Extreme times make for unusual situations. Such was the spectacle of seeing one of the biggest, but most low-profile, buyout kings pop up at a panel discussion held Thursday at Manhattan’s Pershing Square restaurant. Not only that, Christopher Flowers, along with Hank Greenberg and Peter Peterson, turned up to be grilled by Vanity Fair columnist Michael Wolff, author of the recent biography of Rupert Murdoch, in an event called “The Big Fix”.
Rather than focusing on any “fixes”, however, the tone of the discussion seemed to be more about “who to blame” for the financial mess. Not surprisingly, the answer from the three men was: “anyone but us”. First in the firing line were the credit rating agencies, who the three slammed for giving top grade ratings to so many companies. In Flowers’ view, their “mis-ratings” led to “extraordinary damage” to the financial system.
Greenberg, former chief executive of AIG, (and presumable an architect of some of the empire’s faultier foundations) even had the – er, chutzpah – to thunder: “What they did was outrageous… They caused great damage to financial Institutions.” Not to be outdone, Peterson, chairman emeritus of the Blackstone Group and former head of Lehman Brothers, also blamed corporate managers, who he said took “extraordinary risks” by leveraging companies too highly.
But Peterson also “took a more philosophical view,” notes DealBook (although it looks to us like more of an attempt to broaden the blame) saying part of the shift happened when Wall Street firms converted from private partnerships to public companies whose shareholders demanded ever-higher returns on equity. Fancy that.
Lamenting the rise of “short-term” culture, Peterson noted how Wall Street firms leaped headlong into leverage and trading in instruments they didn’t fully understand. “I thought we violated the risk-reward equation,” he said. “When I would talk to management about how these derivatives work, I got very uneasy feelings.”
Greenberg, however, probably gets the chutzpah award, focusing on the ills of overregulation and stating: “We compensate by overcompensating,” he said, adding that regulators should be paid enough “so they’re not clowns.”
Who’s the clown?
On the question of recovery, the prevailing view of the buyout veterans was to look to the real estate market, noted DealZone. The financial crisis won’t be over, said Flowers, “until real estate bottoms out,” which could well be next year, and without a lot of “stupid regulation.”
Then, concluded Flowers in the most candid insight of the “Big Fix” event, “lowlife grave dancers like me will make a fortune.”