FOR IMMEDIATE RELEASE
Oct. 10, 2024
CONTACT:
Carter Dougherty, carter@ourfinancialsecurity.org
New Legislation Needed to Curb Private Equity Abuses
Reforms would protect workers, their pensions, and communities
Americans for Financial Reform today applauded the introduction of the Stop Wall Street Looting Act of 2024, which is designed to end destructive, predatory practices by Wall Street private equity and hedge funds and their executives.
“Private equity has an immense impact on the U.S. economy, touching virtually every aspect of life from healthcare to housing to technology to retail and more,” said Lisa Donner, executive director of Americans for Financial Reform. “Private equity’s extractive strategies harm workers and communities, diminish access to quality affordable health care, worsen the housing crisis and the climate crisis, and perpetuate systemic racism. And the effects of this playbook can linger for years after a private equity owner sells a company.”
The Stop Wall Street Looting Act of 2024 includes new measures to curb the growing power of private equity across the board and in key sectors of the economy like healthcare, and to penalize private equity firms and executives for their actions that harm a company and its workers even after they no longer control it.
These additional elements of the bill include a cap on capital distributions such as dividend payments at 10 percent of an acquired company’s overall debt for the duration of a private equity firm’s ownership. Another new provision extends the statute of limitations to examine potential fraudulent transfers to 15 years, which provides an avenue to investigate private equity’s favorite cash-generating tactics.
Lessons from the 2023 collapse of Steward Health Care, which stemmed from its 2010 buyout by private equity firm Cerberus Capital Management, shaped the new provisions. Cerberus extracted $800 million in profits while Steward hospitals fell into disrepair, patients’ access to quality medical care dropped, and hospital workers were stripped of their jobs and pensions.
Steward’s mismanagement illustrated private equity’s playbook in action: asset stripping and dividend payouts to shareholders including Cerberus and Steward CEO Ralph de la Torre. Dividend payouts funded de la Torre’s lavish lifestyle at the expense of Steward’s low-income Medicare and Medicaid patients, as explored by a recent Senate HELP hearing.
The growth of private equity funds has been a defining feature of the American economy over the last two decades. In 2004, private equity and private fund firms managed less than $1 trillion in assets under management. As of June 2023, private equity and other private funds firms managed more than $13.1 trillion and are growing. Today, private equity-owned companies control the livelihoods of almost 12 million workers.
“Without major changes, a handful of ultra wealthy Wall Street executives will continue getting richer at everyone else’s expense,” Donner said. “The Stop Wall Street Looting Act takes important, much-needed steps to rein in Wall Street predatory practices and promote a more just and sustainable economy.”
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