The latest targets of Senator and Democratic presidential candidate, Elizabeth Warren, are private equity firms. According to her, releasing the economy from the “stranglehold” of Wall Street will spur economic growth, help small businesses and raise wages. She calls her latest bill the Stop Wall Street Looting Act. This bill would impose regulations, new taxes and legal liabilities that are likely to make it too risky and costly for private equity firms to invest in struggling businesses.
What private equity firms do (a brief explanation)
As the name suggests, private equity firms raise money privately. Their investors are usually institutional investors, like pension funds. They also raise capital from investors who meet a certain set of criteria that allow them to make riskier bets. Private equity firms buy struggling companies or those they believe have a high potential for growth.
Their aim is to fix inefficiencies or speed up growth, and then sell the company. In some cases, trying to improve the health of a company means having to reduce staff or close factories.
