Protect investors or 'our gravy train will stop'

June 02, 2009

We've already written plenty on this blog about Tim Blixseth, Credit Suisse and the Yellowstone Club debacle, so this article from Fortune -- which reveals that eight high-end developments financed by CS are currently in some sort of financial trouble -- might seem like familiar territory to some of you.

But the reporting on the subject is interesting, with its focus on the events of Yellowstone, and this passage caught our eye:

"The portfolio of loans was the brainchild of David Miller, a Managing Director at Credit Suisse, who was co-head of the U.S. capital markets business within the syndicated loan group. When Credit Suisse made the loans, it got paid millions in fees and then syndicated them all off to investors, who will be fortunate to get back pennies on the dollar during the various bankruptcy proceedings. (Credit Suisse currently has a minimal exposure to the original loans.)

Miller was well aware of the golden goose he had on his hands. In an August 2005 email to a colleague, Miller wrote, '[T]hese are aggressive deals and it is in all of our best interests, that the investors are protected, because if one of them should blow up, you will see these investors pull out of this land development mkt [market] and our gravy train will stop.' "

-- G.R.