Private equity firms should be abolished

In his latest BIG newsletter, Matt Stoller (previously) relates the key moments in the history of private equity, from its roots in the notorious "leveraged buyouts" of the 1980s, and explains exactly how the PE con works: successful, productive business are acquired through debt financing, drained of their cash and assets, and then killed, leaving workers unemployed and with their pension funds looted, and with the business's creditors out in the cold.

Private equity's story begins with William Simon, "a mean, nasty, tough bond trader who took no BS from anyone" whose idea of child-rearing was the douse his children with buckets of ice-water to rouse them from bed on weekend mornings. Simon was given senior Treasury appointments under Nixon/Ford, then became America's energy czar during the oil crisis. He was pro-austerity and blocked the bailout of NYC in 1975.

Once out of government service, Simon set about to create a Republican "counter-intelligentsia" to swing the party to the right. He ran the influential far-right think-tank the Olin Foundation, and dispersed money to fund law and economics scholars who were devoted to discrediting the New Deal and the idea of any limits on corporate power, all cloaked in "scientific" rhetoric.

The darlings of this movement -- Henry Manne, Milton Friedman, Michael Jenson -- promoted the idea of "shareholder capitalism" and the notion that managers have a single duty: to put as much money in the pockets of investors, even at the expense of the business's sustainability or the well-being of its workers. Read the rest