On Wheeler's new to-do list
One of the things the board that runs Oregon state pension fund investments is working on these days is plunking $100 million into buying up assets of failed banks. The deal, which would involve a number of public employee pension funds around the country, is being put together by Sageview Capital, some sharpies formerly employed by the nationally known vulture venture capital firm KKR. The new company holding the assets, called Community Bancorp, would be run out of Houston by some banker big shots down there named William Harrison, formerly the main man at Chase, and Robert Steel, former Henry Paulson protegé and one-time vice chair of Goldman Sachs.
At its last meeting, the PERS investment board gave its o.k. into buying into the deal. The pitch that they approved is here.
Ted Sickinger of the O filed a nice report on the transaction earlier this week. In it, he explained:
The OIC clearly liked the pitch, though they questioned the deal's rich fee structure, which could include stock options for the board and management equal to a 20 to 25 percent stake in the entire holding company. That's in the neighborhood, if not richer, than private equity transactions -- and fees that the council says it's trying to control.More taxpayer money enriching sweethearts from Goldman Sachs and Chase? Why, it's the American way.One outside observer at the meeting was alarmed by the deal. Bill Parish, a local investment advisor who tracks the state pension fund's investments, said the deal's architects are showering themselves in stock options. He questions whether Sageview, as one of the deal's orchestrators and board members, would really be exercising some form of control.
"Rather than functioning as a fleecing catalyst for (leveraged buyout) artists, the OIC should instead roll up its sleeves and find better partners to accomplish the same goal of investing in failing banks," he said.
Keith Larson, an Intel Capital executive who is vice chairman of the state investment council, did express concern that a direct investment in a bank holding company doesn't offer the diversification that the pension fund typically gets by investing in funds.
"There's risk in everything," Ron Schmitz, Oregon's chief investment officer, said in a later interview. "It's not a free lunch, but we think the risk-reward profile is favorable."
| Posted at 3:41 AM | Permalink |
|
Comments (7)
"Community" Bancorp? I suppose these are some of the people the city will be doing business with in the Timbers/PGE Park re-renovation scandal?
Posted by none | March 13, 2010 4:14 AM
Vulture Capital! I love it!!!
Posted by Portland Native | March 13, 2010 7:51 AM
[Mr. Fox}
"Would you gals mind stepping out of the coop, please? See, that was OK! Now would you mind drenching yourselves in honey and rolling around on that plate of sesame seeds over there...."
Posted by Old Zeb | March 13, 2010 8:51 AM
There are hundreds of conservatively managed community and regional banks with sound balance sheets. In time, these institutions will start paying dividends again, or increase dividends, yielding sound, steady and growing returns -- exactly the sort of thing a pension fund ought to be looking for.
One of the best investments I ever made was in a sound, conservatively managed S&L during the height of the S&L crisis circa 1990 -- paid back at a ratio of about 10 to 1. Your state and local funds ought to be looking at these kinds of opportunities for the financial part of its portfolio or (God I never thought I would say this) buying up shares of CITI if its wants to take some risks without too much of a downside.
One of the problems with the hedge fund type arrangements is they have so many roach motel characteristics -- not that public pension fund managers are all that nimble to begin with.
Posted by Grady Foster | March 13, 2010 9:33 AM
Is this a giant over-correction? I think reasonable people would admit that a tax on the wealthy of 90% a few decades back was ridiculously high. I understand how we went from there to a movement where rich people sought to pay a lesser rate.
Along the way though we over-corrected to the point where the wealthy are like a runaway Toyota. Every possible chance they have to shower themselves in riches is treated like they are righting a wrong.
The head of Goldman Sachs recently said that he was doing "God's work." Matt Taibbi had a different image:
"The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."
I recently attended an event where both Randy and Ted kidded around with Sam looking on. Sam and Randy have already proven they are morons when it comes to being duped by rich Goldman Sachs types. I mean how do we pay part of the hourly wages at PGE Park, to enhance the experience so Henry Paulson's kid can fatten his allowance? It's ludicrous.
Ted clearly showed the brains that night to process this stuff better - which is why Portlanders should be so worried to lose him - but also why I am encouraged to know Oregon could be in better hands.
Ultimately though, the rich people of this country have got to impose some limits to their insatiable greed. We need a new mindset. "The deals architects are showering themselves in stock options"?
I picture an out-of-control Toyota going a hundred-miles-an-hour with a vampire squid at the wheel.
Posted by Bill McDonald | March 13, 2010 9:52 AM
Why go to bed with these financial sluts? I'm flummoxed.
Posted by SKA | March 13, 2010 11:19 AM
Same old story, by the way, folks should view THE OBAMA DECEPTION
Posted by AL M | March 13, 2010 3:34 PM