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Elizabeth Warren's private equity plan seeks to strip industry of riches

Heather Perlberg, Sabrina Willmer and Michael McDonald, Bloomberg News on

Published in Business News

WASHINGTON -- Elizabeth Warren wants to force private equity executives to eat their own cooking.

Predictably, they aren't thrilled.

The Democratic senator and candidate for president issued a proposal this week that would link the profits at private equity firms to the success -- or failure -- of the companies they buy and sell. She also proposed limiting certain tax breaks.

"It is more of an industry-destroying proposal," said Steve Biggar, an Argus Research Corp. analyst who covers Blackstone Group Inc., Apollo Global Management LLC and KKR & Co. "If firms like Blackstone and KKR can't do this, in a free market someone less regulated will pick up the slack."

Warren's plan seeks to rein in private equity firms, which she said often act like "vampires" in their acquisitions by "bleeding the company dry and walking away enriched even as the company succumbs."

A former Harvard law professor, Warren consistently places in the top four in a crowded Democratic field, having enjoyed a boost in polls after the first presidential primary debate. The plan unveiled Thursday -- called the "Stop Wall Street Looting Act" -- has several Democratic co-sponsors, including her 2020 rival Kirsten Gillibrand of New York and House Democrats Ayanna Pressley of Massachusetts and Rashida Tlaib of Michigan.

 

Warren is taking aim at an industry that's booming. Investors have committed about $4 trillion to private equity in the last decade, according to Preqin data, and the money is continuing to pour in. Blackstone alone raised $88 billion in the first six months of this year.

The plan drew a rebuke from the industry's trade group. "Private equity is an engine for American growth and innovation -- especially in Senator Warren's home state of Massachusetts," said Drew Maloney, president of the American Investment Council. "Extreme political plans only hurt workers, investment, and our economy."

Here's a look at Warren's proposal.

Carried Interest

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