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I'm a Private Equity Investor. Here's Why We Need to Rein in Private Equity
If you look at our economy from 30,000 feet, it’s easy to believe President Donald Trump’s boasts that we’re living in boom times. But if you get closer to the ground, where too many good jobs are being replaced by precarious ones, where large-scale employers waver at the brink of going under, and where the faux boom’s profits are overwhelmingly going to the wealthy, you can see a practice escalating across the economy, a practice that has already had disastrous effects on workers generally and a practice with the potential to take down hundreds of thousands more jobs and put investors and consumers alike in jeopardy. That practice is the unchecked and reckless overuse of heavy burdens of debt, and then of bankruptcy laws, by some private equity (PE) firms and hedge funds to the overwhelming detriment of employees and retirees.
That’s why we all need to pay attention to a new bill introduced this week by Sen. Elizabeth Warren and other members of Congress that would curtail the threat financial predators pose and remove the incentives for them to further harm our economy. It would also eliminate a tax abuse I have written against several times and one that Trump even campaigned he would eliminate, namely, the so-called carried interest loophole.
...Today, too many PE fund managers are generalists, with little or no experience in the industry they’re investing in. And we’re seeing them use a much-discredited playbook: cut costs, take out cash for their own short-term benefit, add little genuine competitive value, and then slash jobs and worker benefits in a desperate bid for greater operating cash flow. This is why this week’s legislation matters so much. The aptly-named Stop Wall Street Looting Act would finally hold predatory private equity firms and hedge funds liable for the damage they cause, close tax loopholes that encourage excessive debt and let executives avoid paying their fair share of taxes, and limit the debt that predatory firms can access to seize control of companies. And, tremendously importantly, the bill would protect workers when employers go bankrupt, giving them added recourse to pursue the severance that is currently denied them.
...Private equity isn’t going away, nor should it, as in the right hands and with the right target company, it can bring great value to investors and employees alike. Now, some will say that the proposed bill will hurt PE and in turn, hurt economic growth. It won’t, and in fact it will only improve the sector as appropriate balance is restored among PE managers and investors and employees...But one thing’s for sure: If we don’t act, nothing will change. There are simply too many incentives in place today for reckless and often immoral behavior by some PE investors. So, let’s enact the Stop Wall Street Looting Act before even more damage is done.
More at https://fortune.com/2019/07/22/elizabeth-warren-private-equity-bill/
That’s why we all need to pay attention to a new bill introduced this week by Sen. Elizabeth Warren and other members of Congress that would curtail the threat financial predators pose and remove the incentives for them to further harm our economy. It would also eliminate a tax abuse I have written against several times and one that Trump even campaigned he would eliminate, namely, the so-called carried interest loophole.
...Today, too many PE fund managers are generalists, with little or no experience in the industry they’re investing in. And we’re seeing them use a much-discredited playbook: cut costs, take out cash for their own short-term benefit, add little genuine competitive value, and then slash jobs and worker benefits in a desperate bid for greater operating cash flow. This is why this week’s legislation matters so much. The aptly-named Stop Wall Street Looting Act would finally hold predatory private equity firms and hedge funds liable for the damage they cause, close tax loopholes that encourage excessive debt and let executives avoid paying their fair share of taxes, and limit the debt that predatory firms can access to seize control of companies. And, tremendously importantly, the bill would protect workers when employers go bankrupt, giving them added recourse to pursue the severance that is currently denied them.
...Private equity isn’t going away, nor should it, as in the right hands and with the right target company, it can bring great value to investors and employees alike. Now, some will say that the proposed bill will hurt PE and in turn, hurt economic growth. It won’t, and in fact it will only improve the sector as appropriate balance is restored among PE managers and investors and employees...But one thing’s for sure: If we don’t act, nothing will change. There are simply too many incentives in place today for reckless and often immoral behavior by some PE investors. So, let’s enact the Stop Wall Street Looting Act before even more damage is done.
More at https://fortune.com/2019/07/22/elizabeth-warren-private-equity-bill/
3 replies
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= new reply since forum marked as read
This area is one of Elizabeth Warren's strengths and one of the main reasons I like her as a candidate. However, I just don't know if she can pull it off nationally. I love having her as a senator and would love to see her on the ticket as VP, but I'm still on the fence about her at the top of the ticket.
However, if she is the candidate, I would enthusiastically vote for her.