CARLYLE CAPITAL FUND COLLAPSES UNDER STRAINS OF LEVERAGE

It can be difficult to make sense of the collapse of a private equity fund, but when you look behind the curtains and see that there really was never much to see in terms of equity, it can cause one to question the sanity of the financial markets. For example, for every $1 of equity Carlyle Capital had, it borrowed $31 additional to invest. That meant if the investments were good, everyone was happy - loans were repaid, investors made money, and company executives made fat bonuses; however, when markets and investments soured, the fund was destined to collapse. Perhaps it is time to step in and begin some serious regulation of these private investment vehicles as it isn't only the investors in those funds that get burned when they go bad. Instead, a ripple effect is felt throughout the global financial markets and everyone shares a small piece of the loss. Sadly, this is likely one of many failures to come.

For more on Carlyle Capital's implosion, read this article at The New York Times.