Tuesday, August 2, 2016

NYT Pushes PEU Dependence on Public

NYT's Bottom Line Nation published an odd series of slides praising the impact of private equity underwriters (PEU).  Readers are free to scroll through their slides in a search for actual substance.  I offer a historical perspective from a former major financial news reporter.

There are very few people out there who will talk and write honestly about private equity. I know from personal experience that the financial press is so eager to break news on "deals" that reporters (who are increasingly compensated on the number of "market moving stories" they write) can't afford to be critical of Carlyle, KKR and Blackstone, and risk losing access to people at those firms.

NYT's Slide 4 states "Private equity firms are essentially savvy bargain hunters. They make money by buying up businesses they consider to be underperforming, looking to maximize profits and eventually sell them off."

The "daily life" products shown in NYT's slides are made and used by people.
I have seen so many people -- particularly those in their 50s - 70s -- taken apart by what has happened in their industry as greed has hollowed out the economy. These are people took pride in their jobs and held themselves to this invisible standard that we all just took for granted, but is being wiped out.
Slide 5 in the private equity promo offered "These investors have lots of money at their disposal, mainly from rich individuals and pension funds. They also face fewer regulations than banks. Since the 2008 financial crisis, they’ve expanded their horizons and begun shopping for bargains in new places."

I can remember Bloomberg's private equity reporter - who you featured in a recent blog photo - going on TV to talk about the HCA dividend and calling it a "liquidity event." The reporters are trained by the PE firms' PR people to use language that they find acceptable. Wouldn't want to say they're "cashing out." I've never seen anything like it before. 
KKR added billions in new healthcare costs with its ownership of hospital giant HCA but that should not be a surprise given President Obama's health reformer Nancy Ann Deparle came from private equity.  To the private equity swamp she returned after her years of "public service."  This points to how private equity utilizes government to pave the way for their next round of profits.

The Carlyle Group scares me more than anything I've ever seen on Wall Street. It seems to exist to corrupt politicians and it's hard to know who they even represent.
I watched a video interview of (David) Rubenstein and his arrogance is really beyond tolerance. He was going on about the debt ceiling problem and how there would need to be cuts in services and higher taxes. When the reporter asked him about tax on carried interest he turned really disdainful and said that this "only" amounted to $22 billion over some number of years and this was not serious money. Boy, nothing like everybody doing their small part to save the country from oblivion!
Rubenstein saved private equity's preferred taxation, a feat recently recognized by Harvard University's investment arm.

NYT's piece on private equity ended in a puff of smoke, where PEU owned emergency responders have slower response times.  I'm sure the public feels better knowing profits outweigh their personal safety.

A different Bottom Line Nation story stated:

The amount the private equity industry spent on lobbying in 2015 was more than triple what it had spent a decade earlier, according to the Center for Responsive Politics. At the peak of the financial crisis, the figure was even higher. Political donations have increased nearly sixfold.
Remember:  Politicians Red and Blue love PEU!  If private equity is so integral to daily life NYT could be paving the way for the next bailout.

Note:  PEUReport houses ten years of stories showing the impact of private equity.  Feel free to search the site for issues important to you.  There might be actual information on private equity's impact, current or historical.