November 13, 2007 (LPAC)--The two big private equity locusts Blackstone Partners and Fortress Investment Group "went public" early in 2007--i.e., they sold stock in themselves to ordinary investors who had neither the means, nor the sophistication and time, to follow their complicated financial operations. By going public, the founding and managing partners of Blackstone and Fortress "cashed out" on a grandiose scale, at the expense of those ordinary investors. Leading the pack was Blackstone founder and Wall Street oligarch Peter G. Peterson, who cashed out a whopping $1.7 billion payout; CEO Steven Pearlstein trailed with a mere $640 million cashout.

We reported at that time, that the funds were inviting in the ordinary mickeys to take the losses that would now ensue, and that forecast has been confirmed. Blackstone, since going public and getting, in addition, a $3.7 billion investment from the Peoples Bank of China, has lost 35% of the value of the stock it issued! In addition, it just posted a third quarter operating loss of $113 million "because of the mortgage crisis."

Blackstone CEO Tony James told the Financial Times, "The mortgage black hole is, I think, worse than anyone saw. Deeper, darker, scarier."

As for Fortress, which last year was gobbling up hundreds of thousands of rental flats in German cities, it lost $55 million in the second quarter of 2007, and just announced another $38 million loss for the third quarter.