Oct. 20, 2021
FOR IMMEDIATE RELEASE
Private Equity Reform Needed to Curb Worker Abuse as Industry Explodes
Americans for Financial Reform today applauded the introduction of legislation aimed at ending abuses by the private equity industry, which has exploded in size over the past decade and now controls vast swaths of the American economy despite a history of practices that lead to worker abuse, monopoly pricing, degradation of health care, among other harms.
The Stop Wall Street Looting Act would rewrite the rules that shape the private equity industry, which now has about $7.1 trillion in assets and wealth under its control, so that regulation and market incentives promote productive, sustainable investment, not the wealth extraction that now is all too common.
“When workers, doctors, homeowners, nursing home residents, and people from many walks of life come together to demand reform of one of Wall Street’s most predatory actors, it’s a sign that Congress needs to curb this industry’s influence,” said Ricardo Valadez, AFR’s private equity campaign manager. “More and more people are touched by the damage private equity has done, and are ready to demand change, and it’s no wonder. The evidence that private equity increases inequality, economic precariousness, and racial injustice has piled up in recent years.”
The list of sponsors includes: Senators Elizabeth Warren (D-Mass.), Tammy Baldwin (D-Wisc.), Sherrod Brown (D-Ohio), Chair of the Senate Banking Committee, along with Representatives Mark Pocan (D-Wisc.) and Pramila Jayapal (D-Wash.). Co-sponsors are Senators Bernie Sanders (I-Vt.) and Jeff Merkley (D-Ore.) along with Representatives Eleanor Holmes Norton (D-D.C.) and Jesús “Chuy” García (D-Ill.).
The legislation also enjoys broad support among public interest groups.
“Right now, private equity moguls can’t lose when they buy a company with mostly debt that they are not jointly liable for but can siphon off management fees, dividends and other payments. Too often workers and communities pay the price,” said Andrew Park, AFR’s senior policy analyst. This legislation would end such loopholes that reward looting that should never have been allowed in the first place.”
Key provisions of the legislation would put private equity executives on the hook for the damage they cause, restrict the use of common looting-like techniques, and protect workers in the event of bankruptcy. Another part of the legislation closes tax dodges, including the infamous carried interest loophole. Other provisions require honest reporting of fees and returns for investors in private equity funds, increased transparency around environmental, social and governance actions, and mandate that banks that finance these debt-driven buyouts assume some risk for the money they loan.
“The current system of special privileges and loopholes for private equity encourages abuses that help super-rich Wall Street executives get even richer at the expense of workers, communities, patients, racial equity and our climate, and enables them to take control of ever-larger pieces of our world, from retail, to technology, to housing, to healthcare and more,” said Lisa Donner, executive director, Americans for Financial Reform. “The Stop Wall Street Looting Act would be a powerful step toward creating rules of the road that promote a more just and sustainable economy.”
A fact sheet with information on private equity in the context of this legislation can be found here. A section-by-section summary is here; the full bill is here. An economic analysis of the legislation is posted here. Private Equity: By The Numbers contains information and links about private equity, its reach, and its abuses.