Wall Street Comes to Fayette: Update 4

Hey there! Because I can't let it go, here's another short update on the saga of First Brands, private equity, the private lending business and what all that means for towns. I invite completists to go back to the first post, about little Fayette, Ohio. (I don't really expect anybody to do this, but I'm a dog with a bone when it comes to this stuff.)

This past week, news broke that First Brands, the fraud-ridden umbrella company under which a number of auto-related names were glommed together by Cleveland-based financiers supported by Wall Street firms lending an ungodly amount of money via private lending, was selling its most famous brand names, like Fram, to PGI Northstar, LLC (Premium Guard). The price, $25 million, is a low-ball bargain.

PGI is an investment of Trive Capital, a Dallas-based private equity firm. A few years ago, Trive/Premium Guard, bought out another auto aftermarket company, IPC Global Solutions (everything in business is now a "solution"). IPC distributed overseas-made parts. It had a big distribution center in Grove City, Ohio, just outside of Columbus.

With me so far?

Meanwhile, the private lending industry is collapsing, sending chills through financial markets, as if the markets didn't have enough to worry about already. It's all a big mess, with indictments and bankruptcy court. Lawyers are going to make a lot of money. Communities have been shafted.

I would love for you to read this excellent American Prospect story by my friend Maureen Tkacik and David Dayen. They discuss the First Brands debacle and go deep into PE's new strategies for reaping windfalls. Yes, it gets into the details, so it's not an easy read, especially if you're not familiar with that world, and I know readers sometimes recoil (Glass House reader to me at a bookstore event: "I loved your book, but the finance stuff gave me a headache"). Mo's good at this, though, and pulls no punches.

Why do I harp on this stuff? Because so many of us still believe the capitalism that exists today is the same kind of capitalism that existed in the 1940s and 1950s when companies were integrated into towns, and the executives lived there, and everybody could count on them to be there tomorrow, a time when company names made sense. "IPC Global Solutions" and "PGI Northstar LLC" are not Fram, or Autolite. They are generic sounding, meant to belong to no place and nobody. They exist in a new capitalist world divorced from people you know. They are placeless "vehicles" and "platforms" for cash extraction free of pride and meaning.

I just don't think that's healthy for our society, our government, our communities.