The Ultimate Bubble?

At a lavish conference in Monaco, the game was guessing which big private-equity firm will be first to go bust. But the smoke and mirrors that wrecked the global economy might actually save the likes of K.K.R. and Blackstone.

by Michael Wolff
February 2009

Here’s a parlor game, played best by the people who are in it: Which private-equity firm’s going bust first? Carlyle? Fortress? K.K.R.? Cerberus? Apollo? Could it even be mighty Blackstone, with its vast real-estate holdings? Which of these one-word-branded enterprises (the word should emphasize strength, opacity, and preferably be culled from mythology—though no one in private equity, rest assured, reads his Bulfinch’s) that make up what’s been called the world’s “shadow banking system” will collapse and, in the domino pattern of this financial crisis, take the other firms with it?

There’s an urgency to this question because no big firm has actually gone bust—yet. All of the behemoth investment groups that sit on top of trillions of dollars of the largest capital accumulation outside the public markets remain suspended over the global economy like awfully big shoes waiting to drop. The wait increases both the suspense and the bitchiness of the game: somehow every private-equity guy (private-equity guys have been among the most unpopular figures of the great bubble) feels he’s been more prudent and responsible than all the others. Given the credit crunch, no private-equity deals are getting done now—chances are that what you’re doing with your idle hours as a P.E. man is trying to figure out who deserves to crash and burn before you.