Elizabeth Warren’s banking proposals are designed to demolish the private equity sector and force finance to serve the people

Elizabeth Warren’s banking proposals are designed to demolish the private equity sector and force finance to serve the people

Elizabeth Warren’s bid for the Democratic 2020 presidential nomination has been dominated by a series of bold, detailed policy proposals that are designed to enact deep, structural changes in American law and policy to reverse 40 years of post-Reagan corruption and wealth accumulation by the richest 1%.

One of these proposals deals directly with the finance sector, an area where Warren has real credibility, thanks to her excellent work in founding and structuring the Consumer Finance Protection Bureau (alas, many of the structures put in place to protect the CFPB from Republican Congressional meddling have backfired, saddling the Bureau with a long-term Trump appointee of the very worst sort).

Writing on The Reformed Broker, Joshua M Brown describes how the Warren finance proposals “have been designed to deliberately shrink the financial services business in general and its profits in particular” and how Warren’s detailed knowledge of how private equity allows the super rich to grow their fortunes by destroying real businesses and real jobs mean that these proposals are “banking-sector napalm…burning away every loophole and unfair advantage these funds have and disintegrating their profitability into ash”

Here’s how it works:

My plan would transform the private equity industry and end this looting with a comprehensive set of legal changes, including:

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Putting private equity firms on the hook for the debts of companies they buy, making them responsible for the downside of their investments so that they only make money if the companies they control flourish.

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Holding private equity firms responsible for certain pension obligations of the companies they buy, so that workers have a better shot of getting the retirement funds they earned.

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Eliminating the ability of private equity firms to pay themselves huge monitoring fees and limiting their ability to pay out dividends to line their own pockets.

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Changing the tax rules so that private equity firms don’t get sweetheart tax rates on all the debt they put on the companies they buy.

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Modifying bankruptcy rules so that when companies go bust, workers have a better shot at getting pay and benefits and executives can’t pocket special bonuses.

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Preventing lenders and investment managers from making reckless loans to private equity-owned companies already swimming in debt and then passing along the danger to the market by requiring them to retain some of the risk.

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Empowering investors like pension funds with better information about the performance and effects of private equity investments and preventing private equity funds from requiring investors to waive their fiduciary obligations.

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Closing the carried interest loophole that lets firm managers pay ultra-low tax rates on the money they loot.

End Wall Street’s Stranglehold On Our Economy [Elizabeth Warren]

Elizabeth Warren’s Banking Sector Napalm [Joshua M Brown/The Reformed Broker]

(via Naked Capitalism)

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