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Tom Barrack rakes the ashes

By Laurie Bennett

December 7, 2010 at 9:37am
The bailout: who profited?

Thomas Barrack Jr. has a talent for spotting business opportunities in high-profile disasters.

During the S&L crisis, he snapped up bad loans at bargain prices from the FDIC.

When Michael Jackson, fighting off creditors, vowed never to return to Neverland after his acquittal on child-molestation charges, one of Barrack’s real estate companies bought the property.

When photographer Annie Leibovitz dug herself into a multi-million-dollar hole, another Barrack company bailed her out with a $10.1 million investment in a $30.4 million loan.

After the 2008 financial meltdown, Barrack again went to the FDIC. He also invested in a government program aimed at resuscitating consumer lending.

Thomas Barrack Jr.
Thomas Barrack Jr.

The Muckety map above shows Barrack’s investment in an FDIC portfolio of distressed loans, as well as a Federal Reserve program called Term Asset-Backed Securities Loan Facility, or TALF.

The tangle at the bottom - a sort of cat’s cradle of related interests - shows investments by several companies that last year obtained a low-interest TALF loan (3.64 percent) of $31.9 million. Colony Financial forecasts a cash yield of 15.7 percent.

In July, the FDIC awarded another Colony company a 40-percent stake in a $1.85 billion portfolio of commercial real estate loans. Colony paid about 59 cents on the dollar.

The grandson of Lebanese immigrants, son of a grocer, Barrack attended the University of Southern California, obtained a law degree, then honed his negotiating skills in Saudi Arabia, where he reviewed business deals for two young princes.

He returned to the U.S. and put the knowledge to work in the California real estate market. Some of those dealings would later bring unwanted attention. Barrack helped find a buyer for a home owned by Ed Meese, who would later become attorney general.

Meese’s personal finances came under scrutiny because of questionable dealings with Great American, an S&L that was seized by government regulators. Investigators were particularly interested in how many people involved in Meese’s home loans and sale were later named to government posts.

The president of Great American became a delegate to the United Nations. Ed Gray, Great American’s PR man and a friend of Ronald Reagan, became chairman of the Federal Home Loan Bank Board. And Barrack became deputy undersecretary of the Interior.

He didn’t stay long. Barrack left Washington in 1983, did a brief stint with E.F. Hutton in New York, developed real estate in Canada, then helped manage investments for Robert M. Bass. He founded Colony Capital in 1991.

His face appeared on the cover of Fortune in 2005, with the tagline, “The World’s Greatest Real-Estate Investor.”

Forbes ranks him 332 among the 400 richest Americans, with an estimated wealth of $1.2 billion.

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