Elizabeth Warren Seeks to Cut Private Equity Down to Size

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    • #191251
      Cold Mountain Trail

      The more I learn about private equity, its global reach & the significant chunk of our economy it controls, the worse I feel.


      Elizabeth Warren’s Stop Wall Street Looting Act, which is co-sponsored by Tammy Baldwin, Sherrod Brown, Mark Pocan and Pramila Jayapal, seeks to fundamentally alter the way private equity firms operate. While the likely impetus for Warren’s bill was the spate of private-equity-induced retail bankruptcies, with Toys ‘R’ Us particularly prominent, the bill addresses all the areas targeted by critics of private equity: how it hurts workers and investors and short-changes the tax man, thus burdening taxpayers generally.

      Not only would Warren’s legislation prohibit some of the most destructive private equity activities, but it would end their ability to act as traditional asset managers, taking fees and incurring close to no risk if their investments go belly up. The bill takes the explicit and radical view that:

      Private funds should have a stake in the outcome of their investments, enjoying returns if those investments are successful but ab-1sorbing losses if those investments fail.  Needless to say, this upends the traditional private equity model of “head’s I win, tails you lose.”

      Warren’s bill owes a considerable debt to the work of Eileen Appelbaum and Rosemary Batt, who have been investigating the private equity industry for many years…firms would share responsibility for the liabilities of companies under their control, including debt, legal judgments, and pension obligations to “better align the incentives of private equity firms and the companies they own.” The bill, if enacted, would end the tax subsidy for excessive leverage and closes the carried interest loophole.  The bill also seeks to ban dividends to investors for two years after a firm is acquired. Worker pay would be prioritized in the bankruptcy process…



      The comments on this article constitute an overview of some of the awful features of PE’s business: asset-stripping & money-laundering for starters.

      American Investment Council is PE’s industry trade group, fyi

    • #191256

      the principle of common law that is violated by private equity is that they buy the assets of their prey but avoid the liability by finessing the corporate limited liabiliy.

    • #191460
      Cold Mountain Trail
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