News Release: Fed Should Avoid Weakening Rules that Limit Private Equity Access to Bailouts


Aug 13, 2020

Carter Dougherty
(202) 251-6700

Fed Should Avoid Weakening Rules that Limit Private Equity Access to Bailouts

A group of financial reform, labor, and public interest organizations today warned the Federal Reserve not to water down rules that limit the access of companies owned by private equity firms to emergency lending facilities created during the COVID-19 pandemic.

“Weakening affiliation rules could provide inappropriate access to Main Street Lending Facilities for private equity owned companies, without requiring strict conditions to protect public funds from being diverted from their public purpose by the private equity owner,” the groups wrote in a letter to the Fed.

The text of the full letter is here.

It has become clear that the Paycheck Protection Program, administered by the Small Business Administration, has permitted private equity-owned businesses to access funds despite rules — which do have some exceptions — that ostensibly bar them if they are affiliated with investment funds that own other companies. Clearly, the private equity industry is seeking, and sometimes finding, ways to circumvent affiliation rules.

Now allies of the industry, including Rep. French Hill, have pressed the Fed to loosen the affiliation rules for its new Main Street Lending Facility, a step that would ease the way for private equity to access public money despite its ready access to capital markets and uninvested capital.

“Private equity funds constantly boast about the financial firepower they can bring to bear on behalf of companies they own, and they are also masters at siphoning away funds from their portfolio companies,” said Marcus Stanley, policy director at Americans for Financial Reform Education Fund. “We should remember that every time the industry or its allies seek access to public money. Main Street lending support needs to carry conditions that focus it  on funding employment and investment at real middle market companies.”