The financial crisis appears to be creating some jobs for at least one group of people – former banking executives.

As private equity firms turn their attention to banks, they are seeking out retired chiefs and other senior executives with banking experience to lead their investments and run the banks they buy. 

Besides their operational experience, these executives bring to the table a crucial quality that can sometimes make or break a group’s bid to take over a bank – street cred with U.S. banking regulators.

Credible management for the banks they oversee is one of the key concerns of regulators, who worry about the health of the industry and separation of banking and commerce. It becomes all the more crucial in the case of private equity groups that don’t already own banks and so have no recent track record for regulators to rely on.

John Kanas, a veteran of the banking industry and former head of North Fork Bank, made such a comeback with a successful bid for Florida’s BankUnited.

Kanas leads the management team for BankUnited, which was bought by a consortium of private equity investors including WL Ross, Carlyle and Blackstone. He was tapped early last year by Ross to explore just such a possibility.

In another deal expected to be announced Thursday, Fortress Investment, Crestview Partners and Lightyear Capital plan to install Gene Taylor, a former Bank of America executive, as CEO after injecting $800 million into Florida’s First Southern, according to the Financial Times.

As the banking landscape is redrawn, it wouldn’t be a surprise then if other old faces end up in new roles before this crisis is over.

Middle-market investment bank Robert W. Baird & Co still finds reason for optimism, despite global M&A volume being down 36 percent this year. 

The middle-market is also down this year, with a large fall-off in April, Baird wrote. Middle-market deal activity dropped 33.1 percent and dollar volume was down 54.8 percent in the month.

But Baird still sees a light at the end of the tunnel.

“Although signals are still mixed, continued positive momentum in the credit and equity markets coupled with a sense that the world economies have bottomed could be the catalyst for a revival of M&A activity in Q3 2009,” the firm writes in its monthly M&A report released on Thursday.

The full report is below.

Baird M&A update (May 2009)

Private equity firm The Carlyle Group gave a blunt assessment of 2008, when a financial crisis pulled three of its portfolio companies — German auto parts maker Edscha, energy company SemGroup
and Hawaiian Telcom — into bankruptcy protection or administration.
    
In its annual report, Carlyle told investors “the year 2008 was a humbling experience for us and most of the financial services industry. After several years of unprecedented growth, product innovation, geographic expansion, capital deployment and investment gains, our world changed dramatically.”
    
Going forward, Carlyle takes a cautious view.
    
“In 2008, the financial landscape change — and it will remain changed for the foreseeable future. Operating conditions for our portfolio companies will remain challenging. Transactions will be fewer and smaller. More equity will be required and debt terms will be less favorable. And hold periods will increase while returns will decrease.”

Click here to see the full Carlyle Group annual report.

What’s surprising: Talks for General Motors Corp’s Opel failed to yield a deal.

What’s not-so-surprising: GM needs cash. Again.

Talks that ran all through Wednesday night to sell Opel to one of four final bidders narrowed the race to two but failed in sealing a deal. German ministers, emerging in the early hours of Thursday morning after more than 12 hours of talks, blamed GM and the U.S. Treasury for the failure.

Why? Because GM, the ministers say, shocked participants by announcing it needed 300 million euros ($415 million) more in short-term cash from the German government to  keep Opel operating.

Italian automaker Fiat and Canadian auto parts supplier Magna remain in the race to buy Opel. Belgian private equity firm RHJ International is out. China’s Beijing Automotive Industry Corp was not present at the meeting but the option for it to return with a more detailed offer remained open.

Meanwhile, GM, which has lost $82 billion in the past four years and has received $19.4 billion in government funding since the beginning of this year.  It has also said it would likely need $7.6 billion from the U.S. Treasury after June 1. Buy GM cars or not, they sure are getting your money.

Opel remains the biggest story of the day. Marathon talks to shield it from a looming bankruptcy ended with no results, a deal is now expected by Friday. In another bankruptcy-related story, Nortel Networks is looking for a buyer for its majority stake in a South Korean joint venture with LG Electronics. For today’s top headlines on deals, click here.

This is what we found of interest in the newspapers:

* Fortress Investment Group, a listed private equity and hedge fund company, is nearing an agreement to inject $800 million in fresh capital into First Southern, a Florida bank, with other investors, the Financial Times said.

* Eircom Holdings has started detailed discussions with three potential bidders to sell its 57 percent stake in Eircom, the former Irish state-owned telecoms company, the Financial Times said.

* Citigroup Inc is in early negotiations with the U.S. Securities and Exchange Commission (SEC) to settle a probe into whether it misled investors by not properly disclosing its  troubled mortgage assets, the Wall Street Journal said.  Read a Reuters story here.

* Reinsurer Swiss Re is in talks with India’s Religare Enterprises to form a joint venture health insurance company in India, the Economic Times said on Thursday. Reuters story here.

* Investment bank Morgan Stanley has presented a recapitalisation proposal to Australian miner OZ Minerals Ltd, giving it an alternative to its planned takeover by China’s Minmetals, the Australian Financial Review said on Thursday. Read a Reuters story here.