Elizabeth Warren - “Stop Wall Street Looting Act”
What are this forum's thoughts on Elizabeth Warren's outlined plan to regulate private equity? Interestingly I haven't seen this topic discussed on WSO yet.
Elizabeth Warren Takes Aim at Private-Equity Funds
If enacted, it seems to me that this would significantly choke out the industry. I think the bill contains a great deal of posturing and is layered with misunderstanding: some of the proposed rules make no sense to me - for example, making PE funds liable for debt in addition to their equity contribution - which is surprising, given Warren's "expertise."
What does everyone think - is it unreasonable or has Warren proposed a bill with good points?
also interested in what people think
The same person who claimed to be "Native American" to get into Harvard because she heard it from her parents? I understand Wall-Street takes advantage of people who in are middle class but some of these people are not informed. Investing on the Wall-Street won't make you wealthy in a few months or a year, you have to have to accept the risk. If she proposes raising taxes, I'll drop my U.S citizenship and move somewhere else with more reasonable and logically laws for a career.
Everyone loves to hate the basically totemic Wall Street fat cat in a pin stripe suit, puffing a cigar worth more than a blue collar man's daily take home pay.
They forget its the hard working people on Wall Street that turn the dimes they stack in their pensions into dollars and the monthly insurance premiums they pay turn into a 9 - figure fund that pay out an insurance claim they could never afford to pay cash.
And you are right, people fundamentally do not understand what happens in finance, they think its just magically making money and cheating the system.
Out of curiosity, where do you see taxes heading in 2020 and beyond? I've legitimately considered relocation just because it's absurd that I'm losing near if not more than half of my paycheck. Ridiculous that hard workers have to suffer more.
My personal answer is I am going to have to wait to see what happens next year and what happens to the tax rate in the New York area or basically in the United States. If it is absolutely unreasonable, I will leave and I will tell you where. Alexandra Ocasio Cortez said who needs more than $10 Million and Bernie Sanders is suggesting 70%+ on millionaires/billionaires? It will take time to answer this question.
These fucking lefties are gonna bring the next recession.
fucking liberals
They forgot to mention how many cases PE funds rescued companies (saving jobs), expanded them (creating new jobs) or increased product quality (customer care improvement).
Why not enacting a law restricting the salaries and bonuses that politicians received OTC? Why not enacting a law to monitor all promises made during campaign or the amount of hours they actually work or output generated?
Is a problem PE guys pays a lot in taxes to pay their salaries?
As one British politician said "You can be as left wing as your wallet can afford"
Good point, the problem is not people having money, it is the fact that politicians allow themselves to be influenced by the investor/donor class more than the average american or an organization of average Americans.
While this proposal would personally affect my employment prospects I can't deny that there are a lot of negative effects of private equity that likely offset most of the positive ones.
Negatives 1) Job Loss- the most common strategy in PE always involves job cuts. I can count on my hands how many deals that I've looked at that didn't have some sort of synergies / cost savings which were primarily headcount related. Popular PE plays such as roll ups in fragmented industries always result in job losses which leads to my next point;
2) Consolidation and pricing power- consolidation being a popular strategy always leads to higher prices for consumers and businesses in the end. Sure you get benefits of economies of scale (and dont raise prices) and there maybe improved service / product but in the end if you go from 100 providers to 10-20 (or less) prices will always go up.
3) Over reliance on debt- I'm much more impressed by operator driven shops vs those that just bring financial engineering to the table and hope for a quick flip by timing the market. The era of low interest rates has created a huge number of zombie companies that are way over levered. They cant grow out of the debt as there is no cash flow they can invest into new products so they just chug along hoping that rates stay low.
The retail industry has been decimated by eCommerce but PE had a big role in it too by over levering companies giving them little wiggle room to adjust to new customer trends or put money into online platforms / re design their stores. Toys' R US , Sears to name a few were milked to the bone (mgt fees, dividends, sales lease backs on real estate), while employees and creditors were ultimately left holding the bag. These examples are not widely understood so populist anger hasn't manifested itself vs PE as it has against Banks.
4) Shrinking of public markets- Increasingly retail investors, your mom and pops so to say have fewer and fewer picking to choose from as the assets they can invest in ( at low cost) have shrunk as demonstrated by decline in # of publicly listed companies. At the same time private markets have grown driven by the exponential growth in PE and alternative investments. This effectively locks out majority of the populace from being able to benefit from a large sector of the economy and thus locks in gains for the select few. With $2 trillion of dry powder in PE funds out there this will only continue.
**Positives **
1) Higher Returns for Pension funds and public investment vehicles. In an era of low rates and under-performance in traditional investments (bonds, equities) PE (and real estate) has been driving outsize returns, albeit with high fees. This directly benefits retirees and public finances, especially in states were pension funds are severely underfunded.
2) Turnaround of Distressed Assets - As others have mentioned PE takes the risk on a lot of assets that were in bad shape, rescuing those businesses ( if possible) and thus jobs in the process.
3) Professionalizing operations - this is more true in lower middle market PE where family run companies are running inefficiently or not being ambitious enough. Shrewd operators can make all the difference and push the business to the next level, while creating value and jobs in the process.
There are likely some other positives that i'm missing or dont want to expand on (efficient markets, etc).
I don't think it will ever fly.
Since when do lawmakers need "expertise" to make laws?
She’s batshit.
I would love to hear this woman try to defend this policy to a room full of financial literates.
What makes you think she's unqualified to discuss this topic, or any less qualified than any other politician? This has been her area of focus throughout her time in Congress and she is extremely articulate in her Wall Street criticism. I get why many on this forum don't like her, but to say she's dumb or a moron is ignorant. She would put Trump in a bodybag in a debate if given the chance.
She is not dumb or a moron. She's disingenuous. She knows this would have ramifications that would wreak havoc on the financial system, but she proposes it anyway to get sound byte brownie points from those who don't know any better.
She would lose a debate against a U-Penn graduate in Economics even if she is a Harvard Lawyer. What does a lawyer know about the market? She would never win a debate against Trump. Hillary Clinton lost the debate against Trump as a Yale Lawyer. Trump would destroy her.
Thank you for the monkey sh*t, no worries.
Trump is the most policy-ignorant, incurious, empty suit we've ever had as major politician. He's good at one thing, and that is conning people like you.
I gave you a silver banana Alt-Ctr-Left because I respect your opinion even though we have differences in thought.
Thanks man. I gave you the monkey shit because you're wrong.
It is such a mistake to tout Trump's education as some justification for his understanding of economics. He's repeatedly shown he doesn't understand it and doesn't understand how to make informed policy decisions.
See where her campaign funding and financial support for the DNC comes from and you'll see that this law makes no sense if taken at face value.
Lol as if this being one's area of focus throughout one's time in congress means anything. I strongly suggest you go back and watch the post crisis senate hearings, particularly GS and another that included most of the CEO's/Chairmen. "We can't actually do that because it's illegal." - John Mack having to remind the lawmakers about their own laws pertaining to holding underwritten securities on the IB's own books.
She's a pandering performance artist at best and a moron at worst. None of what's in this law makes sense. I'm not worried about it.
The only good thing about these democrat sponsored legislation is the effort they put in to making anagrams for them like the MAR-A-LAGO act, always good entertainment. Always seems crazy that they seemingly draft & introduce them just to have a headline when they know full well that the crazy BS they suggest will never get passed. Came here for similar laughs but was disappointed.
It will never pass because the donor class that these politicians have to beg are the ones running these firms and deeply invested in them. Democrats will beat Wall Street over the brow one minute then kiss its figurative hand for a campaign funding hand out. With the election coming up, something tells me this tune will change pretty fast
When you have a politician in the US that wins a primary based on grass roots funding and actually uses language class warfare to organize the working class and working poor, then we can talk. Even given that, things can change, one example in Brazil is where once armed, militant Marxist revolutionaries got in bed with neoliberal elites once they came to power.
Money and power are a hell of a drug.
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