Nobel laureate economist Joseph Stiglitz: “[A] recent study by groups including Americans for Financial Reform found that private-equity bankruptcies in the retail industry alone cost 600,000 jobs. One of those laid off, Giovanna De La Rosa, told of her experiences in this publication. The best outcome would be fewer bankruptcies, but when they happen, the welfare of workers needs to be at the top of the list, not at the bottom.”
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.
Today, private equity and hedge fund managers take advantage of gaps in regulations to make billions of dollars by looting real-world businesses and engaging in abusive practices without any accountability. They also pay taxes at a lower rate than teachers and firefighters. The undersigned organizations support the Stop Wall Street Looting Act (S.2155 / HR 3848 ). This legislation would eliminate tax, securities and bankruptcy law carve-outs that allow these Wall Street titans to make billions at the expense of workers, communities and pensions.
In advance of tomorrow’s hearing, “America for Sale? An Examination of the Practices of Private Funds,” I am submitting written testimony in support of the “Stop Wall Street Looting Act of 2019,” a comprehensive bill aimed at stemming abusive practices employed by some private equity firms to line their pockets at the expense of workers, institutional investors, creditors, and others with stakes in the companies they acquire—and too often destroy. As I told Senator Elizabeth Warren in an earlier letter, the legislation will not hinder those private equity firms that prosper by delivering efficiency gains to underperforming companies in their portfolios. Instead, it will simply remove tax and other incentives that allow some firms to realize large gains by inflicting even larger losses on other stakeholders. This type of negative sum strategy is pursued too often in the private equity industry and requires a legislative and regulatory response.
Today we submit written testimony in support of the “Stop Wall Street Looting Act,” which would address the problems currently being created by private equity firms and hedge funds while preventing these problems in the future. This is an urgent issue for low-income communities and communities of color organizing in our network, who are directly impacted by Wall Street’s predatory and risky financial practices. Every day, people are faced with the harsh realities of corporations that exert more and more power in our economy and their lives. From the moment they wake up, people are increasingly subject to the whims of unregulated corporate power that determines where people live, how they work, and even their ability to access live-saving healthcare.
If you look at our economy only from 30,000 feet, it’s easy to believe 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 profits overwhelmingly go to the wealthy, you can see a practice escalating across the economy, a practice that has already had disastrous effects on workers generally and that has 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 PE firms and hedge funds to the overwhelming detriment of employees and retirees.
We are pleased to endorse the Stop Wall Street Looting Act (the “SWLSA”) (H.R. 3848) that was introduced by Representatives Pocan, Jayapal, García, Grijalva, Khanna, Lee, Pressley, Schakowsky, and Tlaib earlier this year. If enacted, the SWSLA will shut down a series of loopholes in the securities, bankruptcy and tax laws that allow a handful of Wall Street millionaires and billionaires to profit at the expense of working people.
I want to testify here on the role of private equity in the news industry. In particular, I want to discuss one newspaper chain, MediaNews Group (MNG) which is also known as Digital First Media. This is a newspaper company with such venerable titles as the Boston Herald, the Denver Post, the Detroit News, the Orange County Register, the San Jose Mercury News, and the St. Paul Pioneer Press. MNG is controlled by the Alden Global Capital which is both a private equity firm and a hedge fund. The NewsGuild-CWA represents 500 workers at 13 MNG papers.
Alden has played a particularly destructive role in local journalism. Since it has controlled MNG, it has slashed staff and sold real estate to extract cash from the news organizations without regard to the role news organizations play in communities. Alden has depleted newsrooms, eliminated beats, and made it virtually impossible for local papers to fully tell the stories of their communities.1 Alden has also extracted hundreds of millions of dollars in profits from its newspaper holdings to invest in unrelated businesses, some of whom have gone belly-up.
WGAW would like to contribute to the Committee’s record with a report on the corrupting influence of private equity on Hollywood talent representation. “Agencies For Sale: Private Equity Investment and Soaring Agency Valuations” details the harmful effects of private equity investment on talent agency representation in Hollywood. While talent agencies are fiduciaries, legally required to act solely in the benefit of their clients, the billions in private equity capital invested in Hollywood’s largest talent agencies has driven these agencies to engage in practices that leverage their clients for the agencies’ financial benefit and violate the law. Most recently, this private equity investment has facilitated talent agency expansion into content ownership and production, effectively making agencies the employers of their own clients. The last time a talent agency expanded into content production, the Department of Justice filed an antitrust lawsuit that caused the breakup of MCA-Universal in 1962.
I moved into my manufactured home community so I could have an affordable life. My neighbors are mostly low-income seniors who survive on fixed incomes, like my friend who gets just $800 a month from disability. I, along with 150+ families that call this community home, loved the stability and community closeness Swartz Creek Estates provided. Our hopes of living in an affordable, decent home in a healthy, vibrant community were dashed when a real estate investment company named Havenpark Capital bought our community. In one year, they increased the rent we pay for the land our homes sit on by 30%. Havenpark also increased the fees that we have to pay out for garbage pickup and sewage and water services almost another 10%.