who did the heavy lifting on this." [fn 5 ]
According to Jonathan Bush, George Bush's brother and the finance chiarman of the New York
State Republican Party, Henry Kravis was "very helpful to President Bush in fundraisers."
According to brother Jonathan, Kravis "admired the President. And also, significantly, on a personal
level, his father, Ray, and [George Bush] were friends from way back. And that meant a lot to
Henry. He wanted to be part of that."
Henry Kravis had married the former Janey Smith of Kirksville, Missouri, who now called herself
Carolyne Roehm. Carolyne Roehm had been introduced into New York Nouvelle Society by Oscar
de la Renta. She and Henry Kravis cultivated a frenetically sybaritic lifestyle in the company of a
social circle that included Bush's patron Henry Kissinger, American Express Chairman JimRobinson and his wife Linda, Donald and Ivana Trump, Anne Bass, corporate raider Saul
Steinberg, cosmetics magnate Ronald Lauder, and Bush's finance operative Robert Mosbacher and
his wife Georgette. It was very much a Bushman crowd. Kravis and his "trophy wife" lived in a
Park Avenue apartment large enough to be a Hollywood sound stage, and also had a 270 acre estate
in Weatherstone, ConneRegister, has nine fireplaces. Henry and Carolyne added a $7 million, six-building, 42,000 scticut. The palatial house there, which is listed in the National Historicquare (^)
foot "farm complex" for their seven horses. This was Henry Kravis, chief stoker of the bonfire of
the vanities, celebrated by Vice President Dan Quayle as the New York Republican Party Man of
the Year.
It was to such an apostle of usury that George Bush turned for advice on public policy in economics
and finance. According to Kravis, Bush "writes me handwritten notes all the time and he calls me
and stuff, and we talk." The talk concerned what the US government should do in areas of
immediate interest to Kravis: "We talked on corporate debt--this was going back a few years--and
what that meant to the private sector," said Kravis.
Henry Kravis certainly knows all about debt. The 1980's witnessed the triumph of debt over equity,
with a tenfold increase in total corporate debt during the decade, while production, productive
capacity, and unemployment stagnated and declined. One of the principal ways in which this debt
was loaded onto a shrinking producassisted leveraaged buyout, of which Henry Kravis and his firm were the leading practitioners. tive base was through the technique of the hostile, junk-bond
The economist Franco Modigliani had written in the 1950's about the theoretical debt limits of
corporations. Small scale leveraged buyouts were pioneered by Kohlberg during the late 1970's. In
its final form, the technique looked something like this: Corporacompanies that would be worth more than their current stock price if they were broken up and soldte raiders looked around for (^)
off. Using money borrowed from a number of sources, the raider would make a tender offer (once
again, a la Jimmy Gammell in the Liedkte United Gas buyout) or otherwise secure a majority of the
shares. Often all outstanding shares in the company would be bought up, taking the company
private, with ownership residing in a small group of fiwith an immense amount of new debt, often in the form of high-yield, high-risk sunbordinanciers. The company would end up saddlednated debt
certificates called junk bonds. The risk on these was high since, if the company were to go bankrupt
and be auctioned off, the holders of the junk bonds would be the last to get any compensation.
Often, the first move of the raider after seizing control of the company and forcing out its existingmanagement would be to sell off the parts of the firm that produced the least cash-flow, since
enhanced cash flow was imperative to start paying the new debt. Proceeds from these sales could
also be used to pay down some of the initial debt, but this process inevitably meant jobs destroyed
and production diminished.