THESE ARE THE PLUNDERERS

The troubled story of private equity, which is anything but equitable.

Private equity, write financial journalists Morgenson and Rosner, typically builds nothing. Instead, it leverages troubled companies, loots what assets they have, trims expenses to the bone, and often leaves acquisitions in bankruptcy or ruin. One philosopher the authors quote calls it “asshole capitalism,” and while the authors are a touch more genteel, they don’t hesitate to call the practitioners of “this rapacious form of capitalism” pirates and worse. By way of example, they look into the private-equity acquisition of nursing homes, a favorite target. In those cases, equity ownership equates to a far higher death rate, more visits to emergency rooms, and increased Medicare costs. Private equity has also absorbed huge chunks of the medical sector, laying off doctors and cutting out essential services even at the height of the coronavirus pandemic. On that note, the authors observe, private owners took great pains to use the cheapest possible ventilators for Covid-19 patients in critical care, which finally resulted in a federal fine of $40.5 million, a fraction of what they made. As Morgenson and Rosner clearly show, the pirates are flourishing; while there were but three “debt-fueled billionaires” in 2005, there were 22 in 2020. Much of this wealth comes from self-dealing, for apart from owning medical providers, private equity is also heavily invested in insurance, ripe with the possibilities of conflict of interest. No matter what the sector—and equity is now moving rapidly into education—the modus operandi is the same: “slash costs, eliminate higher-paid union workers, and reduce employee benefits; shut down less profitable divisions; or acquire competitors to bolster the pricing power of the company they own.” In addition, these firms, which have doubled in number in the last decade—are well protected in Congress.

A well-documented, maddening book that cries out for legislative reform and regulation.