June 25, 2020

Warren to Private Equity Industry Lobbyists: Don't Exploit the COVID-19 Pandemic to Line the Pockets of the Wealthy at the Expense of Struggling Workers and Communities

Warren urges AIC to reform private equity practices that hurt workers and hold back economic recovery, rather than lobby for federal bailout funds; Warren's Stop Wall Street Looting Act would protect workers, consumers, and communities from the predatory practices of private equity

Text of Letter (PDF)

Washington, DC - United States Senator Elizabeth Warren (D-Mass.), Ranking Member of the Senate Banking, Housing and Urban Affairs Subcommittee on Financial Institutions and Consumer Protection, sent a letter to the head of the American Investment Council (AIC), which represents the private equity industry, regarding reports that private equity firms are maneuvering to acquire and siphon profits off of distressed companies and the federal assistance programs designed to provide economic relief to small businesses struggling in the midst of the economic collapse caused by the coronavirus disease 2019 (COVID-19) pandemic. Senator Warren urged AIC to instead work to protect the millions of workers, consumers, and countless other stakeholders that find themselves dependent on private equity owners and the businesses they control, and to support her Stop Wall Street Looting Act.

"I am particularly concerned that the private equity industry you represent may exploit this crisis to continue extracting value out of struggling companies, lining the pockets of wealthy firms at the expense of workers and communities struggling to respond to this pandemic across the country," Senator Warren wrote. 

Raising concerns about the private equity industry's further potential exploitation of the public health and economic crises, Senator Warren's letter highlights how the pandemic has revealed long-existing weaknesses in the economy and how private equity practices have hurt workers and communities. Health care companies run by private equity firms have cut the pay and benefits of healthcare industry workers amid the pandemic, even though these workers have been at the forefront of the pandemic response. The largely unregulated economy-wide expansion of private equity has come at the expense of workers, consumers, taxpayers, families, and communities across the country, as private equity funds often seek to meet drastically high returns by laying off workers and employing cost-cutting measures that reduce quality of service.

"Your organization lobbied for increased access to funds allocated by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which was intended to provide economic relief to small businesses and industries suffering from the economic collapse caused by the COVID-19 pandemic, or has otherwise pushed the Trump administration to benefit the private equity industry amid the pandemic," Senator Warren continued.

Despite some limitations on the companies eligible to participate in the Federal Reserve System's direct lending programs, private equity firms stand to reap substantial financial benefits from the $2.3 trillion lending programs backstopped with taxpayer dollars. The industry also benefitted when the Department of Labor announced that the private equity industry can now access a multi-trillion-dollar market through some retirement plan sponsors. 

"As the COVID-19 pandemic brings the economy and millions of businesses around the country to the brink of collapse, private equity firms and managers should prioritize and support their existing portfolio companies, and the workers, consumers, and communities that rely on those businesses. And private equity firms with investments in industries that have been disrupted by the pandemic should take immediate action to guarantee that workers and other stakeholders do not bear the brunt of the financial fallout," Senator Warren wrote.

Senator Warren has requested that AIC respond to her letter no later than Wednesday, July 8, 2020.

Last year, Senator Warren introduced the Stop Wall Street Looting Act of 2019 to close the legal, tax, and regulatory loopholes that have long allowed private equity firms to capture the rewards of their investments while passing the risk on to target companies, investors, workers, and consumers.

Senator Warren has also conducted a series of investigations into private equity abuses throughout her time in the Senate and is continuing to fight for reforms that will protect consumers during this crisis. She published an op-ed in The New York Times on what Congress must do now to confront the coronavirus crisis, including the need to ensure that small businesses that want to come back can do so without being forced to sell to giant corporations or predatory private equity funds. She and Representative Alexandria Ocasio-Cortez (D-N.Y.) also introduced the Pandemic Anti-Monopoly Act to impose a moratorium on risky mergers and acquisitions -- and stop large corporations from exploiting the pandemic to engage in harmful mergers and strengthen the federal government's ability to respond effectively to future crises.