Davos Notebook

Banks to be disintermediated? or is that just replaced?

Is it actually distintermediation if the thing being disintermediated has ceased to function?

Henry Kravis of Kohlberg Kravis Roberts said in Davos that, as in essence banks aren’t playing their role of intermediating debt capital for buyouts, he would be going straight to the source, doing deals directly with investors who want to fund debt for deals.

Of course many of the institutions that used to fund buyouts, CLOs and CDOs for example, no longer exist and many like hedge funds have lower appetite. He acknowledged that leverage has “come down tremendously,” which might get the prize for biggest understatement of the week.

But, like Steve Schwarzman of Blackstone earlier in the week, he maintained that lower asset prices for deals originated now would help returns.

“You might be able to buy it with less leverage and you can still get the same returns because of the purchase price you are paying.”

It’s never too late to blame Greenspan

Alan Greenspan hasn’t been chairman of the Fed for three years, but his policy mistakes keep paying dividends in the form of blame at this year’s World Economic Forum in Davos.

Polish Finance Minister Jacek Rostowski yesterday:

“This was the failure of one of the key institutions in the world.” During the Greenspan era he said they continually met downturns and distress with easing and “eliminated fear.”

Ken Rosen of Berkeley, who was writing about the housing bubble in 2005 or so, is in the same camp: