Private Equity Players Want In on Banking

Fed resists easing restrictions on risky, cash-rich enterprises
By Kevin Spak,  Newser Staff
Posted May 6, 2009 9:22 AM CDT
Employees of FDIC leave the IndyMac Federal Bank headquarters in Pasadena, Calif. A trio of private investors, including J.C. Flowers & Co., have teamed up in an effort to buy failed thrift.    (AP Photo/Kevork Djansezian, File)
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(Newser) – Even in the midst of the banking crisis, numerous entities are willing to buy the big banks, the New York Times reports. Private equity groups like J.C. Flowers & Company are itching to snap up the cash-strapped behemoths, but the Fed won’t let them. It’s worried that selling banks to the notoriously risk-loving private equity crowd would invite a future crisis.

“I don’t think the Republic is going to be brought to its knees if private equity owns banks, personally,” says J.C. Flowers, who last year bought a tiny Missouri institution just for its national bank charter. The government fears non-banks manipulating the banking system, but private-equity tycoons counter that what the system needs is huge cash infusions—something only they are in a position to provide. "I find it to be an extraordinary time to invest," says Flowers.