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Baldwin, Warren, Brown, Pocan, Jayapal, Colleagues Unveil Bold Legislation to Fundamentally Reform the Private Equity Industry

Comprehensive Bill Would Ensure Private Investment Funds Have Skin in the Game

Reforms Would Empower Workers, Safeguard the Financial System, and Protect Investors


WASHINGTON, D.C. U.S. Senators Tammy Baldwin (D-WI), Elizabeth Warren (D-MA) and Sherrod Brown (D-OH), along with Representatives Mark Pocan (D-WI) and Pramila Jayapal (D-WA), today unveiled the Stop Wall Street Looting Act, a comprehensive bill to fundamentally reform the private equity industry and level the playing field by forcing private equity firms to take responsibility for the outcomes of companies they take over, empowering workers, and protecting investors.

“An out of state, predatory private equity firm shut down stores across Wisconsin and nearly 3,000 Shopko workers lost their job. We need to rip up the predatory playbook that private equity firms are using to leave workers with nothing but pink slips,” said Senator Baldwin. “Our legislation takes on Wall Street abuse and closes loopholes that private equity firms are using to make a quick buck while they shut down businesses and lay off workers. This bold reform will help rewrite the rules of our economy and protect workers from predatory practices so that we can start rewarding hard work and not just wealth.”

“For far too long, Washington has looked the other way while private equity firms take over companies, load them with debt, strip them of their wealth, and walk away scot-free —leaving workers, consumers, and whole communities to pick up the pieces,” said Senator Warren. “Our bill ends these abusive practices by putting private investment funds on the hook for the decisions made by the companies they control, ending looting, empowering workers and investors, and safeguarding the markets from risky corporate debt.”

“Workers’ jobs, benefits, and pensions have been wiped out by private equity executives looking to make a quick buck,” said Senator Brown. “The Stop Wall Street Looting Act will protect hardworking Ohio families by ending the risky bets that cripple Main Street companies for the benefit of Wall Street.”

“With the help of our rigged tax code, private equity firms have made out like bandits at the expense of workers and communities. Private investment funds should not be able to cash out by gambling with the wellbeing of hard working families,” said Representative Pocan. “When the private equity firm Sun Capital bought Shopko – a retail chain that’s been in business for over 50 years – they loaded it up with debt, sending it into bankruptcy and leaving their workers with no severance and few options. After many employees spent years – some decades – working for Shopko, they were abruptly left out in the cold with nowhere to turn. This critical piece of legislation holds predatory private equity firms accountable and protects workers from the consequences of firms’ greed.”

“This bold legislation stands firm against Wall Street and private equity firms by protecting workers from abusive practices that eliminate jobs and topple markets,” said Representative Jayapal. “My colleagues and I are taking the powerful steps this issue deserves – we are listening to the families, workers and small businesses that deserve fair treatment.”

Joining the lawmakers in introducing the legislation are Senators Kirsten Gillibrand (D-NY) and Bernie Sanders (I-VT), along with Representatives Barbara Lee (D-CA), Jesús "Chuy" García (D-IL), Ayanna Pressley (D-MA), Rashida Tlaib (D-MI), Jan Schakowsky (D-IL), Ro Khanna (D-CA) and Raúl Grijalva (D-AZ).

“It’s time to eliminate greed as a business practice and start rewarding work again, and this bill is an important step toward that goal,” said Senator Gillibrand. “It’s shameful that a few powerful investors can mine a company to benefit themselves at the expense of communities, workers, and their families. We must take on predatory practices of private equity firms and fight to protect and empower workers and ensure they have a voice in the economy.”

“We must act now to prevent more mass lay-offs due to predatory private equity deals,” said Representative Ro Khanna. “Our laws should reward hard work and persistence, not loopholes and financial looting. Proud to support this bill to demand fairness and transparency from Wall Street.”

“For far too long, workers have found themselves collateral damage in the destructive business decisions of private equity,” said Representative Pressley. “This bill protects the interests and dignity of workers throughout acquisition and beyond.”

Over the last two decades, private equity activity in the economy has exploded. Since 2009, investors have allocated $5.8 trillion globally to private equity. These funds have purchased companies in all sectors of the economy — from nursing homes, to newspapers, to grocery stores — laying off hundreds of thousands of workers and ruining thousands of companies in the process. Today, 35,000 companies owned by private equity employ nearly 5.8 million workers.

The private equity industry claims that it earns high returns for investors by leveraging their capital to buy companies, using funds’ management expertise to make the companies’ operations more efficient, and then selling the companies at a profit. In reality, private equity funds often load up companies with debt, strip them of their assets, and extract exorbitant fees, while guaranteeing payouts for themselves and walking away from workers, communities, and investors if the bets go bad.

The Stop Wall Street Looting Act would fundamentally reform private equity by closing the legal, tax, and regulatory loopholes that allow private equity firms to capture all the rewards of their investments while insulating themselves from risk. Firms that take appropriate steps in the interest of the company, the fund, and workers, will continue to make investments. The bill would:

  • Require Private Investment Funds to Have Skin in the Game. Firms will share responsibility for the liabilities of companies under their control including debt, legal judgments and pension-related obligations to better align the incentives of private equity firms and the companies they own. In order to encourage more responsible use of debt, the bill ends the tax subsidy for excessive leverage, and closes the carried interest loophole. 
  • End Looting of Portfolio Companies. To give portfolio companies a shot at success, the proposal bans dividends to investors for two years after a firm is acquired and ends the extraction of wealth from acquired companies through excessive fees.
  • Protect Workers, Customers, and Communities. This proposal prevents private equity firms from walking away when a company fails and protects stakeholders by:
    • Prioritizing worker pay in the bankruptcy process, and improving rules so workers are more likely to receive severance, pensions, and other payments they earned.
    • Creating incentives for job retention so that workers can benefit from a company’s second chance.
    • Ending the immunity of private equity firms from legal liability when their portfolio companies break the law, including the WARN Act. When workers at a plant are shortchanged or residents at a nursing home are hurt because private equity firms force portfolio companies to cut corners, the firm should be liable.
    • Clarifying that gift cards are consumer deposits, ensuring their priority in bankruptcy.
  • Empower Investors by Increasing Transparency. Private equity managers will be required to disclose fees, returns, and political expenditures so that investors can monitor their investments and shop around.
  • Require Regulators to Address Risky Leverage.  The Dodd-Frank provisions that require arrangers of corporate debt securitization to retain some of the risk will be reinstated.

The bill text is available here, the one-page summary is available here, and a section-by-section summary is available here. The Center for Economic and Policy Research’s economic analysis of the legislation is available here

“The Stop Wall Street Looting Act will, for the first time, create sensible rules for the private equity industry that will allow productive investment to continue while halting the kinds of abusive practices that wipe out jobs and cripple strong companies,” wrote Eileen Appelbaum, PhD, Co-Director and Senior Economist at the Center for Economic and Policy Research (CEPR). 

The legislation is supported by the AFL-CIO, Americans for Financial Reform, American Federation of Teachers, United for Respect, UNITE HERE, NewsGuild, Communications Workers of America, the Strong Economy for All Coalition, the Center for Popular Democracy, and the Economic Policy Institute.

“The Stop Wall Street Looting Act will shut down loopholes and carve outs in the law that allow a handful of Wall Street millionaires and billionaires to take over healthy businesses and suck them dry,” said AFL-CIO President Richard Trumka. “It will protect the 5.8 million workers employed by private equity-owned companies and many more workers and retirees whose retirement savings are tied up with these Wall Street tycoons.”

“I put 30 years of my life into Toys ‘R’ Us and built my store into a beloved part of my community. Wall Street profiteers threw that love and value away when they bled Toys ‘R’ Us dry for profit. If we hadn’t spoken out, they would have left tens of thousands of us on the street without the severance and respect we had earned,” said Madelyn Garcia, a United for Respect leader who spent her entire career with Toys ‘R’ Us and was a store manager in Boynton Beach, Florida when her store was shuttered. “This bill is about giving working people a better chance to stand up to billionaire predators and fight for our jobs, our livelihoods, and our dignity. This bill is what standing up for working people looks like.”

“Private equity and hedge funds have come to wield enormous influence over the American economy, often with terrible consequences for workers and communities,” said Lisa Donner, Executive Director, Americans for Financial Reform. "We need effective rules of the road to stop predatory practices by these Wall Street giants.”

“We need policies like those proposed in the Stop Wall Street Looting Act to discourage companies from taking on excessive debt to complete deals, protect workers in bankruptcy, and hold private equity owners responsible when the companies they target end up in bankruptcy. We need to make sure wealthy private equity managers pay their fair share of taxes by closing the loop hole on carried interest,” said D. Taylor, President of UNITE HERE.

“Private equity firms and hedge funds have played a particularly destructive role in local journalism. Motivated only by greed, they deplete news organizations, eliminate beats, lay off journalists at twice the industry average, and shutter newspapers to sell their assets. They make it virtually impossible for local news organizations to serve as government watchdogs or effectively tell the stories of their communities. It’s time they are held accountable. Our democracy depends on it,” said NewsGuild-CWA President Bernie Lunzer. “The Stop Wall Street Looting Act will highlight and limit these predatory maneuvers.”  

“For years, private equity fund managers have gotten obscenely wealthy on the backs of the working class. They have made billions by buying up companies, loading them up with debt and stripping them of assets, and leaving workers and retirees holding the bag if anything goes wrong. They've put everyone from manufacturers to retailers to local newspapers out of business in the process. The Stop Wall Street Looting Act will fix that by shining a light on these predatory practices and ensuring that private equity funds will be held accountable for the results of their risky bets. CWA is proud to endorse this important bill,” said Shane Larson, Director of Legislation, Politics, and International Affairs for the Communications Workers of America. 

“When we talk about extraction in our economy, private equity firms are some of the biggest culprits,” said Jennifer Epps-Addison, Network President and Co-Executive Director of the Center for Popular Democracy. “Black communities were devastated by the Great Recession, losing nearly half our wealth following the collapse. This legislation will help restore and keep wealth in Black and Brown communities, instead of the pockets of Wall Street billionaires.” 

“If the Vikings had had public relations teams, they would have claimed to be making better use of the resources of the fishing villages they pillaged. Private equity often leaves a similar trail of destruction—looting productive resources rather than salvaging unproductive ones. This bill addresses serious problems with the private equity business model, without getting in the way of firms that actually do produce allocative or operational efficiencies that strengthen the U.S. economy,” said Thea Lee, President of the Economic Policy Institute.

Throughout her career, Senator Baldwin has stood up for the rights of workers and has called out the abuses of private equity firms. She is the author of the Carried Interest Fairness Act, which requires private equity managers to pay their fair share of taxes—that legislation is included in the Stop Wall Street Looting Act. In June, all Shopko stores in Wisconsin closed their doors, laying off 3,000 workers. They were promised severance pay that they have yet to receive. Senator Baldwin has met with former Shopko workers, and has demanded that Sun Capital stand by their promise to pay ShopKo workers their severance.