And that’s the problem – no regulation mean these monsters run wild, doing destruction on people’s lives.
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It was a long write-up, but @doctorow did include this bit right in the middle:
And this:
Thus driving home the point that just changing out the dim bulb in the Oval Office won’t change vulture capitalism.
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The problem is the financial influence that extreme wealth has on the people of government.
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Yeah, I get it. Winning the Whitehouse and the senate is critical for national survive. We don’t have time for the small stuff.
No one is going to help us. We are going to have help each other.
I like the sentiment, but it has nothing to do with the topic or my reply.
If sewage is flowing into a pond, you don’t fix the problem by replacing the water in the pond – you fix the source of the problem by stopping the sewage.
But I get your point that distracting people from the actual issue at hand is good way to protect the interests of sewage.
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The illegal Bust Out scheme is exactly what PE does. That it exists is absolute proof how completely corrupt our political and financial systems are. They exist on pure rent seeking and pure destruction.
There is no valid economic reason for these companies to exist.
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You are probably right.
I was thinking about vulture companies, and I have no idea how much they overlap with PE.
Back in the 80’s they called this corporate piracy. I really liked that term, it was colorful and left no doubt as to which side was in the wrong.
Its interesting how piracy has been reframed to mean what people of moderate means do against multinationals.
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I’ll settle for Sanders if Warren drops out. Not until then.
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the banks are making their money on the fees. ( and people at the bank get their bonuses based on the fees, so there’s that. )
they often package up the loans and sell them to their investors as securities. ( making money yet again. )
in the cases where they do hold the loans, they ensure they are the preferred lender so when the company does go bankrupt - they get their money back first.
win. win. win. a loan’s interest isn’t where the money is
i will say i don’t think it’s just politician’s fault. computer trading, the ability to package things up and sell derivatives, the ability to analyze the deals, the ability to communicate the statistics - all this stuff is new. it wouldn’t have been possible before the 80s and 90s… and law always takes time to catch up. ( even assuming anyone has an interest to fix things, which mostly people don’t. )
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I’m in the midst of the Edison biography by Edmund Morris. What amazes me is that we think the attitude is new and unique. The thinking behind PE is exactly what they did pre-great depression reforms.
You think the Google interview quiz/brain buster is innovative and new? Nope, Edison did it during one of the recessions of the time and was reviled in the press for it.
Everything old is new again.
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Hmmm, as much as I hate to admit it the 80s/90s 29 to 39 years in the past.
If the law hasn’t managed to catch up to what amounts to multi-billion dollar fraud enablers, what the hell is it doing trying to interfere in online privacy/speech involving technology less then ten years old?
I don’t think the age of the problem has a lot to do with this one…
(which to be fair you address under “even assuming anyone has an interest to fix things, which mostly people don’t”, but I think the answer is more cynical, and has to do with who pays lobbyists and who hires former congress critters as lobbyists)
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I don’t agree with the analogy. Also, if we go about it that way we are destined to lose and lose everything. Get your priorities straight.
Yes, that is what makes it a leveraged buyout. The PE firm borrows a bunch of money to buy a company, then transfers that debt to the company it purchased. Leveraged because the PE firm didn’t actually have or commit the cash to the buyout.
As to what happens, it is a combination of factors: in some cases strip mining the assets is enough to pay pack those creditors, while drying up the revenue stream that it had been producing to service their existing debt. In some cases the lenders are just suckers, and as long as the money managers that are acting as intermediaries get their commission they don’t care. In others maybe they do eventually have to write down some of the debt but they loaned the money at such an outrageous interest rate (the original borrower doesn’t care, they don’t have to pay it back) that they make money even if they officially have a “loss” of principal.
[quote]With it being old debt, you’d start to expect that the debt issuers to otherwise healthy pre-PE firms would add covenants on the debt that would protect (although not protect employees as creditors) in the case of a PE buyout.
[/quote]
The companies are not necessarily “otherwise healthy” – depending on your point of view. PE companies prey on struggling companies, because those are the cheapest to buy out. And PE firms can apply a lot of dirty tactics to suppress the value prior to a buyout – PR campaigns and independent consulting reports that bring into question the ability of the company to continue operating can be enough to scare the creditors and existing stockholders to take any deal even if in reality it is going from an uncertain future to one that will certainly go bankrupt.
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That’s the kicker. Private equity firms make more money off of a company failing than succeeding to pay off its debts. The moment a company pulls that off they lose any chance to parting out assets to the highest bidder. It’s what was a hallmark of the 1980s. It’s not a fluke that Richard Gere’s character in pretty woman was one of those characters because that was the norm and still is to this day.
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Maybe the problem is capitalism.
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According to research, PE firms performed better than their publicly traded counterparts.
https://www.hbs.edu/faculty/Publication%20Files/18-005_14ea83f3-2b54-47da-9693-f2160b60247b.pdf
