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Gebbeth

Banks' Pyramid Scheme

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I'm finding Robert Peston's blog to be a good read at present:

Banks' pyramid scheme

Financing for big takeovers by private equity firms has evaporated.

Why did it happen? Nothing terribly sinister or complicated. It is simply that private equity firms became too cocky and ambitious for their own good.

...

But what they seem to have failed to notice was quite how much additional debt they were expecting these investors to buy. By the middle of the year, the big banks had agreed to provide somewhere between $300bn and $400bn of debt to new private-equity deals, which was six or seven times the amount of such debt placed in a typical year until very recently.

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