During a U.S. House Financial Services Committee hearing Tuesday, Rep. Alexandria Ocasio-Cortez railed against private equity firms for "wiping out tens of thousands of jobs" and having "undemocratic impacts on media companies."
"I wasn't sent here to safeguard and protect profit," said the New York Democrat. "I was sent here to safeguard and protect people."
Toys R Us: 30,000 jobs wiped out
ShopKo: 14,000 jobs
Not to mention the undemocratic impacts on media companies: Splinter, Deadspin, local newspapers pic.twitter.com/oQcUadMWRA
— AFR (@RealBankReform) November 19, 2019
The hearing, entitled "America for Sale? An Examination of the Practices of Private Funds," was called by Rep. Maxine Waters (D-Calif.), chair of the committee, "to examine the impact of private funds on businesses and workers," as Waters said in her opening statement.
"While there are some examples of private equity firms playing a beneficial role in the U.S. economy, there are far too many examples of private equity firms destroying companies, and preying on hardworking Americans to maximize their profits," Waters added. "Today we are going to take a hard look at those practices and examine whether Congress should take action to prevent the predatory practices of some private equity firms and hedge funds."
The hearing focused on three pieces of legislation, including the Stop Wall Street Looting Act of 2019 (H.R.3848 and S.2155). Introduced in July by Rep. Mark Pocan (D-Wis.) and Sen. Elizabeth Warren (D-Mass.), the bill is co-sponsored by many progressives in both chambers, including Ocasio-Cortez.
Warren's office explained in a fact sheet (pdf) earlier this year that the bill aims to "level the playing field, protect workers, consumers, and investors, and force private equity firms to take responsibility for the success of companies they control by closing the loopholes that allow them to capture all the rewards of their investments while insulating themselves from risk."
The hearing came after Warren, Pocan, and some of the bill's other sponsors—including one of Warren's rivals in the 2020 Democratic presidential primary, Sen. Bernie Sanders (I-Vt.)—sent a letter (pdf) Monday to Carmine Di Sibio, global chairman and CEO of Ernst & Young AG, to criticize the accounting firm for an October report on the private equity industry.
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The report (pdf) was released in partnership with the American Investment Council (AIC), an industry trade group, but the lawmakers' letter suggests the joint effort was intended to bolster private equity in the face of intense criticism and recent legislation in Congress.
"This new report appears to have been prepared as part of the response to our new private equity legislation, the Stop Wall Street Looting Act of 2019," the letter says. "We are not surprised that the private equity industry is fighting this legislation at every tum—and we have questions about the role your firm is playing in providing rigged reports and conclusions as part of this effort."
Offering a broader critique of the industry-backed research, the letter continues:
We are concerned about corruption and corporate capture of the legislative and regulatory process. All too often, wealthy interests are able to buy influence and rig the system through campaign contributions, lobbying, and revolving door hiring practices that allow insiders and lobbyists to become government policymakers—and then return to their lucrative corporate gigs.
There are a myriad of other ways that corporate interests can wield their influence. One way they do so is by funding sham research—by consultants and researchers who receive big bucks for their work—to back up their views. These studies are distorted and biased and misused in the regulatory and legislative... process, lending an air of legitimacy to corporate special pleading. The new EY report, prepared with and for a trade group for the private equity industry, appears to be a picture-perfect example of such sham study.
Drew Maloney, AIC's president and CEO, was among the witnesses who testified at the House hearing Tuesday. Maloney said in his prepared remarks (pdf) that "our industry creates jobs, powers the economy, and strengthens the retirements of millions of Americans."
Warren, meanwhile, slammed the industry in a series of tweets Tuesday morning that highlighted the bill and letter.
"Here's the bottom line: private equity firms are putting millions of workers at risk by loading up companies with debt, stripping assets, and collecting huge fees," she tweeted. "If the bets go bad, they walk away. I'll keep fighting to #StopWallStreetLooting and hold private equity accountable.
Ernst & Young’s industry-funded report paints a dishonest picture about private equity's effect on our economy. For example, when EY calculated private equity-owned companies’ avg wages, they included their Wall Street investors’ fat paychecks to skew the numbers. pic.twitter.com/VOJGthXyFi
— Elizabeth Warren (@SenWarren) November 19, 2019
Other signatories to the letter included bill co-sponsors Sen. Tammy Baldwin (D-Wis.) as well as Reps. Jesus "Chuy" Garcia (D-Ill.), Janice Schakowsky (D-Ill.), Ayanna Pressley (D-Mass.), Rashida Tlaib (D-Mich.), and Pramila Jayapal (D-Wash.).