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Looking into “Chinese Boxes”: Hedge funs and the Eu’s draft directive Poul Nyrup Rasmussen PES President CEPS Conference, Brussels, 26.06.2009
They were all in the same boat IMF Global Stability Report (April 2008): “There was a collective failure to appreciate the extent of leverage taken on by a wide range of institutions […] and the associated risks of a disorderly unwinding”
Only the banks to blame? The claim by the PE and HF industry: The crisis is a result of excessive risk-taking in regultated banks and other financial institutions – not PE and HF’s activity. Answer: They were all in same boat! Not enough to look at the originators of loans – we need to also look at the demand side.
S&P (September 2008) • Looking af 55 entities that have defaulted globally in the first 8 months of 2008. • In 70% of the cases, private equity had been involved in transactions at one point or another.
Could LBO’s have triggered the crisis? • "Perhaps it has just been sheer luck that some multi-billion mega LBO deals were not the first to trigger a similar crisis" • "Private Equity: Boom and Bust?" • Journal of Applied Corporate Finance, 2007, Vol. 19 (4) • REMEMBER: Long before the crisis there were structured problems with LBO’s
Super light touch:10 loopholes in the COM proposal • Only EU managers • Pure formality – no requirements • Massive exemptions (min. 100 mio/500 mio. Euros) • No capital requirements or liquidity • Insufficient transparency • No real disclosure on portfolio companies • No initiative on market disruption by non-EU funds • No regulation of naked short-selling • No specific protection of institutional investors • Nothing on tax evasion
The Road to Recovery and progress • A smart green growth and jobs strategy • New financial market regulation • Reductions in climate change emissions • A Social Progress Pact • Workers’ rights, incl. Posting of Workers Directive
This crisis is not a law of nature! • Let’s turn it into new opportunities • A New progressive roadmap for sustainable jobs