Big Financial Firms Grab the Burger Business

The owners of Burger King restaurants are not simply small business restaurateurs ⎯ they are the financiers at the center of the current financial crisis. Publicly traded Burger King Holdings Inc.'s (NYSE: BKC) largest owners are Texas Pacific Group (TPG), investment bank Goldman Sachs, and Bain Capital, with 11.2%, 10.3%, and 10.1% of outstanding shares, respectively.

In 2002, the three firms bought out Burger King and then relisted the company in 2006 in a $425 million IPO. In the process, the three firms bilked $448 million out of Burger King through management fees and dividends. While other investors now own shares of Burger King, the three firms still have representatives on the board who, along with Burger King's CEO, control the company's executive committee.

Outside the corporate headquarters, Burger King's restaurants are also far from "mom and pop" establishments. Burger King and its five largest franchisees may operate or control the property for as many as 39% of the chain's 7,512 restaurants, and other corporate franchisees (outside the top five) control hundreds more restaurants. Among these owners are private equity giant The Blackstone Group and Cerberus Capital Management, which, like Goldman Sachs, has received billions in bailouts from taxpayers.

Goldman Sachs Cashes In on the Crisis

Although major financial firms like Goldman Sachs contributed to the economic crisis, management of the bailout was handed over to Goldman Sachs alumni.

Treasury Secretary Hank Paulson, a former Goldman CEO, recruited Goldman staff to manage the Troubled Asset Relief Program (TARP), and staff were especially solicitous of the finance industry in administering the bailout. Allegedly, "federal regulators", most likely Treasury officials,notified "select banks" that the Treasury intended to distribute TARP funds through direct capital infusions even before telling key members of Congress and negotiated a template for bank capital infusions with Goldman Sachs that is considered to be "egregious" by some experts. According to Nobel-Prize winning economist Joseph Stiglitz , "Paulson said he had to make it attractive to banks, which is code for 'I'm going to give money away.'"

As a result, Goldman Sachs has received $10 billion in direct capital infusions and up to $45 billion in other forms of taxpayer backing with few strings attached. Yet instead of using the funds to shore up its capital base or expand lending, Goldman has issued its highest dividends to shareholders since 2003, shopped for acquisitions internationally, and lavished bonuses on the same financial personnel and staff who contributed to the crisis.

The bonuses, along with changes to the rules governing stock awards, have saved Goldman Sachs traders and executives from what the Wall Street Journal called "margin calls" on their lifestyle: "expensive homes, lavish getaways and other luxuries that were comfortably affordable when times were good."