Create an private equity fund
After the subprime mortgage debacle banks are looking for more capital to replenish their coffers. That would get them back into the lending business which should help pump up the stagnant economy. So far the main sources of capital have been stock sales and CEOs running around the globe asking for cash from sovereign wealth funds. The Federal Reserve is looking at fine-tuning its regulations to let private-equity firms invest in banks without having to deal with excessive regulations:
The Fed is not contemplating an overhaul of those rules, according to sources familiar with the plans. Rather, its lawyers are working on documents that would formalize how their fine points are interpreted, which would make it easier for private-equity firms to know what is and isn’t possible as they consider bank investments.
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The Fed is likely to clarify some of the less-settled questions of how the rules apply, the sources said yesterday. They spoke on condition of anonymity because they weren’t authorized to comment publicly on the ongoing matter. For example, an investment fund cannot buy more than 9.9 percent of the stock in a bank and seek to influence its operations without being classified as a bank holding company subject to extensive oversight. Less clear is what happens if several funds get together and each put less than 9.9 percent into a single consortium.
Critics could object to this “deregulation,” but I would add that private-equity firms are about buying faltering companies on the cheap to quickly sell them. Companies like Blackstone, TPG, and Bain Capital aren’t in the business of building conglomerates. Banks need capital and allowing private-equity to provide some of that seems like a good idea.
“Fed Move Would Ease Investing in Banks“
