Fed Head

"A YEAR ago this week, Henry R. Kravis, the legendary buyout mogul who
invented the modern-day private equity industry, gave a rare speech to a group
of investors in a ballroom of the Waldorf-Astoria. In describing how far the
business had come, Mr. Kravis, a slight man with a dry wit, recounted how
difficult it had been for him to raise $355 million to buy one of his first
companies, Houdaille Industries, in 1979."

""The availability of financing was our biggest challenge," he said.
"Literally, we had to add up the potential capital sources at that time, which
consisted of several banks and insurance companies, and one by one go out and
raise the money."""

"Today, he has the opposite problem. Investors have been throwing money
at the red-hot leveraged-buyout industry - so much so that Mr. Kravis now has to
turn away some of them, rejecting their cash as a mere
"commodity.""...

"The trillion-dollar question is whether these shopaholics are setting
themselves up for a giant fall. If the market begins to show even the faintest
signs of strain, this bubble may pop, say many financial analysts as well as
private equity players themselves. If that happens, the leveraged-buyout boom
and bust that Michael Milken led in the 1980's could end up looking like a dress
rehearsal for the mess to come. As Mr. Kravis said during his speech:
"Unfortunately, there is a flip side to having access to plentiful capital. It
means that too many people without experience in building businesses have too
much money.""