FOR IMMEDIATE RELEASE
Nov. 18, 2019
CONTACT:
Carter Dougherty
carter@ourfinancialsecurity.org
(202) 251-6700
New Poll Shows Very Broad Support for Action to Curb Private Equity Abuses
Voters are very skeptical of the tactics that private equity uses and support reforms of this increasingly powerful industry, according to a new survey released by Americans for Financial Reform.
The survey, conducted by the bipartisan team of Lake Research Partners and Chesapeake Beach Consulting, found that voters across party lines both disapprove of common approaches of private equity firms in taking over and running existing businesses. They also approve of measures to increase accountability, close loopholes, and protect workers, investors and the viability of target firms.
“Private funds now wield enormous influence over the American economy, and the dangers of their current business model are becoming increasingly clear, so voters are overwhelmingly critical,” said Lisa Donner, executive director of Americans for Financial Reform. “We need effective rules of the road to stop predatory practices by these Wall Street giants, which often bring terrible consequences for workers and communities.”
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 they benefit from tax advantages and loopholes.
The poll documents bipartisan public skepticism of these abuses, and support for remedies to them. A memo on the results can be found here.
The House Financial Services Committee will hold its first-ever hearing on the private equity industry on Tuesday at 10am., with a focus on the Stop Wall Street Looting Act, the proposed legislation that would curb abuses in this sector. AFR’s 2-page summary of key provisions of the bill can be found here.
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.
Millions of jobs are at risk if Congress does not act. Already, private equity and hedge fund executives have played a key role in the demise of retailers such as Toys ‘R’ Us, Sears, and Shopko, with grave consequences for a retail workforce that is 40 percent workers of color. It is also responsible for abuses in sectors as diverse as media, manufactured housing, and health care.
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