Joint Letter: No Bailout for Private Equity

No Bailouts for Private Equity 

Congress needs to resist calls from private equity executives to gain access to pandemic-related bailout programs. Private equity-owned firms are not comparable to ordinary small businesses, who cannot draw on deep-pocketed Wall Street owners who could support them if they chose to do so. Private equity (PE) funds are pooled investment funds managed by Wall Street firms that purchase operating companies. Prominent examples of private equity-owned portfolio companies include Toys ‘R Us, Shopko, and TeamHealth.

The track record of private equity funds demonstrates that these firms will wherever possible seek to divert income streams, including government support, to wealthy private equity executives rather than supporting employment and customer service at portfolio firms.

One visible effort by private equity firms to gain support from pandemic-related government funding involves the $350 billion Paycheck Protection Program (PPP). This program is intended to support small- and medium-sized businesses impacted by the crisis, and it is limited to businesses that collectively employ fewer than 500 people across all affiliated companies in the organization. This qualification clearly excludes companies owned by large private equity firms. But large private equity firms have been demanding that their owned companies become eligible for government assistance through the PPP. They have threatened to conduct significant layoffs across their companies if their demands are not met. Congress should firmly reject these blackmail demands from private equity firms and preserve PPP funding for genuine small businesses. 

Private equity tycoons are also seeking to gain Federal Reserve backing for poor quality credits in their portfolios. Private equity related leveraged loans are not poor credit quality due to the pandemic crisis alone. For many years before this crisis began, private equity made large profits by loading portfolio firms with excessive and unsustainable amounts of debt through leveraged buyouts. Putting federal backing behind these assets would amount to an enormous taxpayer subsidy for the predatory business model that has inflated private equity profits for years. 

It is true that private equity owned firms, like other businesses, are impacted by the current economic crisis. But if Congress wishes to assist ordinary workers and customers of such firms, rather than subsidize the profits of private equity owners, tough special conditions must be placed on assistance that flows to any firms owned by private equity. These conditions must be designed to ensure that government assistance is not siphoned away by already wealthy private equity ownership and is instead genuinely used to support employment, working conditions, and service quality at portfolio firms. It is crucial that requirements apply to the whole PE firm and its executives, and to all of the companies it owns, and that they apply to any and all channels of aid to private equity portfolio companies. 

In addition to requirements covering other recipients of aid, any private equity firm that gets assistance of any kind for its portfolio companies must be required to: 

  • Maintain employment and benefits at its portfolio companies;
  • Agree not to charge dividends, monitoring fees, or other forms of extraction from its portfolio companies, as this will transfer federal funds to the private equity owner instead of workers and customers of portfolio firms;
  • Accept joint liability with the portfolio company for obligations of the portfolio company, including the obligation to pay back federal assistance;
  • Comply with Centers for Disease Control-approved safety and protective measures for all employees and provide paid sick days;
  • File ongoing financial disclosures with the Securities and Exchange Commission, beginning immediately; and
  • Agree to re-open owned portfolio companies after the crisis shutdowns are over, and not use the crisis as an opportunity for financial restructuring of these companies or for transferring value away from these companies.

 Finally, special consideration must be given to private equity’s control over health care firms. These companies are a critical resource to the current fight against Coronavirus. However, there are repeated examples of private equity firms managing health care firms in a manner that prioritizes their own profits over the well-being of patients and staff. The most notorious examples are the use of surprise medical billing by the medical groups TeamHealth and Envision Healthcare, owned by Blackstone and KKR. We have also seen numerous examples of private equity firms seeking to close hospitals, lay off medical personnel, or underinvest in safety practices in order to pad their bottom line. The nation absolutely cannot afford any continuation of these practices during the current urgent health crisis. Congress should act to restrict irresponsible profiteering at any private equity owned health care firm receiving any federal funds during this crisis.

Congress must stand up to private equity’s efforts to hold their own workers and customers hostage in order to get a public bailout, and it must focus small business assistance on actual small businesses. If Congress decides to not simply prevent access to all public dollars for PE firms, it must impose strict conditions that ensure these funds are used for the public good, not to pad the profits of the private equity executives.



American Federation of Teachers

Americans for Financial Reform

Center for Economic Policy Research

Center for Popular Democracy

Communications Workers of America

Economic Policy Institute

Hedge Clippers Campaign

Main Street Alliance

New York Communities for Change

Partnership for Working Families

Patriotic Millionaires 

People’s Action

Private Equity Stakeholder Project

Public Citizen

Strong Economy for All

Take On Wall Street

United for Respect

Working Families Party