The financial impact of the mortgage and credit crisis is far from over, according to the chairman of The Carlyle Group, one of the world's largest private equity firms. In remarks made at a breakfast meeting of the Institute for Education Public Policy Roundtable in Washington Tuesday, Carlyle chairman David Rubenstein said that "enormous losses" yet lie ahead for many of the worlds largest banks and financial institutions. Rubenstein even expects some financial institutions to fail, although he didn't name any companies, according to Bloomberg News, which initially reported on the remarks. From Bloomberg:
"The sovereign wealth funds are not likely to jump into the fray again to bail out these institutions," Rubenstein said. "Many financial institutions aren't going to be able to survive as independent institutions." Rubenstein said sovereign wealth funds are becoming wary after losing $25 billion on their investments in struggling banks and securities firms worldwide.
The Carlyle chairman also said that he sees the U.S. hitting the economic skids through the rest of this year, saying that "I don't think it's going to be over for quite a while." Rubenstein didn't mention the enormous growth in distressed mortgage assets, tied to the current industry downturn. Billions of dollars of capital have flowed into a growing number of hedge funds and private investors that are looking to capitalize on both the whole loan and bond side of the mortgage mess. Some funds have already begun buying up assets, although HW's sources on the Street suggest that deals are often still few and far between; most expect that to change within the next six months as the market continues to roil from increasing borrower defaults. "The bid-ask spread, if you will, on these loans is still too far apart," said one source. "It will come down."