While the past couple years have been tough for private equity firms, the problems at Cerberus Capital Management have been quite painful. After all, the firm got crushed on investments in companies like GMAC and Chrysler.

But this does not mean everything has been bad. For example, Cerberus has filed for a $100 million IPO of Tower Automotive.

This post was written by DailyFinance contributor Peter Cohan.

Wall Street has a short memory when it comes to pay. That's what came to mind when I saw a report saying that many big leveraged buyouts (LBOs) are in trouble -- four of the 10 biggest companies bought in leveraged buyouts have stopped paying back the money they borrowed. Nevertheless, Wall Street will pay itself record bonuses in 2009.

Unless my memory is failing me, it was only 14 months ago that Wall Street nearly went bankrupt. Without trillions of dollars in taxpayer money, it's highly unlikely that it would be in a position to pay itself $140 billion in bonuses this year.

Cerberus, the private equity fund that nearly ruined itself by making bad bets in Detroit, particularly on Chrysler, is considering taking its gun company interests public. According to The Wall Street Journal (subscription required), the firm "is in advanced preparations for an initial public offering of Freedom Group Inc." The company has about $900 million in sales.

The move may be a profitable one for Cerberus. Gun company Smith & Wesson (NASDAQ: SWHC) trades at just above $5, near the high end of its 52-week range. That gives the company a market cap of $300 million on sales of about $345 million. On a ratio-and-proportion basis, that would make Freedom worth close to $800 million.

For a company named after a mythical, multi-headed hound, Cerberus is definitely in the dog house with its investors. The huge private equity firm is being deserted by many of its key clients, continuing a trend of fund flight that has intensified in the past year. Several media outlets reported that 71% of the investors in the firm's two large funds want their capital returned. The money these clients have with Cerberus totals $5.5 billion, putting the New York-based investment manager in a tough position.

Steve Feinberg made a fortune in distressed investing during the early 1990s. So, when the financial system fell to pieces over the past couple years, it should have been a boon for his private equity firm, Cerberus.

Not this time. In fact, the New York Times has an extensive piece on the topic, covering Feinberg's folly on the buyout of Chrysler.

Yes, the deal was struck about two years ago, when the private equity market had reached its peak. Debt was easy to get. And, Feinberg thought that there would be lots of opportunities to slash costs (which is easier when a company is private).

Steve Feinberg made a fortune in distressed investing during the early 1990s. So, when the financial system fell to pieces over the past couple years, it should have boon for his private equity firm, Cerberus.

Not this time. In fact, the New York Times has an extensive piece on the topic, covering Feinberg's folly on the buyout of Chrysler.

Yes, the deal was struck about two years ago, when the private equity market had reached its peak. Debt was easy to get. And, Feinberg thought that there would be lots of opportunities to slash costs (which is easier when a company is private).

GMAC finally got its wish. It has been designated a bank under federal rules, the same rules that transformed Goldman Sachs (NYSE: GS) from being an investment house to being a commercial banking operation.

Now, like the other companies with the new designation, it can go, hat in hand, and beseech the Treasury to give it money. According to Reuters, "analysts estimated GMAC might be seeking loans of more than $6 billion." The government could also be asked to back new debt issues from the firm.

GMAC is in both the car loan and mortgage businesses. It may be a stretch to figure how it gets in under the commercial bank rule set up by the Fed. But, there is a more disturbing angle to the story. GMAC is majority owned by Cerberus, just as Chrysler is. The bailing out of Detroit is beginning to look like a bailing out of Cerberus, which by most estimates has over $25 billion under management.

Maybe tax payers should get a controlling ownership of the hedge fund that they are keeping afloat.

Douglas A. McIntyre is an editor at 247wallst.com.

Cerberus, the fund that owns the majority of Chrysler and has made other investments in Detroit, is blocking year-end withdrawals from one of its funds. According to Reuters, "Cerberus plans to suspend year-end withdrawals for up to one year, founder Stephen Feinberg said in a letter to the investors of the fund." The firm will allow investors to take 20% of their year-end withdrawals out in cash, but that's it.

Obviously, Cerberus is being badly hurt by its investment in Chrysler and may get none of that money back if the company goes bankrupt or a government investment wipes out the car firm's obligations to its parent.

That raises the question of how much trouble Cerberus is really in. It has $27 billion in assets under management but it has put money into GMAC which is having trouble due to car and home loans. It could lose part of that money as well.

Cutting withdrawals from its funds may be a signal that other Cerberus investments have gone south. If matters get worse, it may end up being one of those fund groups that simply ends up liquidating itself and sending investors cents on a dollar. In this environment that is happening a lot. The Cerberus investments in Detroit may turn out to be its undoing.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Cerberus, the fund that owns the majority of Chrysler and has made other investments in Detroit, is blocking year-end withdrawals from one of its funds. According to Reuters, "Cerberus plans to suspend year-end withdrawals for up to one year, founder Stephen Feinberg said in a letter to the investors of the fund." The firm will allow investors to take 20% of their year-end withdrawals out in cash, but that's it.

Obviously, Cerberus is being badly hurt by its investment in Chrysler and may get none of that money back if the company goes bankrupt or a government investment wipes out the car firm's obligations to its parent.

That raises the question of how much trouble Cerberus is really in. It has $27 billion in assets under management but it has put money into GMAC which is having trouble due to car and home loans. It could lose part of that money as well.

Cutting withdrawals from its funds may be a signal that other Cerberus investments have gone south. If matters get worse, it may end up being one of those fund groups that simply ends up liquidating itself and sending investors cents on a dollar. In this environment that is happening a lot. The Cerberus investments in Detroit may turn out to be its undoing.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Will our 43rd president help the auto industry fend off the threat of bankruptcy? No. Over the weekend, General Motors Corp. (NYSE: GM) and Chrysler owner, Cerberus Capital, tried to get $10 billion of the $810 billion bank bailout bill to help finance their merger. Yesterday, Bush turned down the request. While Barack Obama supports help for the auto industry, John McCain does not. And since no reason was given for the turn down, we are free to draw our own conclusions for Bush's decision.

I think the case for not bailing out the auto industry has been severely weakened by the decision to bail out Wall Street. After all, if it's OK to give our money to the executives of big banks that got us into the financial crisis so they can pay themselves multi-million bonuses, there is no meaningful reason why everyone should not get a bailout.

I think that GM and Chrysler got themselves into their current mess by continuing to push gas guzzling, but highly profitable, minivans and SUVs rather than investing the profits in fuel efficient vehicles. And the industry has already gotten approval for $25 billion in loans to pay for fuel efficient vehicles that it should have built with profits earned during the boom years.

Chrysler has elected to suspend talks with Renault and Nissan about a three-way global auto company hook-up that would have saved the American company personnel and production costs. Chrysler will stake its future on a deal with General Motors (NYSE: GM), which means it may have no future at all.

According to The Wall Street Journal (subscription required), Chrysler's controlling shareholder, Cerberus, wants to put all of its energy into the deal it believes is most likely to close.

The decision is hard to understand. GM has indicated that it cannot finish a deal without $10 billion from the Fed to handle worker severance and costs associated with a consolidation of the two companies. It appears that the Administration has turned this down and punted it to the next president.

On paper, the GM deal makes more sense. A buyout would create one U.S. company with about 35% of the American market. A total of 30,000 or 40,000 jobs could be taken out.

What almost every analysts is asking is why Chrysler would tie its future to GM, which could run low on cash itself sometime around the middle of next year.

The answer to the question is simple. No one wants Chrysler except, possibly, GM. The number three U.S. car company is worth more in pieces than as a whole. That would give vultures an opportunity to sift through the wreckage for the best pieces and avoid taking on any of the company's liabilities or a battle with Cerberus over who owns what.

Douglas A. McIntyre is an editor at 247wallst.com.

Since filing for bankruptcy in July, Mervyn's has been closing stores and fighting for survival in a much-smaller form. But now the company has announced that it will close its 149 remaining stores, with going out of business sales set to begin shortly.

In a press release, CEO John Goodman announced that "We are disappointed with this outcome but the Company's declining liquidity position and the extremely challenging retail environment, together with the fact that we have exhausted all other possibilities, requires that we take this action."

The company was taken private by a group including Cerberus and Sun Capital back in 2004, and that deal is now the subject of considerable controversy. Last month, the bankrupt company sued its former owners, alleging that the deal was structured to separate the operations from the real estate, and that the private equity owners then proceeded to sell real estate, pay themselves dividends, jack up lease payments, and essentially transfer value from the chain to the private equity buyers.

It remains to be seen what will come of that lawsuit but, if it goes to trial, it will be an interesting case that looks at the role of private equity in the financial world.

GMAC, the former lending arm of General Motors Corp. (NYSE: GM) has hedge fund Cerberus as its largest owner. GM still has a piece. Now, the financial firm has begun to undermine the fortunes of the car company that created it to give car loans to its customers.

According to The Wall Street Journal (subscription required), "GMAC LLC, the big home and auto financing company, this week began restricting new loans to the most credit-worthy buyers after an attempt to raise new funds failed. The move threatens to crimp General Motors Corp.'s U.S. sales, forcing the struggling auto maker to push its potential buyers to other lenders." Those "other lenders" are mostly banks, who do not want to give car purchasers any money either.

GMAC's problems are, to a large extent, because of its mortgage lending operation, but that hardly matters to GM, which is losing $1 billion a month on its North American operations. GM's unit sales are running off 20% or better compared with last year.

The Wall Street Journal reported that (subscription required) General Motors (NYSE: GM) had has merger talks with Ford (NYSE: F) as well as Chrysler. The Ford deal would make more sense. Together, the two largest car companies would have 36% of the American market. There would be no reason for the needs of a private equity firm, in the case Chrysler owner Cerberus, to be served.

While many people do not realize it, the Fed can make capital available to institutions outside the banking system if it believes that their problems could have a dire impact on the economy. By most measures, Ford and GM have enough money to make it to the second half of next year. The Fed could provide capital to stretch that well into 2010 when many analysts think that they worldwide auto industry will begin to recover.

While there may not be huge savings in putting the two largest U.S. car companies together, they could improve margins by closing some of their poorest performing brands.

Better that the government provide capital to one combined company than two smaller ones.

Douglas A. McIntyre is an editor at 247wall st.com.