High life
Whizz bang
Taki
enry Kravis is the Toulouse-Lautrec- sized financial whizz known for buying up companies at inflated prices, loading-them down with mountains of debt and then selling off parts of them at great profit to himself. Although I have never had the bad luck to meet Kravis, I often see him lunching at Mortimer's, in a special seat constructed for him by the management so that the dwarf's elbows can rest on the table. Mind you, for an extremely short man, Kravis has a hell of a reach. Only last year he took over RJR Nabisco for some- thing like 26 billion greenbacks, which if
stacked up would dwarf the Empire State Building, a fact that must have crossed our Henry's greedy little mind.
Oh, yes, I almost forgot. Kravis is not only a leveraged buy-out artist par excel- lence, he is also a hell of a philanthropist. He contributes to chic charities with a vengeance and deducts, I assume, from his taxes as vigorously as his PR people tell the world of his munificence. He was recently nominated to the board of the Metropoli- tan Museum in New York on the strength of a $20 million contribution. Now that's what I call making it.
The reason Kravis comes to mind is because of last week's panic on Wall Street, a subject that occupied everyone who is anyone last week in the Big Bagel, everyone but the homeless, that is. When I rang Diego Del Vayo, a stockbroker and son of the last Spanish Republican premier before Franco, he blamed it all on the whizzes who drove up the indexes. 'Every- thing that is artificially inflated must one day come down,' said the wise Diego, a far wiser man than his father ever was.
Not being a businessman, I remain confused. But I do know a thing or two, or have learned since 14 July. Debt-financed takeovers cannot possibly be an efficient way to restructure corporate assets. They can only be an efficient way for the takeover artist to make a quick buck. The other piece of wisdom I have to offer is that LBO champs, arbitrageurs and corporate executives who put these deals together do it for the money and nothing but, and when they say they are promoting long-term growth rather than short-term gains, they are speaking with forked tongue.
Needless to say, the man who invented the whole mess of junk bonds, Michael Milken, is under indictment, but the dam- age has been done. Junk bond takeovers decrease rather than increase employment, hamper research and development, de- crease capital spending, and yield far less tax. Yet the Kravises of this world tell us the opposite is true, and until today they have been winning the war of words. And making billions in the process.
My father always told me that debt is bad. And it makes sense. How can debt possibly be good, except for a joke eco- nomy like that of Greece where inflation and devaluation chronically wipe out debt? What I would like to see is the likes of Kravis and Gutfreund and Milken employ people and start industries, not take them over and sell their assets. But that would be like Jeff going on the wagon, or Andreas Papandreou telling the truth — impossible.
But who am I to talk? Only recently I was seriously thinking of issuing stock for some junk hotels I own, and then some wise guy advised me to do the opposite and issue junk bonds instead, and, oh well, we're all a bit greedy, so I plan to see the midget and ask him to take me over for a change.
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