BLACKSTONE, the world’s biggest private equity capitalist raider, has reported a collapse in its profits in the last three months of 2007.
Blackstone’s chief operating officer Hamilton James said: ‘Last quarter, I described the environment as deeper, darker and scarier than we anticipated, and I still think that was an accurate assessment. . . It’s pretty clear that the basic economy is shrinking.’
Even the capitalist wolves have got the shakes!
With good reason since Blackstone’s shares have declined 53 per cent from their $31 initial public offering price last year and 33 per cent so far this year. It also lost $170m (£85m) during the fourth quarter, compared with profits of $1.18bn during the final quarter in 2006.
Blackstone said funding takeovers would be difficult in 2008. It’s the end for the private equity capitalist raiders, with the banks no longer able to supply the massive credit that they require.
In fact, the banks have their backs to the wall, forcing the Federal Reserve Bank of the US to brief that more emergency interest rate cuts are on the way, while the Fed blocs with the other central banks, including the Bank of England, to inject more than $200bn into the banking system.
The US central bank announced it will lend the cash through weekly auctions to the world’s biggest banks for a period of 28 days instead of the current 24-hour period.
Crucially, the Fed is also prepared to accept as collateral for the loans, agency and mortgage-backed securities, that is the fictitious value that has produced the US sub-prime mortgage crisis.
In a short statement released early in Washington D.C., the Fed said itself, the Bank of England, the European Central Bank, the Bank of Canada and the Swiss National Bank had been consulting ‘regularly on liquidity pressures in funding markets.’
This is a repeat of a similar manoeuvre last December, which failed to put a stopper on the crisis that erupted in the summer and produced the queues outside the Northern Rock Bank.
The news of today’s intervention lifted shares around the world adding further fuel to the inflationary fires that are being stoked up.
This panic reaction comes just one day after panic swept the credit markets on reports of an insolvency crunch at both the US investment bank Bear Stearns and the mortgage giant Fannie Mae. Both institutions denied the rumours.
While the British government is now pledged to aid any banks that are about to go under, in Ireland the fall in house and land prices has brought the banking system to the edge of the abyss, where the government is being advised that if push comes to shove they will have to mount a series of nationalisations to put the banking system onto ‘life support’ and bail it out.
With property prices slumping the Irish banking system faces defaults.
Morgan Kelly, of University College Dublin said yesterday, ‘We have a domestic recession now colliding with a global recession.
‘We cannot do the things that are normally done, with interest rates because we are part of the euro zone.
‘It is the state of the banking system that will determine how terrible this will be, and frankly that is looking very shaky.
‘We are going to see banks on life-support with very big bail-outs. The Nordic countries faced a like problem in the early 1990s when they had to take over the banks.’
Capitalism is on the rocks, and the working class is already paying the price, with rapidly growing unemployment, and a 15 per cent rise in food and fuel prices.
This is the crisis that is overshadowing Darling’s budget, which will seek to rescue the banks at the expense of the working class.
There is only one way out for the working class and this is through a socialist revolution to expropriate the bosses and bankers, to put an end to ‘Law of the Jungle’ capitalism, and to go forward to a planned economy and a socialist society.
