Shady investors are rigging the economy to get rich by making your life more expensive.
It’s called private equity.
Private equity firms are privately owned financial organizations.
Here’s how they make money: they buy struggling companies with borrowed money, often using
the companies’ assets as collateral for the loans.
They then make the purchased company profitable by cutting wages, outsourcing jobs, and stripping
assets.
Then they resell what’s left of the company, often laden with debt, and pocket the returns.
Private equity managers have their tentacles in so many industries that they touch almost
every part of your life without you even knowing.
These are just a few:
First, housing.
Private equity has a hand in today’s skyrocketing housing costs.
Private equity-backed real estate corporations are buying up both single-family homes and
apartment buildings at record rates.
In 2021, private equity investors bought nearly one in seven homes in the country’s top
metro areas, and private equity-backed corporations now own at least 260,000 homes across the
country.
It’s a lucrative business.
Blackstone, one of the largest private equity firms in the world, made a cool $7 billion
when it sold off its shares of the rental company it created, Invitation Homes – more
than double what it initially invested.
So what happens when your landlord becomes a private equity firm?
Higher rent.
Faster evictions.
Punitive fees.
Shoddier repairs and services, if anyone even shows up at all.
Even if your building isn’t owned by a private equity firm, their impact on the market is
probably driving your rent up.
When corporate landlords gobble up already-scarce homes, they shut out millions of people from
being able to buy their own homes, preventing them from building financial stability and
generational wealth.
In essence, it’s a direct transfer of wealth from the middle and working class into the
pockets of private equity managers.
Next, healthcare.
Over the past two decades, private equity in healthcare has exploded from $5 billion
to over $100 billion a year, from buying hospitals to staffing emergency rooms to taking over
nursing homes.
TeamHealth, a staffing agency owned by Blackstone, charges about six times what Medicare charges
in emergency rooms.
TeamHealth and Envision, another private equity-owned physician staffing firm, are notorious for
their surprise medical bills.
Don’t you just love surprise bills?
TeamHealth and Envision doctors aren’t covered by insurance, so when a patient goes to an
in-network hospital but is seen by a private equity doctor, the patient gets stuck with
a surprise out-of-network bill.
Beyond eye-popping costs and surprise bills, patients can also expect lower quality care.
A sweeping study examined private equity-owned nursing homes and found dire effects: staff
hours were slashed, jobs disappeared, and the use of antipsychotic medications – which
have a host of dangerous side effects – skyrocketed.
All this contributed to a 10 percent increase in patient mortality.
That’s more than 1,000 lives lost every year on average.
Now, if private equity is doing so much damage, how come it isn't the front page story on
every paper in the country?
Well, for starters, hedge funds and private equity firms own half the nation's daily papers.
And about a quarter of U.S. newspapers – over 2,000 publications – have shut down over
the past decade and a half.
The result?
Reporters, staff, and readers lose – while private equity managers get even richer.
A 2022 study found that after private equity buyouts, the number of reporters and editors
declined by nearly 10 percent.
The East Bay Times in Oakland, California, owned by Alden Global Capital, laid off 20
employees just one week after the paper won a Pulitzer Prize.
Declines in local news coverage are associated with lower voter turnout, less competitive
local elections, and more government corruption.
Even as jobs and hours are cut, subscription prices are jacked up – sticking readers
with a lower-quality product for a much higher cost.
So what can be done?
First and foremost, close the industry’s favorite tax loophole that enables private
equity managers to keep their taxes low.
The carried interest loophole treats their personal income as capital gains, taxed at
a top rate of just 20 percent, instead of the personal income it actually is, with a
top tax rate of 37 percent.
It’s yet another way private equity is looting America.
The pattern is clear.
When private equity gets involved, costs get higher and quality gets lower – while the
rich get richer.
It’s past time for Congress to rein in this predatory industry.