Warren Stand on Private Equity Under Scrutiny at House Hearing

December 6, 2019 by Dan McCue
Sen. Elizabeth Warren (D-Mass.) answers a question while talking to attendees at an organizing event in the Orpheum Theatre in Sioux City, Iowa, on Saturday, Jan. 5, 2019. (Jerry Mennenga/Zuma Press/TNS)

WASHINGTON – Massachusetts Sen. Elizabeth Warren may score political points with the far left-wing of her party by vowing to rein in the ills of the private equity industry, but her proposals came under fire at a recent House Financial Services Committee.

Warren’s Stop Wall Street Looting Act of 2019 (H.R. 3848), inspired bipartisan push back during a Nov. 19 hearing, and at least one witness raised concerns that the measure could cause “serious harm” to small- and medium-sized businesses’ access to capital.

What was surprising was the degree of push-back the bill, one of a number of pieces of legislation discussed during the hearing, received.

Warren’s proposal would require private equity funds to share liability, prohibit capital distributions for two years after buyouts, and mandate new disclosure regulations.

It was supported at the hearing by Eileen Appelbaum, co-director of the Center for Economic and Policy Research.

She said the liability provisions of the bill would prevent the “reckless loading of debt onto companies.”

But Brett Palmer, president of the Small Business Investor Alliance, warned Warren’s proposal would unintentionally cause serious harm to small businesses’ access to capital while also reducing the funds private equity firms use to invest in small- and medium-sized companies.

Palmer went on to say that Warren’s bill is based on an “incorrect concept of investing.”

Ranking Member Patrick McHenry, R-N.C., went further, saying Warren’s proposal would erase somewhere between 6.9 million and 26.3 million jobs and threaten the pensions of millions of Americans.

He said he based his numbers on a recent report from the U.S. Chamber of Commerce.

Other bills considered by the Financial Services Committee included the Private Fund Board Disclosure Act of 2019, which would require a private fund’s investment advisers to report the board of directors’ race, ethnicity and gender composition to the Securities and Exchange Commission, and the SEC to make the report public; and Investment Adviser Alignment Act, which would define “private equity adviser” in addition to requiring certain report filings and impose a fiduciary duty on private equity funds.

Wayne Moore, trustee of the Los Angeles County Employee Retirement Association, told the lawmakers that more disclosure of private equity fees and expenses will help public pension fund investors.

“My fiduciary duties include making sure we get what we pay for,” Moore said. “Private equity is one of our best performing assets, but it is also our most costly asset.”

He later added “information is critical, and we lack the information we need.”

Drew Maloney, president and CEO of the American Investment Council, which advocates for the private equity industry, said 91% of public pension funds have private equity investments that in 2018 generated the strongest return of any asset class over the last 10 years.

“These strong returns have become increasingly critical for pension funds at a time when many do not have enough money to meet their existing obligations,” he said.

This statement inspired a flurry of support from Republicans on the panel.

Rep. Roger Williams, a Texas Republican, read a quote from the chairman of the Houston Firefighters’ Relief and Retirement Fund, who said “private equity opportunities far exceed those available in stock market investing for the foreseeable future.”

A number of his colleagues focused on how private equity investments have created rather than destroyed jobs. Among these was Rep. Ann Wagner, R-Mo., who said more than 47,000 of her constituents worked at private equity-backed businesses.

And Rep. Denver Riggleman, R-Va., told the committee that he “wouldn’t be here without private equity.”

He went on to relate how thanks to a $90,000 investment from private equity, he and his family were able to grow their small business and hire 20 full time employees after every bank they approached refused to provide capital.

Riggleman warned the committee that Sen. Warren’s proposed legislation would put his company and all of its employees out of business.

Joining the chorus were several Democrats, including Rep. Al Lawson, of Florida, who said “private equity is the best performing asset class for public pensions, and that is true here in Florida.”

Rep. Josh Gottheimer, D-N.J., said the same is true in his state where private equity investments have generated the highest returns of any asset class for the New Jersey Division of Investment.

These returns played a crucial role in supporting the retirement of local firefighters, schoolteachers and police officers, he said.

Rep. Gregory Meeks, D-N.Y., said organized labor and minority-owned firms are partnering directly with private equity to support jobs and generate stronger pension returns on the current redevelopment of Terminal One at JFK Airport, which is located in his district.

Rep. Ben McAdams, D-Utah, then recounted how private equity investments in Utah have played a critical role in expanding early childhood education, lowering recidivism rates, reducing homelessness, and building clean energy projects.


Federal Financial Regulators Assure Congress They Seek Minorities and Women in Workforce
In The News
Federal Financial Regulators Assure Congress They Seek Minorities and Women in Workforce
September 9, 2020
by Tom Ramstack

WASHINGTON — Representatives from federal financial agencies defended their record on hiring women and minorities Tuesday while members of a congressional subcommittee accused them of an uninspired effort. “I’m not sensing that we’re making a lot of progress here,” said Rep. Sylvia Garcia, a Texas Democrat.... Read More

A Seattle Police Officer’s Extraordinary Pay Raises Questions Department Can’t Answer
In The States
A Seattle Police Officer’s Extraordinary Pay Raises Questions Department Can’t Answer

SEATTLE — Seattle Police Officer Ron Willis was exceptionally busy in 2019 — so much so that he crammed the work of two years into just one. Willis, a 58-year-old patrol officer, made $414,543.06 last year — more than the mayor, the police chief or any... Read More

Senate Committee on Aging Reports on Financial Challenges Women Face
Senate Committee on Aging Reports on Financial Challenges Women Face
August 20, 2020
by Gracie Kreth

WASHINGTON - United States Senators Susan Collins, R-Maine, and Bob Casey, D-Penn., the chairman and ranking member, respectively, of the Special Committee on Aging, released a report last week examining the challenges older women face preparing financially for retirement.  During their later years, women on average... Read More

Supreme Court Holds SEC Can Recoup Money in Fraud Cases
Supreme Court Holds SEC Can Recoup Money in Fraud Cases
June 22, 2020
by Dan McCue

WASHINGTON - With decisions in several high profile cases pending -- including one on whether President Donald Trump can shield his financial records from Congressional scrutiny --  the U.S. Supreme court on Monday opted to rule on a case with quite a bit lower profile. By... Read More

NY Stock Exchange Reopens for First Time in Two Months
NY Stock Exchange Reopens for First Time in Two Months
May 26, 2020
by Dan McCue

The trading floor of the New York Stock Exchange reopened Tuesday, and though it was largely seen as a symbolic first step toward economic recovery, the financial markets opened with a surge of optimism. In early trading, the Dow Jones Industrial Average was up 600 points,... Read More

Ratings Agency Says Non-Bank Mortgage Lenders Face 'Intense' Liquidity Crunch
Ratings Agency Says Non-Bank Mortgage Lenders Face 'Intense' Liquidity Crunch
April 3, 2020
by Dan McCue

WASHINGTON - The rating agency Moody's downgraded its outlook for non-bank mortgage lenders in the U.S. from "stable" to "negative" on Thursday, warning the industry faces "intense" liquidity problems due to the ongoing coronavirus outbreak. As previously reported in The Well News, nonbank lenders like ABC... Read More

News From The Well
scroll top