What Is Steve Schwarzman Hiding?

Stephen A. Schwarzman
AP
Stephen A. Schwarzman

Robin Sidel at the Wall Street Journal tells a fascinating story today about Blackstone restructuring its investment in a Florida bank to avoid disclosing information about CEO Steve Schwarzman's wealth.

The bank in question is actually a savings and loan in Florida called BankUnited. Like a lot of financial institutions, it failed in 2009.

Private equity firms were hot and heavy for Florida exposure at the time, so Bank United got purchased by a cabal of private equity firms led by John Kanas, the guy who sold North Fork to Capital One , and including Blackstone.

It was a wonderful deal.

"The investors bought BankUnited for $945 million. They then received $2.2 billion in cash from the Federal Deposit Insurance Corp., which also agreed to reimburse up to $10.5 billion in future loan losses," Sidel explains.

What happened next is that BankUnited agreed to convert itself to a "national bank" as part of its acquisition of some bank in New York.

Here's what happened next:

As part of the conversion, the Fed requires detailed financial information from "principals" of entities that own more than 10 percent of the bank's stock. The Fed first requested the information in the fall, according to the people familiar with the situation.

The request stretches to the upper ranks of those firms, according to people familiar with the process. That means top executives of those firms are required to provide comprehensive details about private real-estate holdings, investments and anything else that contributes to their net worth.

Apparently this included disclosures about Schwarzman's finances. And so Blackstone is "changing the structure of its investment" in BankUnited to avoid telling the Federal Reserve about Schwarzman.

Which raises the question: What the heck is Schwarzman hiding?

"It isn't clear why Mr. Schwarzman is sensitive about providing such information, " Sidel notes.

No kidding. Schwarzman disclosed a lot about his personal fortune when Blackstone went public in 2007. But something in the intervening years seems to have made Schwarzman shy. Anyone have a clue?

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