Elizabeth Warren's pitch to upend private equity rattles industry

[BeyondGeography]

Private equity leaders are pushing back sharply against a new plan from Sen. Elizabeth Warren (D-Mass.) to rewrite the basic rules of the road for firms she likened to "vampires."...Warren, who honed her brand as a Wall Street scourge, insists drastic change is needed: Unveiling the "Stop Wall Street Looting Act" yesterday, she said that the private equity industry is “the poster child for financial firms that suck value out of the economy."

“Private equity firms raise money from investors, kick in a little of their own, and then borrow tons more to buy other companies,” she wrote in a Medium post. “Sometimes the companies do well. But far too often, the private equity firms are like vampires — bleeding the company dry and walking away enriched even as the company succumbs.”

The plan's most disruptive change would make firms responsible for both the employee pensions and debt obligations of the companies they buy while tying their profits to the companies’ performances. As The Washington Post’s Peter Whoriskey notes, private equity firms frequently load up their takeover targets with debt, which become a burden the companies have to carry, sometimes precipitating bankruptcies. This was perhaps most famously the case with Toys R Us, which crumpled under the $5 billion debt burden that Bain Capital, Kohlberg Kravis Roberts, and Vornado Realty Trust saddled it with after acquiring the toy retailer in 2005.

...Investors appear to be taking the threat seriously. Publicly traded private equity giants saw their stock prices tumble on the news of the proposal. Apollo Global Management dipped nearly 2 percent; the Carlyle Group was off by 1.73 percent midmorning before paring losses to close down .76 percent.

...Warren's bill — which is cosponsored by fellow 2020 contender Sen. Kirsten Gillibrand (D-N.Y.) and a handful of other Democrats in both chambers — would tax private equity gains as ordinary income. The measure would also scotch the ability of private equity executives to pay themselves monitoring fees; change bankruptcy rules to limit benefits to executives and protect them for workers; and force executives to make their fees and returns public.

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More at https://www.washingtonpost.com/news/powerpost/paloma/the-finance-202/2019/07/19/the-finance-202-elizabeth-warren-s-pitch-to-upend-private-equity-rattles-industry/5d30f77e1ad2e5592fc35a0a/?utm_term=.c56dba9ec303

[sandensea]

1. The old Romney-style bustout

Pay off the board of some well-established firm. Run up colossal debts on the company's credit - that's your profit.

Then strip the assets and walk away, leaving the company to stumble along until the next recession (when it usually shuts down altogether).

Lather, rinse, and repeat.

[democratisphere]

2. The carnage of private equity and banksters on companies must be stopped.

The wealthiest are a bunch of greedmongering crooked bastards.

[BeyondGeography]

3. There are few things more demoralizing than working in an environment

where the top executives have hit the jackpot, overhead is being gutted, nothing is going back into the business and the survivors are being pushed to hit unrealistic numbers just so exorbitant interest payments can be made.

[MarcA]

4. Embezzlement by another name. n/t

[Pepsidog]

5. If only her message is heard, what an impact she could have.

[Princetonian]

6. Chump will be raising even more hellacious amounts of money now.

There are millionaires and billionaires who have a social conscience but those in the private equity business are greedy bastards.

[BeyondGeography]

7. That would be a strong campaign point for Warren

If she is the nominee of course. HRC outraised Trump 4-1 overall on Wall Street in 2016 and the margin was 10-1 with hedge funds. He used that as a major selling point because he was for the little guy, yanno.

[marylandblue]

9. Warren's already using it effectively. She raised a lot of money without bundlers.

I personally sent her more money than I otherwise would have. It's not much anyway, but it's nice to know your money is really needed

[BeyondGeography]

10. Same

I give monthly and she just got an extra $35 from me for doing so well in the 2nd quarter. I was very happy to see those numbers.

[Mersky]

8. K&R

[Duppers]

11. Excellent. Love this part..

"would tax private equity gains as ordinary income."

All equity gains should be taxed as income. Period.

[myohmy2]

12. ...go for it...

"...make firms responsible for both the employee pensions and debt obligations of the companies they buy while tying their profits to the companies’ performances. "

...seems fair...

"...Investors appear to be taking the threat seriously. "

...excellent...

...anything that rattles the vampires on wall street has to be a good thing...

...boogie, boogie, boogie...

[saidsimplesimon]

13. "Vampires"

Oh my, I have read and enjoyed all the Anne Rice novels. She may be writing pure fiction, yet, I see some resemblance to reality. (I'm enjoying a solitary laugh.)

[Hortensis]

14. Good! I hope they see this as the writing on the

wall for them. Those most against have already been fighting to keep Republicans in power.

[Blue_true]

16. Very good point.

Who gives a shit about what they think. The biggies in those places are big republican donors. Warren will win the people that have been hurt by their tactics, that is a much larger group.

[Hortensis]

17. Umhm. Of course, there are some decent, responsible people in

the financial industry who want and speak out for regulation and who need to be empowered, starting with recognition. But the rest are a grave menace to society.

We'll have to see about Elizabeth. She's really great, but a lot is going to depend on how successful she is in undoing the very mistaken idea that she's like Bernie Sanders and others who can't give their far left ideology away these days. She's working hard at making people realize she believes in the value of regulated capitalism, of course, before this confusion sinks her candidacy.

[Blue_true]

21. Maybe her and Bernie being side by side at the July 30 debate sheds light.

Some believe they have a tit for tat non-aggression pact, but I think that it is that she simply was not threatening Bernie's poll numbers, now that she is, let's see what happens with both in the same debate setting.

[Blue_true]

15. I hope that she chops them up and feed them to the Sharks.

They have been one of the most damaging elements in the economy since Reagan gave them free reign in 1981.

[richsonpoordad]

18. I know. Sometimes I wish she would have a "hidden agenda" until she takes her oath of office.

[Martin Eden]

19. My former boss, a self proclaimed "very conservative guy"

... was a senior VP in our mid-sized corporation, which had been purchased by a private equity group. He had a good view of all that entailed, and told me what they do should be against the law.

Typically, they refinance the company -- giving themselves huge bonusus. Then they dress up the business to make it more attractive to sell, often by hacking off some of the human resources that make the business work.

They pad their personal wealth with profits from the sale, then, like locusts, move on to the next business "opportunity."

These people are obscenely wealthy. They're not interested in running a business; they just game the system of financial rules they crafted for their own benefit -- usually at the expense of the business itself and the people who work there.

[PatrickforO]

20. Warren keeps getting better and better and better!

First the Accountable Capitalism Act, and now the Stop Wall Street Looting.

Damn, pass just these two little acts and we'll be turning the ship of state away from fascism and going the right direction!

As my kids used to say, Warren's the BOMB!

That's why I'm supporting her - ROCK SOLID policy.

[BeckyDem]

22. Vampires, describes them perfectly.

Warren 2020

[BeckyDem]

23. ha ha Look at how Fox News is depicting protecting the American people, by portraying WS as VICTIM

( Excerpt) Rather than offer a hopeful vision, Warren’s chosen grievance politics. She's focused on bringing the top down rather than lifting everyone up. https://www.foxnews.com/opinion/colin-reed-warren-biden-harris-trump-2020-election


This is typical, they pretend Warren is going after WS to score political points WHILE ignoring the real dangers she is pointing out. That is one example of how Fox brainwashes middle class and poor Republicans.

[BeyondGeography]

24. Saw that...terrible misreading by them

But I’ll take it. That characterization will win Warren more votes than it will cost her, even among Fox viewers. How do you bring the rest of us up when the “shareholder values” mentality keeps channeling all the profits to the top? Yeah, let’s talk about that.

[BeckyDem]

25. Fox will keep trying, its what they do.

We have a shot at breaking through to enough of their voters, but I believe our success will come from our side coming out like never before to vote.

[rampartc]

26. the principle is simple

when you buy a company's assets you buy the liabilities as well. so simple a Wharton mba should understand this is not any kind of "socialism." but wait ……….

[blm]

27. Long overdue