AFR Partners AFL-CIO and SEIU Support Amendment Regarding Private Equity and Hedge Funds

May 18, 2010

United States Senate
Washington, DC 20510

Dear Senator:

On behalf of millions of working families across the country we urge you to vote “yes” on the Reed-Grassley-Johnson-Brown (OH)-Levin amendment offered to the Restoring American Financial Stability Act of 2010 (S. 3217).

If passed, this amendment would ensure that all advisers to private investment funds with more that $100 million under management are required to register with the Securities and Exchange Commission (SEC). Absent this amendment, the bill will include new regulations and registration requirements for hedge funds but exempt private equity and venture capital from these important provisions. Private equity investment strategies, no less than hedge funds, can cause a threat to our economy and working families.

An estimated $1 trillion in leveraged buyout (“private equity”) loans were issued in 2006 and 2007 alone and more than $1.8 trillion in leveraged buyout loans have been issued since 2000. According to Moody’s, about 19.4 percent of companies bought by the 14 largest private equity firms from January 2008 to September 2009 have defaulted and those that have not defaulted face significant refinancing risks in the next few years as more debt comes due. The resulting losses to banks and investors and the job loss for the millions of Americans employed by private-equity owned firms could be on par with the subprime mortgage crisis.

The Reed-Grassley-Johnson-Brown (OH)-Levin amendment would eliminate the bill’s oversight exemption for private equity and venture capital, ensuring that all large private fund managers have a fiduciary duty to the investors and that “ponzi schemes” have no place to hide. It would also provide the SEC and the Financial Stability Oversight Council with the information they need to protect against systemic risks in all private investment funds.

We ask for your support for the amendment and thank you for your consideration of our views. For more information, please contact Heather Slavkin at 202-638-5318 or