With contributions by Maria Wolvin and Ben Marsico.
Congressional Democrats took aim at private equity last week with the announcement of new legislation that would bring sweeping changes to the industry. If implemented, the law would fundamentally alter the operation and oversight of private equity funds.
Meanwhile, President Donald Trump announced his nomination for secretary of the Department of Labor. The announcement comes as the department continues work on its joint-employer rulemaking, which has received criticism from Democrats.
Lastly, Congress looks forward to its summer recess, during which work in Washington, D.C., will be on hold. Accordingly, ACG’s Public Policy Roundup will also go on break until lawmakers return on Sept. 9. However, ACG’s public policy team will continue to monitor activity should any highly pertinent news arise.
Elizabeth Warren Releases Sweeping Private Equity Overhaul Bill
High-ranking Democrats, including 2020 presidential hopefuls, unveiled a plan late last week that would dramatically alter the private equity industry.
On July 18, Sen. Elizabeth Warren, D-Mass., and four other Democrats in the Senate introduced the “Stop Wall Street Looting Act of 2019,” a bill that would impose heavy restrictions and increased oversight on private equity funds.
If implemented, the wide-ranging legislation would make private equity funds liable for debt and other obligations held by their portfolio companies and eliminate the preferential tax treatment for carried interest. It would also prevent investors from receiving dividends for two years after a company is acquired; prioritize worker severance over executive pay during a bankruptcy; require private equity managers to disclose fees and returns; and make collateralized debt managers subject to Dodd-Frank regulations.
In a more than 3,000-word post on Medium published on the same day the bill was announced, Warren described the private equity industry as “legalized looting,” calling it “the poster child for financial firms that suck value out of the economy.” She also accused the private equity industry of making “a handful of Wall Street managers very rich while costing thousands of people their jobs, putting valuable companies out of business, and hurting communities across the country.”
The bill is a cornerstone of Warren’s “economic patriotism” agenda, an initiative laying out the economic policies she would support if elected president in 2020.
Sens. Kirsten Gillibrand, D-N.Y., Bernie Sanders, I-Vt., Tammy Baldwin, D-Wis., and Sherrod Brown, D-Ohio, joined Warren as co-sponsors of the bill.
Reps. Mark Pocan, D-Wis., and Pramila Jayapal, D-Wash., introduced a companion bill in the House that was co-sponsored by Reps. Barbara Lee, D-Calif., Jesus Garcia, D-Ill., Ayanna Pressley, D-Mass., Rashida Tlaib, D-Mich., Jan Schakowsky, D-Ill., Ro Khanna, D-Calif., and Raul Grijalva, D-Ariz.
The introduction of this legislation is the latest example of the negative image some policymakers associate with private equity, despite its contributions to economic growth across the country. The latest issue of Middle Market Growth reports on data that show companies with private equity backing outperform the broader business community in retaining jobs, even in the districts of legislators who support the Stop Wall Street Looting Act.
ACG is actively analyzing the bill text and assessing next steps for strategic advocacy on behalf of the middle market.
Antonin Scalia’s Son to be Nominated for Labor Secretary
The Department of Labor may soon be getting a new leader, according to a statement from President Donald Trump.
In a Tweet posted July 18, Trump announced his nomination of Eugene Scalia, the son of the late Supreme Court Justice Antonin Scalia, for Labor Secretary.
Scalia has previous experience at the Labor Department, where he served as solicitor during the George W. Bush administration. During that time, Scalia built a reputation as an opponent of regulation. Later, he built a career in private practice defending companies in labor disputes, which indicates he will likely continue the department’s deregulatory agenda.
The Labor Department post was vacated when its previous secretary, Alex Acosta, announced his resignation on July 12 after facing heavy criticism for his role in a 2007 court case involving Jeffrey Epstein, the wealthy financier accused of sex trafficking.
The replacement comes at a time when the Labor Department continues its joint-employer rulemaking, which has come under fire from Democrats.
ACG’s public policy team submitted a comment letter in favor of the rulemaking on June 25.
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Benjamin Glick is ACG Global’s marketing and communications associate.