Congressional Democrats take aim at private equity

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Congressional Democrats are again taking aim at private equity, but they don't have much more firepower than the last time around.

Driving the news: The Senate Banking Committee held a pair of hearings earlier this week, one focused broadly on PE misdeeds and one focused specifically on PE's role in the U.S. housing market. The former was chaired by Sen. Elizabeth Warren (D-Mass.) and the latter by Sen. Sherrod Brown (D-Ohio).

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  • Both were designed to build support for the "Stop Wall Street Looting Act," which was just reintroduced after failing to get a vote back in 2019.

  • The bill would effectively end leveraged buyouts by making funds liable for portfolio company debt and pension obligations. It also would end dividend recaps, limit portfolio company monitoring fees, make general partners individually liable for certain obligations and increase transparency and standardization around LP reporting.

What to know: The hearings may have satisfied certain constituencies, just by existing, but the substance was overshadowed by the lack of participation. Only one of Warren's Democratic colleagues showed up, and Brown’s hearing managed to snare just three other Democrats (including Warren).

  • Republicans were also MIA, with just three GOP senators taking part (two of whom were ranking members John Kennedy and Pat Toomey).

  • If either side felt this bill had a serious chance of moving forward, there would have been much more engagement.

The bottom line: The big differences between 2019 and 2021 is that Democrats control both the Senate and the White House, and that they aren't distracted by presidential primaries. But there's no reason to think the Stop Wall Street Looting Act will meet a different fate, particularly as Democrats continue to squabble over their signature legislation.

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