Bush's investor buddies behind Bear Stearns collapse?

Remember what happened to the power grid on August 13, 2003, when a rotten tree falling on a transmission line in southern Ohio triggered a massive blackout across the northeastern U.S.?

The same thing may be happening to the country's financial markets.

The blackout so far is Bear Stearns, the nation's fifth largest investment bank. While it's not massive (yet), in an effort to confine the outage, the Federal Reserve Bank (i.e., we taxpayers) and JPMorgan Chase have agreed to bail out Bear Stearns.

But what caused Bear Stearns problems?

Well, it appears that the rotten tree that hit the power line was none other than the Carlyle Group, well known to political and financial observers as the House of Bush's favorite financial partner. Bear Stearns shares tanked after the Carlyle Group, a Bear Stearns affiliate, defaulted on nearly $17 billion of debt.

Kevin Phillips wrote extensively about the connection between the Bush family and the Carlyle Group in his book American Dynasty (reviewed here).

According to "The Barreling Bushes" in the Los Angeles Times, January 11, 2004:

After losing his bid for a second term as president, [George H. W.] Bush joined up in 1993 with the Washington-based Carlyle Group. Under the leadership of ex-officials like [Howard] Baker and former Defense Secretary Frank C. Carlucci, Carlyle developed a specialty in buying defense companies and doubling or quadrupling their value. The ex-president not only became an investor in Carlyle, but a member of the company's Asia Advisory Board and a rainmaker who drummed up investors. Twelve rich Saudi families, including the Bin Ladens, were among them. In 2002, the Washington Post reported, "Saudis close to Prince Sultan, the Saudi defense minister … were encouraged to put money into Carlyle as a favor to the elder Bush." Bush retired from the company last October, and Baker, who lobbied U.S. allies last month to forgive Iraq's debt, remains a Carlyle senior counselor.

Hoover's Online, a respected source of "valuable business intelligence including company information, business news, and more," says this about the Carlyle Group and the Bush connection:

Carlyle's directorship reads like George Walker Bush's inaugural ball invite list. Reagan Secretary of the Treasury James Baker serves as a senior counselor, and Richard G. Darman, former director of the Office of Management and Budget under George Herbert Walker Bush, is a managing director. Former President George Bush has served with Carlyle and Colin L. Powell, before becoming Secretary of State, made an appearance on behalf of the firm.

Writing in The Nation in March 2002, Robert Scheer offers more details about our current president's father and his Carlyle connections:

But that score [a stock deal from the now disgraced Global Crossing] was nothing compared with the elder Bush's own global crossings as a highly paid consultant to the Carlyle Group, a $12 billion equity investment firm heavy into the defense and energy games. Carlyle's chairman, Frank Carlucci, who was Reagan's Defense secretary, is a close friend of the current secretary, Donald Rumsfeld, his Princeton wrestling partner. The Carlyle company roster also includes top vets of the first Bush Administration, led by ex-Secretary of State James Baker--a political gunslinger who worked hard on George W. Bush's postelection campaign to secure Florida's electoral votes and the White House.

And from the The Observer (UK):

The Carlyle Group defines the next phase of power: a Washington-based private equity fund with a difference. It is headed by Frank Carlucci, former CIA director and defense secretary under Ronald Reagan and lifelong friend of George Bush Sr. Bush (also once director of the CIA) sits next to Carlucci on the board with a portfolio specialising in Asia and does not hesitate to communicate with his son on concerns of regional relevance to Carlyle such as Afghanistan or the Pacific Rim. [Current President] Bush Jr was once chairman of a Carlyle subsidiary making in-flight food.

Many very serious economists are saying that like a house of cards the U.S. banking and investment system may be on the verge of wholesale collapse. Could the ultimate source of that collapse originate in the halls of the White House?

An extensive list of the Bush-Carlyle connection is at BuzzFlash.com. A video about the Carlyle Group is here.