AOC laid out a devastating one-minute case against private equity in a House hearing — and blamed it for massive job losses

Business Insider Politics 3 weeks ago

As the nation cast its gaze onto another round of public testimony in the impeachment proceedings against President Trump on Tuesday, congressional Democrats on the House Committee on Financial Services held a hearing delving into the practices of the private equity industry.

Democratic Rep. Alexandria Ocasio-Cortez of New York made a devastating case against the sector in the hearing, blaming it for massive job losses that have upended the lives of average Americans through the years and calling for tougher regulations.

"I wasn't sent here to safeguard and protect profit," she said. "I was sent here to safeguard and protect people."

"We're talking about reining in private equity, which is responsible for wiping out tens of thousands of jobs at Toys R' Us alone," Ocasio-Cortez said, referring to the iconic retail chain that declared bankruptcy last year, shuttering its stores and laying off all its workers.

Ocasio-Cortez continued: "And then we're hearing, 'But what about the companies that made 100 jobs here, or 200 jobs there?' Toys R' Us, 30,000 jobs wiped out. ShopKo, 14,000 jobs. Brookstone, David's Bridal, Payless."

Then the New York congresswoman listed several media publications that suffered withering layoffs, including Splinter, Deadspin, Sports Illustrated, as well as local and regional newspapers that have all been gutted under private equity ownership.

She called it "undemocratic" and blamed the industry for at least 590,000 job losses over the past ten years before starting to question Giovanna De la Rosa, a progressive advocate and former Toys R'Us employee. She testified that retail employees had their work hours cut and benefits trimmed to save the company costs.

"We need to think about our economy not just in terms of the returns for stockholders. But in terms of how the lives of workers are impacted," Ocasio-Cortez said.

However, she largely struck a discordant note in the hearing. Politico reported that Republicans and several business-friendly Democrats downplayed the controversies around the private equity sector and drew attention to its economic benefits instead.

The private equity sector has grown, but its led to job losses

What private equity firms do is buy struggling companies, then revamp them to increase their short-term profitability and lure a buyer. Then they sell them again to turn an even bigger profit.

Firm executives say they rescue mismanaged companies on the verge of bankruptcy and leave them in a healthier state. But critics argue private equity firms strip businesses bare and fire workers in their drive to rack up massive profits.

Since the financial crisis a decade ago, the sector has vastly expanded its influence and reach into services critical to American life, The New York Times reported.

Certain segments of the economy have been hit hard as a result and evidence is mounting that private equity takeovers can lead to significant job losses. One study from a group of progressive organizations released in July found that private equity ownership of retail had eliminated 1.3 million jobs in the sector in the past decade.

Another study published by Josh Lerner of the Harvard Business School and Steve Davis at the University of Chicago last month found job losses average around 4.4% in the two years after a private equity firm takes over a company.

Over the summer, the New York congresswoman joined other Democrats to introduce the "Stop Wall Street Looting Act." It seeks to reform the sector by "holding private equity firms jointly liable for the debts of companies under their control and by requiring greater transparency in private equity firms' practices," the bill read.


Source link
Read also:
Axios › Finance › 2 months ago
Illustration: Lazaro Gamio / AxiosPrivate equity takeovers result in significant job losses, according to a landmark new study by Josh Lerner of Harvard Business School and Steve Davis of the University of Chicago.Why it matters: Private equity...
Forbes › Finance › 1 month ago
Private equity firms are not job creators. Quite the opposite. All too often, private equity executives fire hundreds of people and take away their livelihoods.
Axios › Politics › 1 month ago
Private equity wasn't mentioned by Elizabeth Warren during last night's debate, even though she got more speaking time than any of the other 11 candidates. For private equity, that was the good news.The state of play: The bad news for private equity...
Forbes › Finance › 2 months ago
A thorough study of over 9,000 private equity buyouts sheds important light on job losses and wage decreases in thousands of private equity transactions. Legislators in Europe and the US will continue to focus on how to reduce adverse economic effects...
Forbes › Finance › 3 weeks ago
For only the third time in history, the prices private equity pays to buy companies are higher than stock market values. Recent, fundamental changes in both the public and private markets, mean that this time around private equity's premium is likely...
Business Insider › Opinions › 5 days ago
The private-equity industry has been extracting wealth from the US economy for investors at the expense of the American economy for too long. The private-equity industry is too secretive, loads takeover targets with too much debt, and pushes companies...
The Wall Street Journal › 1 week ago
U.S. private-equity firms, armed with a record amount of cash, are struggling to find ways to spend it, as already expensive takeover candidates have gotten even pricier, making many of them too rich for even the most optimistic private-equity buyer.
Forbes › Finance › 0 month ago
Over a million jobs have been lost in the U.S. at private-equity backed retailers and suppliers and local businesses interconnected with those retailers.
CNBC › Politics › 3 weeks ago
Swift on Thursday plead for help from private equity firm Carlyle Group, which helped finance the deal to acquire her masters that she is protesting.
The New York Times › Finance › 2 weeks ago
Private equity firm Silver Lake has agreed to make a $500 million equity investment into the owners of English Premier League soccer champions Manchester City, the firms said on Wednesday, confirming a report in the Financial Times.
Sign In

Sign in to follow sources and tags you love, and get personalized stories.

Continue with Google
OR