Statement: Roosevelt Institute Experts Respond to Stop Wall Street Looting Act
July 18, 2019
By Ariela Weinberger
Today, Senators Elizabeth Warren (D-MA), Tammy Baldwin (D-WI), Kirsten Gillibrand (D-NY), and Sherrod Brown (D-OH) released the Stop Wall Street Looting Act, a bill to curb private equity (PE) firms’ most egregious tactics, which routinely drive companies into bankruptcy. Specifically, the legislation will force PE firms to take financial responsibility for the companies they take over, closing loopholes that allow them to capture all the rewards of their investments while insulating themselves from any of the risk.
In response, experts from the Roosevelt Institute issued the following statements:
“Key regulatory and legislative changes over the past few decades have allowed PE firms to implement extractive financial strategies—like cutting jobs and reducing wages—in order to obtain maximum wealth for their executives,” said Senior Economist and Policy Counsel, Lenore Palladino. “This is textbook ‘moral hazard.’ If we want to make real changes in our economy, we need to rewrite the laws so that PE firms are liable for their investments and cannot leave companies, and their workers, to bear all the risk.”
“For too long we’ve allowed PE to strip businesses down, load them up with debt, and extract a significant amount of resources, completely indifferent to the long-term health of the company,” said Roosevelt Fellow, Mike Konczal. “This bill introduces several mechanisms to align the interests of PE with the businesses they take over. Placing limits on how they remove funds and requiring them to put their own skin in the game are sensible steps to take to rein in abuses. PE could be a force for good, but with the current rules in place, they instead aggravate the worst trends in our society.”
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