If the PE shops are getting involved it will be at a substantial risk to the taxpayer. The two pieces of information these guys have are not on view for the public are: (1) the actual assets in the inventory and associated marks and (2) the inside deal they are getting at taxpayer expense.

Yet another sign of the sheer desperation. Bernanke is a stone loser in this anyway you cut it. The only thing I am waiting for is the headline “we had to destroy it to save it.”

I still have to differ somewhat, although I probably should have been more precise. KKR did look at Bear, but most forget that Kohlberg, Kravis and Roberts all came out of Bear.

Military contractors are money coining machines. It’s brutally difficult and costly to win contracts, but once you have them, the contracts have very long lives and are generally hugely profitable. They have a product monopoly granted by the government.

The PE interest in telecom (the regulated part, not equipment suppliers) is recent and due to looser regulations.

Banking in many ways is now the worst of both worlds: regulated but with very few areas that are de facto oligopolies. Credit cards have via consolidation become an oligopoly, but look at the mess they made of that. When the business was more fragmented (by issuer) back in the 1980s, everyone charged annual fees, so there was no incentive to find (create) the chronically indebted customer. But they started offering no-fee cards and moving the profit model towards greater dependence on credit.

I don’t see the direction of re-regulation doing much to reduce the competitiveness within product lines (ie, no one seems to be contemplating restoring Glass Steagall). So we’ll have a competitive industry subject to tougher capital requirements and possibly more regulatory scrutiny of complex products. I don’t see that as a great profit formula.

Yes, you can buy low and sell high, but that means you have to be pretty confident we’ve hit bottom and the profit improvement will be on a timetable that works for the PE firm. But look how long it took Japan’s banks to get back on their feet.

Finally, most PE players come out of the M&A side of Wall Street or industry. They don’t understand managing a treasury operation or trading risk and they know it. Yes, in theory you can hire management, but given that pretty much everyone senior is associated with failing entities, talent is scarce and hard to vet.

Aside from the FDIC idea (some local banks can have very good franchises, and well run, can outperform big banks), I don’t anticipate much appetite.

I’m not so sure that private equity wouldn’t be interested. Indeed, many private equity firms like regulated entities (e.g. telecom), or entities that are very dependent on government contracts (e.g. military contractors), because many private equity firms specialize in having the lobbying power to tilt the government in its favor.

Indeed, the dirty little secret of the success of some of these firms has little to do with superior business management and more to do with superior government lobbying to change the rules of the game. For example, the Carlyle Group counts as its advisers (both former and current) G.W.H. Bush, G.W. Bush, James Baker, Arthur Levitt, John Major, and numerous other highly placed former political figures.

Such people weren’t hired for their business acumen. But they serve the firm well when it comes to lobbying for changes in rules or awarding of contracts to the businesses they own.

Indeed, the fact that the Fed is basically begging them to step up and buy our banks means they will have extraordinary bargaining power, even before brandishing their political firepower. That bargaining power ensures that there will be favorable changes in the regulatory environment that will allow them to meet their ROI objectives, even at the cost of the fundamental health of the banks or the American financial system in general.