Ted Forstmann

A brief note about the passing Sunday of financier Theodore Forstmann. Mr. Forstmann was a founder of Forstmann, Little and Company in the late 1970s. The firm was a pioneer of the so-called leveraged buyout, or LBO, a practice of issuing debt with which to buy up whole companies. It was a precursor to the active "private equity" transactions of recent years.

Ways of the World remembers Mr. Forstmann, who died of brain cancer at age 71, because he did this well, made good use of the money generated and was not in it for the celebrity. Several of the firm's late transactions during the technology bubble around 2000 resulted in losses, but generally, the companies involved and their managements were markedly improved through the shake-ups that the LBO actions brought about.

So much bad publicity has accrued recently to Wall Street types and to the abuse of debt and leverage, that we really do need to highlight someone like Mr. Forstmann. As in our critical commentary below about recent U.S. Congress deficiencies, the positive sentiments about Mr. Forstmann come from press at both ends of the political spectrum. We found information in the New York Times and we cite in particular an editorial today in the Wall Street Journal which documents Forstmann's work with underprivileged children. He founded the Children's Scholarship Fund with $50 million of his own money and has raised nearly $500 million all together. The fund provides private school educations and has served 123,000 children with affiliate organizations in 33 states.

To quote the Journal: "Ted Forstmann lived a life of purpose that showed how entrepreneurs who succeed both create wealth and spread it around in ways that enrich us all."