The collapse of the credit markets over the last year has hit more than just the homebuilding and mortgage sectors of the economy. As interest rates increased, private equity, or “PE,” an important new form of financial capital, was also rocked on its heels.

PE funds have grown substantially in size as well as political and financial significance in the last decade. The Blackstone Group, for example, one of a handful of top-tier PE funds, recently announced a takeover of the Hilton Hotels Corporation for $26 billion. Cerberus Capital, another major PE player, surprised many when it announced plans to buy the troubled Chrysler Group from DaimlerChrysler—a pioneering venture into the top ranks of industrial America. Kohlberg Kravis Roberts & Co. (KKR), one of the oldest PE funds, currently owns such a large number of independent businesses that it is, indirectly, the second largest employer in America, with 560,000 employees, twice as many as General Motors, ahead of McDonald’...

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FOOTNOTES:

• [1] This author advised the AFL-CIO on the Blackstone IPO.