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).

One of the most common complaints about private equity companies (and activist investors, corporate raiders, etc.) is that their relentless focus on making a quick profit results in the looting of companies, job losses, and so on.

That theory will be tested in court: Mervyn's LLC has sued its former private-equity owners -- including Cerberus and Sun Capital -- alleging that their profiteering tactics led to the chain's bankruptcy. When the $1.26 billion deal was consummated in 2004, The Wall Street Journal reports that (subscription required) "the deal was structured as two separate transactions -- one for the retailer and a second one for the retailer's real estate. This complicated structure, the suit alleges, enriched the private-equity firms while leaving the retail operations insolvent."

The firms then sold off real estate, paid themselves dividends, jacked up lease payments, and essentially transferred value from the chain to the private equity buyers, according to the lawsuit.

This will be a must-follow case -- assuming it isn't settled quickly and confidentially -- for those looking to understand the larger effects of buyout shops. I'm skeptical of the notion that private equity firms destroy companies and if that was indeed the case with Mervyn's, it may have been a result of the complex structure and self-dealing.

In most cases however, there is little money to be made bankrupting something for which you pay hundreds of millions -- or billions.

Despite the beating it has taken in Chrysler, private equity fund Cerberus has about $7 billion on the sidelines to put into bank assets, many of which are going for a fraction of their face value.

One expert commented in The New York Post "I think what you're going to see is the deep- value buyers coming in to get $1 for 50 cents," said Rick Maples co-head of in vestment banking and head of the financial institutions group at boutique investment firm Stifel Nicolaus.

In a perverse way it is good news for banks. At least someone will buy something from them, which should raise the value of their troubled assets over time.

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

• The Alliance Data Systems Corp. (NYSE: ADS) buyout from The Blackstone Group, LP (NYSE: BX)
• SLM Corp. (NYSE: SLM), or Sallie Mae, and J.C. Flowers
• United Rentals Inc. (NYSE: URI) buyout from Cerberus

GMAC, in which GM (NYSE:GM) sold a majority stake to Cerberus, posted another big loss. In the fourth quarter, the red ink flowed and hit $724 million.

According to Bloomberg "GMAC said it's talking to buyers for parts of the Residential Capital mortgage unit, which recorded a $921 million quarterly loss.". Moody's has downgraded the ResCap senior debt.

By spending time in Detroit, Cerberus has managed to get ownership of a car company, Chrysler, just before what may be the weakest year in domestic vehicle sales in over a decade. And, in ResCap it has picked up a mortgage operation which is being hurt by the same delinquency problems that are roiling the industry.

As mortgage companies face a difficult year, the question becomes whether Cerberus will have to put more money into GMAC and ResCap.

Private equity firms tend to do well because they negotiate deals which are particularly favorable due to their ability to bring larges sums of cash to the table. Their armies of analysts should give companies like Cerberus an advantage in picking companies which will do unusually well.

Cerberus needs to get some new analysts.

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

Chrysler currently achieves 90% of its sales from North America, but if the newly private company has its way, it will double its international sales over the next four years as part of its plan to return to profitability.

Rising gasoline prices, declining home values, and general economic malaise have further hurt the company which, along with the rest of the American auto industry, is struggling to compete with lower-cost overseas competitors.

According to The Wall Street Journal (subscription required), "To aid its international-sales expansion, Chrysler boosted the number of products offered overseas to 20 from nine. In China, Chrysler said it is reintroducing Dodge-brand vehicles after a 62-year absence. The Caravan minivan is in production. The Caliber hatchback and Avenger sedan are also slated to be sold in that country."

I wish Chrysler the best of luck because they're going to need it. The same problems that are dogging the company here should be exacerbated overseas -- It's hard to imagine why anyone in China will pony up the extra money to buy a Chrysler when there are so many cheaper options available over there.

Shareholders at United Rentals Inc. (NYSE: URI) have a right to be mad. Hedge fund Cerberus Capital Management offered to buy the company. Shares rose from about $27 to over $34.

Then Cerberus walked. United Rental stock fell to $20.76 and has not recovered much. The entire matter headed to court. The legal battle was to begin today in Delaware Chancery Court. That has been delayed while the two sides talk.

Cerberus said that it was within its right to break off the contract. According to The Wall Street Journal, "the delay could help United's flagging stock price, as well as clear up some of the negative public perception of Cerberus, a Wall Street buyout shop that provided little detail for why it walked away from its agreement."

In other words, it may have been in the financial interests of Cerberus to walk out, but its may be a shaky legal ground.

Private equity firms have broken a number of these buyouts now, and, in some cases, contracts allowed them to do so. The court system is likely to catch up to them at some point soon. If settlement talks with United do not work out, it may be in this case.

Just one announcement that an LBO shop has had to pay hundreds of millions in damages would send a real shudder through the industry.

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