful lot of people (will) want to get out of a lot of assets” when the Fed has reversed direction. And when that happens – hey, just blame George Bush.