Rubenstein: PE to rescue troubled US mortgage assets

The Carlyle Group is steeling itself to be among the largest buyers of distressed mortgage and real estate assets as part of the US government’s $700 billion financial system bailout, co-founder David Rubenstein has said.

Speaking on CNBC, Rubenstein said private equity would play a “significant” part in buying the troubled assets from the government. It came as US treasury secretary Henry Paulson and Federal Reserve chairman Ben Bernanke urged Congress to act swiftly to put in place the rescue package for troubled assets warning delay would put the economy at risk.

The $700 billion bailout is being seen as an RTC-style rescue that would see distressed debt, mainly mortgage- and real estate-related assets, bought up from financial institutions in a bid to try to keep credit markets from choking up.

In response to the savings and loans crisis of the late 1980s, the US government created the Resolution Trust Corporation to hold $394 billion of debt products before selling them off at vastly reduced prices. Financial institutions such as Goldman Sachs’ Whitehall funds and the founders of JER Companies, Joe Robert, and Colony Capital, Tom Barrack, invested heavily in the assets and went on to form some of world’s largest private equity real estate firms.

Rubenstein said today Carlyle would be interested in acquiring some of the troubled assets, adding: “Private equity can help by buying these assets. Private equity can be among the most significant buyers of assets.”

He said the Washington DC-based firm would also look at financial investments. In addition to private equity money, Rubenstein said sovereign wealth funds and international buyers should be encouraged to invest in the US at this time. But he went on to add: “I never thought I'd see anything like this and I hope I never see anything like this again.”