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Friday, March 14, 2008

Carlyle Group and Wall Street Firms: Different Strokes for Different Folks

When the market for auction rate securities collapsed a few weeks back, not one of the big Wall Street firms offered to help their clients deal with the fallout. Although the clients were told that the securities were cash equivalents, they were in fact bonds that carried a significant amount of risk. Countless individuals and institutions are now experiencing a severe cash crunch.

So the attitude of David Rubenstein, co-founder of the Carlyle Group, provides a sharp study in contrasts. Mr. Rubenstein has announced his firm will compensate investors for losses sustained due to the collapse of its $22 billion mortgage-backed securities fund the firm launched just seven months ago.

“We have stood behind our products in the past and we are working on ways to address the losses that are being suffered by investors,” Mr. Rubenstein told the FT.

While it remains to be seen exactly what kind of compensation Mr. Rubenstein will offer investors to soften their financial blows, it’s commendable that he at least pays lip service to the idea of making his investors whole. That kind of talk is completely foreign to Wall Street firms.

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