American International Group (NYSE: AIG), once the world's largest insurer, is selling assets outside the U.S. to repay a government bailout. The Carlyle Group, KKR, JC Flowers, and other U.S. private equity firms and Asian financial groups are reported to be interested in AIG's Taiwanese unit Nan Shan Life Insurance Co.

"Everyone hopes this is going to be a fire sale as AIG is in a difficult situation," said a local partner of Standard & Poor's.

In what could be the most watched private equity deal of the year, a consortium of buyout firms led by billionaire investor Wilbur L. Ross has set its sights on BankUnited Financial Corp. (NASDAQ: BKUNA), says the Wall Street Journal (subscription required). The consortium includes Carlyle Group and Blackstone Group (NYSE: BX).

Earlier this year, federal regulators declared that the Florida-based lender was "critically undercapitalized" and demanded that it find a buyer or raise new capital. While regulators have traditionally favored other lenders in sales of banks, if Ross's group is successful, it would not only be one of the largest acquisitions in the financial-services sector made by private equity, but could also signal a shift in the government's attitude toward private-equity buyers of banks.

In the middle of 2007, the private equity industry started to crumble as the credit crunch shocked the U.S. financial system. Since then, it's been particularly tough for dealmakers.

Yet, according to a cover story in BusinessWeek, the good days may be here again. In fact, private equity may even help the economy get out of its funk.

And, there is historical precedent. Back in the early 1990s, private equity funds were a key source of restructuring and capital infusions. Interestingly enough, some of the players included the Blackstone Group (NYSE: BX), Carlyle and Apollo (yes, these are now some of the largest funds in the world).

But there's a big difference: Private equity funds now have about $1 trillion in capital to put to work.

When it comes to private equity firms and unions, the mix is usually explosive. Private equity firms like to fire people, right?

Well, in the depressed global economy, things can get topsy-turvy.

Just take a recent piece in TheHill.com. The co-authors include Carlyle co-founder David M. Rubenstein and United Steelworkers' President Leo W. Gerard.

Yes, they are proposing a solution for the current economic turmoil. Basically, they think it's critical that the focus be on manufacturing.

This week, some of the top veterans in private equity -- TPG's David Bonderman, Carlyle's David Rubenstein, and KKR's George Roberts -- got together at a conference in Hong Kong. And, all in all, it was fairly depressing (hey, I guess that's what happens when you lose billions and billions of dollars).

Take Bonderman. He thinks the downturn will be protracted, calling it an L-shaped recession (the more common description is a V-shaped recession, which means there is a strong snapback). In fact, he thinks U.S. unemployment will hit 10% or so.

Then again, keep in mind that Bonderman lost about $1.3 billion on his six month investment in Washington Mutual.

Despite all this, Bonderman still has an appetite for investments. For example, he's focusing on the debt securities from hedge funds. Because of massive redemptions, the prices are at distressed levels.

Rubenstein also gave a grim presentation (he thinks the downturn can last several years). But, he is still bullish on some opportunities, especially in Asia. For example, he thinks China offers some compelling valuations and that the country may become more open to outside investments.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Streetsmart Guide to Short Selling: Techniques the Pros Use to Profit in Any Market. He is also the founder of BizEquity, a valuation website.

About a year ago, the rage in private equity was the so-called megabuyout. It seemed like no company was immune. There was even talk of $100 billion dollar deals.

Of course, the credit crunch ended the megabuyout. In fact, it ended most of the activity for private equity folks.

Yet, according to the co-founder of the Carlyle Group, David Rubenstein, things are perking up [subscription required]. His firm – like other veterans, such as The Blackstone Group (NYSE: BX) – understands market cycles. After all, these players have dealt with variety of credit crunches, such as in 1991-1992, 1998 and 2001-2002.

So, Rubenstein predicts we'll see a pick-up in deals over the next few months. Although, the deals are likely to range from $2 billion to $4 billion -- with less debt. And expect more foreign deals.

Funny enough, Rubenstein seems to be leading the charge with its recently announced a $2.54 billion deal for a majority stake in Booz Allen Hamilton.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

The Carlyle Group, which is a top private equity firm, got its start by making deals in the government and defense sectors (back in the 1980s). In fact, its co-founders have extensive federal government experience.

Well, the firm is going back to the future. That is, Carlyle announced a $2.54 billion purchase of Booz Allen's government consultancy (for a majority stake). Apparently, both sides have been working on the transaction since the beginning of the year.

The Booz Allen unit has roughly 18,000 employees and has mega clients, such as the NSA, Department of Homeland Security, the World Bank and the Department of Defense. Essentially, the unit had little synergy with the core business of Booz Allen, which is focused on commercial management consulting. But, of course, there should be lots of strategic value for Carlyle's portfolio of businesses.

And, the Booz Allen government unit has been a strong business, especially in light of the rise of global terrorism.

Something else: this is yet another sign that the buyout market is beginning to improve.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Stock futures were lower early morning, ahead of inflation data coming out an hour before the opening bell. It is likely that futures will continue to drift this way and that until the data is reported and only then will we see a clear direction of the session ahead. A speech from Federal Reserve Chairman Ben Bernanke could affect sentiment as well.

On Thursday, stocks started their journey with deep losses due to Carlyle Capital fund announcing it's near collapse, but later changed direction to finish the day on the positive side. The Dow industrials ended Thursday up 35 points, or 0.29%, the Nasdaq Composite rose 19 points, or 0.88%, and the S&P 500 advanced 6 points, or 0.51%.

The economic calendar today is not busy, but it is meaningful.

• At 8:30 a.m. EDT, February consumer price index will be reported. This closely watched inflation indicator is expected to show inflation rose 0.3% in February, lower that the 0.4% rise in January. Similarly, core CPI, which excludes the more volatile food and energy prices, likely increased by 0.2%, down from January's 0.3%. Any big surprises that may show inflation at the consumer level is much higher than expected (it is already higher than the Fed's "comfort zone") could put a crimp on the Fed's ability to cut interest rates when it meets next Tuesday. The markets could then have a strong reaction as such rate cuts have been widely expected.
• Then, at 10:00 a.m., the March preliminary University of Michigan's consumer confidence index is set to be released. Economists expect the to drop to 69.5 from 70.8, according to Briefing.com.
• At 12:30 p.m., Fed chief Bernanke is to speak on sustainable homeownership in Washington, and investors will likely tune in hoping to hear more about the economy and the growing threat of inflation.

TheStreet.com's Jim Cramer says we have to see when the buyers return.

Can't get your arms around these fears. The Carlyle fear -- that's the "too much leverage in the system ... who knows what people are really borrowing" fear; the Bear (NYSE: BSC) (Cramer's Take) fear -- the "legitimate worry about counterparty risk that can't be stopped until Bear sells itself or goes and gets a 20% investor so it has cash" fear; and the dollar decline fear -- the "who is still stupid enough to have on big trades that lever that currency?" fear.

All of these, in the end, are about the same thing: leverage. The reckless way that hedge funds borrowed and brokers lent in order to make up for low interest rates and the insatiable desire to have a seemingly low-risk way to make money on a monthly basis.

What's discouraging is that the Fed's actions on Monday were actually meant to address some of these problems, but the actions are oblique, meaning that they don't get to the heart of things -- to put money in and take bad paper out. Not borrow bad paper but take it out.

U.S. stock futures were significantly lower this morning, indicating U.S. stock market could start the day with declines. Following the plummet of global markets, the record high prices for oil with record low dollar, investors seemed nervous when hearing that Carlye fund is close to collapse. If Wall Street got a recent boost from the Federal Reserve's actions to improve liquidity, that too now seems to have a limited impact.

U.S. stocks couldn't hold on to Tuesday's rally and dropped on Wednesday. The Dow Jones Industrial Average fell 46 points, or 0.38%, the S&P 500 lost 11 points, or 0.90%, and the Nasdaq Composite lost 11 points, or 0.53%.

Data on several economic indicators will be reported today.

• At 8:30 a.m. EDT, data on weekly jobless claims, February import and export prices and February retail sales will all be released. Retail sales in the U.S. likely cooled in February and increased a paltry 0.2% according to Bloomberg due to rising fuel bills and a slump in hiring, which means claims probably rose. Excluding autos, retails sales are estimates to have risen 0.2% as well. It will also be interesting to see the impact of the dollar on the cost of imported goods. Economists predict a 0.8% rise in February.
• Then, at 10:00 a.m., January business inventories data are due.

Meanwhile, RealtyTrac Inc. reported that nearly 60% more U.S. homes faced foreclosure in February than in the same month last year, with Nevada, California and Florida showing the highest foreclosure rates.

It's a rough day for private equity. Carlyle is having a "crisis talk" with its investors because of the implosion of one of its debt funds.

Oh, and the Blackstone Group LP (NYSE: BX) announced its earnings report. There was a net loss of $170 million, which compares to a net gain of $1.18 billion in the same period a year ago. Unfortunately, the firm has little visibility as to when things will improve.

Simply put, Wall Street is not only concerned about the credit crunch – which means that fewer deals will get done – but also the stability of prior transactions. In other words, will some of them unwind and plunge into bankruptcy?

TheStreet.com's Jim Cramer says this default should send shudders through every institution with a credit line.

Sure I was hoping it wouldn't come to this, but right now we don't even have enough money in the system to buy one asset and sell another and take advantage of the differences.

I know you could argue that who cares, people shouldn't be levering up like that anyway. All people should be able to do is borrow a little bit against their collateral and do nothing else.

But we have trillions of dollars invested in a system where we own one asset and we bet another asset against it, either as an arbitrage or a way to pick up extra interest. A lot of the mortgage REITs that you see going under, and have gone under, were companies that existed to exploit differences in residential mortgage prices. They took on some credit risk, meaning that the assets they bought weren't rock solid but had been as long as housing didn't depreciate too much, but they had good steady businesses.

One of the pioneers of private equity is The Carlyle Group. The firm has minted billions and is a major force in finance, managing about $76 billion.

But lately things have cooled off. For example, Carlyle's Blue Wave hedge fund is down 9.3% for the year (this is according to a piece on Bloomberg.com). The problem was exposure to pesky mortgage investments.

So it should be no surprise that Carlyle's co-founder, David Rubenstein, is kind of glum. He recently commiserated for the folks at the American Enterprise Institute (there was also coverage in TheDeal.com, which is a paid publication).

Rubenstein thinks that private equity may be facing some tough times, and looks at the parallels of the conglomerates of the 1960s.

It's a pretty apt analogy. After all, as private equity firms get bigger and bigger, they look like bloated entities of disparate business units. In other words, might there be lots of complications in managing all this?

I think so.

Besides, the other big issue is finding liquidity for these private companies. Keep in mind that the IPO market has yet to recover from its boom days of the 1990s. And, M&A appears to be tailing off. Oh, and with the credit crunch, how will private equity funds get financing for deals?

So far, there aren't many clear answers. Or, at least Rubenstein isn't giving us any ideas so far.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

While driving on LA freeways, I sometimes wonder: how strong are these structures? Were they meant to handle the huge amounts of traffic?

I hope so. But I also realize that throughout the US the infrastructure is getting old and needs replacement.

Well, the private equity folks are seeing opportunity. For example, this week, The Carlyle Group announced its Carlyle Infrastructure Partners fund, which has about $1.15 billion under management.

The geographic focus will be on the US as well as Canada, and Carlyle will look to invest in projects for transportation and water.

Actually, this is kind of a new area for private equity and as a result, Carlyle has hired 14 professionals to manage the fund.

More importantly, the opportunity looks vast. After all, Carlyle projects that the US will need to spend $1 trillion on infrastructure over the next five years.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

As private equity firms get bigger and bigger, there is a need to expand into foreign markets. But this is never easy and requires lots of resources and political savvy. So, to help things along, why not buy a foreign bank?

That's the thinking of Carlyle's latest deal: a $655.9 investment in Ta Chong Bank, which is based in Taiwan. Due to Taiwanese laws, Carlyle's equity stake is likely to be no more than 25%. As a result, Carlyle will bring along a variety of other financial backers.

The Taiwanese banking sector has been hit hard by a credit crunch. But it looks like things are improving. And it appears that the Taiwanese banking sector is ripe for consolidation. So, by investing in Ta Chong, Carlyle should be poised to be one of the consolidators.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.