Wall Street’s Private Equity Barons

4 mins read

The massive, malignant force in the American economy that Wall Street created has a colorless name: private equity.

These enormous pools of money, controlled by a relatively small number of financiers, have come to control far more companies than are listed on stock exchanges. Since 2008 — that is, since the crisis Wall Street created — private equity has grown from controlling $1 trillion in wealth and assets to an astonishing $7.4 trillion today. And the COVID-19 pandemic, a time of death and distress for millions, has been a boom time for already wealthy Wall Streeters.

The list of abuses of private equity grows daily. It has harmed national security, shortened life expectancies in nursing homes, and increased health care costs. These financiers buy up smaller companies to create monopoly power and raise prices. All in the name of profit.

Over the next month, Americans for Financial Reform, in partnership with groups from around the country, will be releasing a series of videos highlighting the abuses of private equity. Here’s a teaser about how private equity has destroyed retail jobs that Black and Brown communities rely on, contributed to the affordable housing crisis by raising costs for mobile homes, hollowed out local newspapers, and raised costs for families who want to speak with loved ones in prison.

Here’s a short video which shows the damage caused by private equity.

Private equity, which used to call itself the “leveraged buyout industry,” raises money from pension funds, endowments, and wealthy individuals. They use this money plus a lot of debt to buy companies. Sometimes they raise prices for consumers. They almost always squeeze workers. Other times, they sell off valuable assets to pay themselves. They usually walk away in three to five years. 

Private equity companies go bankrupt at a higher rate than companies with other owners, and they’re the reason why you don’t see a Toys “R” Us, Payless Shoes, or Gymboree anymore. When private equity takes over, the looting starts. The pirates who used to loot with sword in hand risked life and limb; Wall Street’s barons just sign some papers and they get rich.

It’s no wonder that activists often refer to #PirateEquity🏴‍☠️

Private equity is also a “billionaire factory,” in the words of one prominent scholar, contributing to the massive concentration of wealth that warps our economy and politics. A single private equity mogul, Stephen Schwarzman, has seen his net worth double, to about $31 billion, during the pandemic. During the 2020 election cycle, he pumped over $35 million into Republican coffers and stayed loyal to Donald Trump even after the January 6 insurrection.

For political and economic reasons, reforming Wall Street private equity must be part of the progressive agenda for economic justice. Polling demonstrates that Wall Street reform is overwhelmingly popular with Democrats and wildly popular with Republicans and independents.

In the last Congress, Sen. Elizabeth Warren and Rep. Mark Pocan introduced the Stop Wall Street Looting Act in an effort to curb the worst abuses of private equity. Sign the petition to support reform at stopwallstreetlooting.org. You can also help spread the word on social media.

Photo by Nick Sparkman on Unsplash

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