Executive Intelligence Review (EIR) – The global leveraged takeover bubble of hedge funds and private equity funds may begin to explode this month in your living room, especially if you live in Manhattan or in Dresden. Two large private-equity takeover schemes speculating on the price of housing—one based in New York, the other in Germany—are threatening to blow up, one on the markets for junk bonds, the other in an IPO on the New York and Frankfurt stock markets. Both schemes, in addition to the prospect that they could fall apart and start a default chain in the huge global bubble of takeover debt, also represent the worst operations of the hedge and private equity funds as financial predators—”locusts” as they are often called in Germany.

The big IPO (initial public offering, or sale of stock on the exchange) of Fortress Investment Group LLC is occurring on Feb. 8 on the Wall Street and Frankfurt stock exchanges. This IPO, a means to get stock investors to put something like $650 million in new capital into Fortress, is based on that hedge fund’s large-scale holdings of apartments in German cities, which it has bought up from city governments or, in some cases, from real estate firms. Fortress owns 110,000 apartments in Berlin, 47,000 in Dresden, 165,000 in Germany as a whole. Other hedge funds like Cerberus, and private equity firms like Terra Firma, have been doing the same thing since 2004. All in all, some 600,000 apartments have been privatized, while 3.3 million (the residences of about 10 million Germans) remain owned by city and state governments and other public groups and entities.

The Fortress Investment Group LLC, with $30 billion assets in its latest public claim (its declarations have been marked by sudden and mysterious changes in its statements of those assets) is run almost entirely by former bankers of the Lehman Brothers and Goldman Sachs Wall Street investment banks. Three of the top five of those executives have previously been principals of Black Rock Partners, the private equity firm behind the takeover of middle-class housing in Manhattan. And several of them have working links to UBS AG, the Swiss-based bank that lends to predatory takeovers worldwide, including those of the well-known “vulture capitalist” Wilbur Ross. They’re quite a group. But a very large amount of Fortress’s investments has been put into it by pension funds.

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