FOR IMMEDIATE RELEASE
Nov. 19, 2019
AFR Applauds Landmark Hearing on Curbing Private Equity Abuses
Americans for Financial Reform today applauded the first congressional hearing focused on private equity abuses and their impacts on workers and communities, and on new proposals to reign in those abuses.
The hearing followed the July 18 introduction of the Stop Wall Street Looting Act Rep. Maxine Waters, the chair of the committee, highlighted that there are “too many examples of private equity firms destroying companies, and preying on hardworking Americans to maximize their profits” as she opened the hearing.
“Wall Street’s private equity barons now wield enormous influence over the American economy, often with terrible consequences for workers, communities, and investors,” said Ricardo Valadez, campaign manager for private equity at Americans for Financial Reform. “The more the spotlight shines on predatory practices by private equity, and the more voters see about the abuses of this industry, the more the public will demand change.”
AFR submitted extensive testimony for the record to the committee, which documents private equity abuses and legislative solutions. A new bipartisan voter survey commissioned by AFR revealed strong public support for many of the proposed remedies of the Stop Wall Street Looting Act. AFR’s 2-page summary of key provisions of the bill can be found here.
Since the introduction of the Stop Wall Street Looting Act legislation, media coverage of private equity’s destructive role in extensive sectors of the economy has grown. Private equity’s role in the American economy has also come under particular scrutiny due to its practice of using surprise billing in the healthcare sector to increase profits, then spending over $4 million to stop a bipartisan effort in Congress to deal with the problem.
The run-up to the hearing drew attention in the media as a big step towards the private equity industry facing accountability in Congress. At the hearing, Rep. Alexandria Ocasio-Cortez offered a tough criticism of the industry; video of it was viewed over 1.1 million times. Rep. Kate Porter called out private equity for its role in surprise billing. Rep. Jesús G. “Chuy” García spoke to Giovanna De La Rosa, a former employee of Toys ‘R’ Us, about private equity’s role in destroying jobs at that company.
Workers harmed by private equity have helped drive the public and elected officials to consider reforms. Retail worker leaders organizing with United for Respect have highlighted the looting of the retail industry, and demanded changes. In the last few weeks, workers in the Washington, DC area have taken on private equity giant Cerberus, which is trying to abandon pension promises made to workers at grocery chain Safeway.
The growth of private equity funds has been a defining feature of the American economy over the last decade. Today, private equity-owned companies employ almost 9 million workers in the United States. Assets held by private equity firms have grown from $1 trillion prior to the 2008 financial crisis to a new global record of $5.8 trillion in 2017.
Bloomberg Businessweek devoted its cover story, “Everything Is Private Equity Now,” to the dramatic growth of private equity and its impact on the American economy, which included this summary from Heather Slavkin Corzo, senior fellow at Americans for Financial Reform and director of capital market policies at the AFL-CIO:
“The massive growth of private equity over the past decade means that this industry’s influence, economic and political, has mushroomed,” she says. “It’s hardly an exaggeration to say that we are all stakeholders in private equity these days, one way or another.”
The current legal framework creates incentives for private equity firms (and other big Wall Street players using similar tactics, like some hedge funds) to load the companies they acquire with excessive debt, and to drain money from the companies to enrich themselves, putting the survival of the firms at risk. Private equity firms also often mislead their own investors, including pension funds, about actual returns and hidden fees. And they benefit from tax advantages and loopholes. The Stop Wall Street Looting Act would stop these abuses.