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stop wall street looting act
Democrats Renew Effort to End Private Equity Looting
"Union-busting, pollution, and bankruptcy aren't side effects of the private equity model: They are the model," said one campaigner backing the bill. "It's a smash-and-grab, plain and simple."
Oct 10, 2024
Less than a month away from the U.S. general election, over a dozen congressional Democrats on Thursday renewed their fight to "fundamentally reform the private equity industry" with a bill that Rep. Mark Pocan said "will finally hold these predatory firms accountable and protect workers from being plundered by corporate greed."
"It's long past time for billionaires and big corporations to stop gambling with hardworking Americans' and their communities' assets in service of corporate greed," declared Pocan (D-Wis.), who is leading the Stop Wall Street Looting Act with Congressional Progressive Caucus Chair Pramila Jayapal (D-Wash.) and Sen. Elizabeth Warren (D-Mass.).
"In Wisconsin, we've seen what happens when private equity firms like Sun Capital raid companies for their wealth and leave workers and communities to pick up the pieces," he noted. "When Sun Capital took over Shopko—a Wisconsin-based retail chain that had stood strong for more than 50 years—they drained it dry, buried it in debt, pushed it into bankruptcy, and abandoned roughly 14,000 workers."
"Private equity takeovers are legal looting that make a handful of Wall Street executives very rich while costing thousands of people their jobs, putting valuable companies out of business, and in the case of healthcare, is literally a matter of life and death."
Warren's state is also dealing with fallout from the industry. As The Boston Globe reported Thursday, the legislation is "designed to rein in the growing power of private equity firms and limit the sort of leveraged buyout deals that led to the crisis at Steward Health Care, whose bankruptcy continues to roil communities in Massachusetts and seven other states."
The bill "was reintroduced in part as a response to the unfolding crisis at Steward, which before its bankruptcy was the nation's largest private for-profit hospital system," the newspaper noted. It follows the Senate's unanimous approval of a resolution to hold CEO Dr. Ralph de la Torre in criminal contempt of Congress for his refusal to comply with a subpoena to testify before a committee. Shortly after the vote—the first of its kind since 1971—he resigned.
"Private equity takeovers are legal looting that make a handful of Wall Street executives very rich while costing thousands of people their jobs, putting valuable companies out of business, and in the case of healthcare, is literally a matter of life and death," Warren, a former bankruptcy law professor, said Thursday. "Our bill is designed to close loopholes and end incentives for private equity pillaging—and it will make sure what happened at Steward never happens again."
As a fact sheet from the sponsors details, the bill would make private equity firms responsible for liabilities including debt, legal judgments, and pension-related obligations; limit how much money they can extract from companies; close a loophole they have used to conceal assets from bankruptcy courts; implement various protections for workers and customers; increase transparency; impose guardrails for receiving public funds; and drive real estate investment trusts out of healthcare.
"From healthcare to housing, millions of Americans are seeing private equity take over companies with the promise of improving services, only to strip them for parts and hurt both workers and working families," said Jayapal. "It's time for Congress to take action to protect Americans from the dangers of private equity and corporate greed, and that's exactly what our Stop Wall Street Looting Act will do."
The legislation is backed by Reps. Raúl Grijalva (D-Ariz.), Rick Larsen (D-Wash.), Barbara Lee (D-Calif.), Delia Ramirez (D-Ill.), Jan Schakowsky (D-Ill.), Alexandria Ocasio-Cortez (D-N.Y.), and Eleanor Holmes Norton (D-D.C.), along with Sens. Tammy Baldwin (D-Wis.), Jeff Merkley (D-Ore.), Bernie Sanders (I-Vt.), Tina Smith (D-Minn.), and Ed Markey (D-Mass.).
The bill is also endorsed by dozens of groups including the American Federation of Teachers, Americans for Financial Reform, Economic Policy Institute, Indivisible, National Employment Law Project, National Nurses United, Public Citizen, Service Employees International Union, Student Borrower Protection Center, Take on Wall Street, United for Respect, and Working Families Party.
"Union-busting, pollution, and bankruptcy aren't side effects of the private equity model: They are the model," said Porter McConnell of Take on Wall Street. "It's a smash-and-grab, plain and simple. That's why we are so pleased to see comprehensive legislation like the Stop Wall Street Looting Act introduced in Congress today. We created the loopholes in the law that allowed the private equity industry to thrive, and we can end them."
United for Respect co-executive directors Bianca Agustin and Terrysa Guerra stressed that "Wall Street private equity firms have proven themselves to be a parasite on workers, our economy, and American retailers by gutting companies for profit and driving mass layoffs. Holding billionaire profiteers accountable for the damage they do to our working families and communities is imperative to addressing growing economic inequality."
"The Stop Wall Street Looting Act will help close loopholes in our laws that for too long have allowed private equity to pillage companies and amass huge profits while workers lose their jobs and are left with nothing," they added. "United for Respect is proud to support this bill—and we need all legislators to join us in protecting workers and putting Wall Street on the hook for the havoc they reap."
While the bill is unlikely to go anywhere in the currently divided Congress, it's a clear statement from the sponsors where they stand, as early voting gets underway to determine the future of the Senate and House of Representatives as well as the next occupant of the White House—Democratic Vice President Kamala Harris or former Republican President Donald Trump.
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'Shocking and Immoral': Report Details Private Equity's Stranglehold on US Healthcare
"The damage that private equity has wrought on Americans' healthcare from cradle to grave, simply for profit, has become a life-or-death situation."
Mar 22, 2023
Private equity's ownership of U.S. healthcare providers is incompatible with the needs and best interests of patients and should be checked with federal legislation, according to a report published Wednesday by the consumer advocacy group Public Citizen.
Critics of for-profit care have long decried private equity's focus on maximizing returns through practices including slashing staff, surprising patients with astronomical bills, and eschewing low-margin care upon which vulnerable populations rely. The new report—authored primarily by Public Citizen healthcare policy advocate Eagan Kemp—examines investment firms' impact on more than a dozen healthcare sectors, from reproductive health through end-of-life care.
"Private equity acquisitions in the healthcare sector have steadily climbed since the financial crisis in 2009, particularly in the past five years," a summary of the report notes. "Unlike acquisitions of hospitals, which typically occur under a public spotlight, the private equity industry's acquisitions of physician practices and other healthcare business lines often occur with little or no disclosure or public scrutiny, hindering the ability of regulators and watchdogs to monitor the effects of private equity ownership."
According to the report:
In general, the private equity industry's business model poses risks to the long-term sustainability of entities that the industry acquires. That is, in large part, because private equity purchases are typically financed with debt that is immediately transferred onto the books of the businesses acquired, thus leaving the acquired entities with debt burdens to manage.
Meanwhile, private equity investors seek outsize returns on an accelerated timeline, generally aiming to exit investments in three to five years with returns of 20%-30% per year. This objective induces them to take short-sighted steps to supercharge profits or otherwise wring capital out of the assets they acquire.
The risks posed by private equity investments in healthcare are particularly acute. After all, the services healthcare providers offer can spell the difference between life and death. Private equity has targeted segments of the healthcare industry since at least the 1990s, with many predictable outcomes. Among them, shocking lapses in safety have occurred, prices have risen faster than at non-private equity acquired entities, and patients have been subjected to price gouging schemes.
The conflict between providers' obligations to provide the best care and private equity investors' insatiable appetites for maximized [returns] provides is clear. "You can't serve two masters," a doctor who previously worked for private equity-owned U.S. Dermatology Partners told Bloomberg. "You can't serve patients and investors."
"Thanks to a lack of transparency, we don't know everything about private equity's incursion into healthcare. But what we do know is shocking and immoral" said Kemp. "The damage that private equity has wrought on Americans' healthcare from cradle to grave, simply for profit, has become a life-or-death situation. Transparency and oversight are needed, stat."
The report suggests legislative solutions including Sen. Elizabeth Warren's (D-Mass.) Stop Wall Street Looting Act and Rep. Pramila Jayapal's Healthcare Ownership Transparency Act. The latter, according to Jayapal's office, "would require private equity firms and other financial interests to disclose ownership stakes in healthcare facilities including nursing homes."
A September 2022 Public Citizen report detailed how federal regulators had failed to implement a 2010 law requiring nursing homes to disclose their owners. Other investigations during the Covid-19 pandemic found that home healthcare, hospice, and nursing facilities and services owned by investment firms often provided a lower standard of care.
"We applaud Rep. Jayapal's ongoing effort to shine a light on the dangerous toll private equity vultures are taking on our health," Public Citizen president Robert Weissman said in a statement. "Adequate regulation of this predatory industry is acutely critical when it comes to the healthcare sector."
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