WEBVTT - The Problems With Private Equity 0:00:11.760 --> 0:00:14.520 Good morning, peeps, and welcome to woo k F Daily 0:00:14.560 --> 0:00:19.919 with Meet your Girl Danielle Moody, recording from the Home Bunker. Folks. 0:00:20.400 --> 0:00:23.759 You know, ever so often I get pretty excited to 0:00:24.320 --> 0:00:27.560 have conversations about things that, guess what, I don't really 0:00:27.600 --> 0:00:31.400 know about And why do I think that that's important? One, 0:00:31.560 --> 0:00:35.400 I think it's important to continue to be students and 0:00:35.840 --> 0:00:41.680 learn about issues that affect our daily lives. And also 0:00:42.240 --> 0:00:46.199 one to just you know, I want to share with 0:00:46.320 --> 0:00:49.240 you all of the ways in which I am learning 0:00:49.400 --> 0:00:54.480 over time how much like we are being screwed in 0:00:54.560 --> 0:00:58.440 so many different ways, and it's actually really wild. So 0:00:58.720 --> 0:01:03.440 on today's show, I sit down with Brendan Blue, who 0:01:03.480 --> 0:01:07.240 is the author of the book Plunder Private Equities Plan 0:01:07.400 --> 0:01:11.760 to Pillage America. And Brendan and I, you know, I 0:01:11.800 --> 0:01:14.000 tell him at the start of the interview, I said, look, 0:01:14.200 --> 0:01:17.400 you know, give me a one oh one class in 0:01:17.560 --> 0:01:22.640 private equity. And you know, he gives a wonderful description 0:01:22.800 --> 0:01:25.240 and low down of fifty thousand foot view of what 0:01:25.319 --> 0:01:28.560 private equity is. But then we talk about the ways 0:01:28.600 --> 0:01:34.720 that private equity has been essentially targeting low income and 0:01:35.200 --> 0:01:42.600 black and brown communities and basically, I don't even know 0:01:42.640 --> 0:01:46.720 what to say, Like pillage is absolutely the right word 0:01:47.160 --> 0:01:52.160 that Brendan uses to describe his book, and that is 0:01:52.240 --> 0:01:57.720 exactly what they are. They are private equity are vultures 0:01:57.720 --> 0:02:05.960 that go into low income communities. They take over services 0:02:06.320 --> 0:02:11.760 and industries that are desperately needed by people with little income. 0:02:12.960 --> 0:02:19.680 They then basically turn those businesses and services into trash, 0:02:20.600 --> 0:02:23.400 cause a lot of harm. And then because they are 0:02:23.400 --> 0:02:26.400 private equity firms, guess who doesn't have the ability to 0:02:26.520 --> 0:02:32.120 sue the people. And so it's just another way in 0:02:32.240 --> 0:02:35.960 which we think. For instance, when you're putting, let's say 0:02:36.400 --> 0:02:38.960 a loved one in a nursing home, and you think 0:02:39.040 --> 0:02:41.720 that if something goes wrong, if they were to slip, 0:02:41.760 --> 0:02:44.840 if they were to God forbid die, that then you 0:02:44.880 --> 0:02:47.840 can go ahead and sue that nursing home. Well, that 0:02:47.960 --> 0:02:51.800 nursing home has now been bought over by a private 0:02:51.800 --> 0:02:56.919 e equity firm that has no liability whatsoever, and also 0:02:57.200 --> 0:02:59.360 don't need to tell you that it's been bought by 0:02:59.400 --> 0:03:05.040 private equity firm. They did this after the foreclosure crisis, right, 0:03:05.360 --> 0:03:09.600 go in and gobble up a bunch of low income housing, 0:03:10.120 --> 0:03:14.400 drive up the costs like, it's just this interview was 0:03:14.600 --> 0:03:20.000 so eye opening and just so disturbing. So I hope 0:03:20.000 --> 0:03:24.920 that you gain as much insight and information as I did. 0:03:25.480 --> 0:03:29.440 Coming up next, my conversation with Brendan Blue, the author 0:03:29.600 --> 0:03:38.200 of Plunder Private Equities Plan to Pillage America. Folks, I 0:03:38.240 --> 0:03:43.080 am very excited to welcome to ook at Daily Brendan Blue, 0:03:43.120 --> 0:03:47.840 who is the author of Plunder Private Equities Plan to 0:03:48.360 --> 0:03:55.560 Pillage America. You basically are the authority on private equity, 0:03:56.720 --> 0:04:00.600 and I want to understand because I will tell my 0:04:00.680 --> 0:04:03.760 listeners it was like I was the kid that I 0:04:03.800 --> 0:04:07.680 think that was took statistics because I had to took 0:04:07.760 --> 0:04:12.960 economics because I had to because of my because of 0:04:13.000 --> 0:04:17.080 my degree in politics, not because I understood anything about 0:04:17.160 --> 0:04:24.040 business or math. So please Brandon, give us a fifty 0:04:24.080 --> 0:04:29.520 thousand foot view, a one oh one explainer on what 0:04:30.000 --> 0:04:31.240 private equity is. 0:04:32.120 --> 0:04:34.640 Well, thank you so much for having me, and I 0:04:34.680 --> 0:04:37.760 really appreciate the chance to answer this question because I 0:04:37.800 --> 0:04:40.200 didn't know the answer to it before I started this project. 0:04:40.200 --> 0:04:42.760 So I was in the exact same boat as you were. 0:04:42.760 --> 0:04:45.200 And I should give a standard disclaimer. I work for 0:04:45.240 --> 0:04:48.160 the government, but I'm speaking in a purely personal capacity. 0:04:49.120 --> 0:04:52.760 So what is private equity? Private equity is a term 0:04:52.800 --> 0:04:54.960 that I'm sure you've heard of. I'm sure most of 0:04:54.960 --> 0:04:57.839 your listeners have heard of, but if we're honest, probably 0:04:57.839 --> 0:04:59.720 a lot of us don't actually know what it is. 0:05:01.160 --> 0:05:04.719 The basic idea behind private equity is very simple. So 0:05:04.880 --> 0:05:08.080 private equity firms use a little bit of their own money, 0:05:08.880 --> 0:05:11.799 some investor money, and a whole lot of borrowed money 0:05:11.800 --> 0:05:15.360 to buy up companies. They then try to make financial 0:05:15.640 --> 0:05:19.159 or operational changes to those companies with the aim of 0:05:19.200 --> 0:05:21.719 selling it for a profit a few years later. So 0:05:22.320 --> 0:05:26.040 that is a very simple idea, and yet it has 0:05:26.080 --> 0:05:31.960 had extraordinary consequences for the entire economy. Last year or 0:05:32.000 --> 0:05:34.400 in twenty twenty two, I don't think we've gotten the 0:05:34.440 --> 0:05:38.839 statistics for twenty twenty three. Yet private equity firms spent 0:05:39.040 --> 0:05:42.880 over a trillion dollars buying up companies in the United States, 0:05:42.920 --> 0:05:46.919 and for comparison, the entire US GDP is about twenty 0:05:46.920 --> 0:05:50.080 five trillion dollars. So we're talking about a not insubstantial 0:05:50.480 --> 0:05:54.560 part of the economy. You know, if you you know, 0:05:54.680 --> 0:05:58.320 went to the veterinarian, went to the obg yn decided 0:05:58.360 --> 0:06:01.240 you know, needed to get an ambi or needed to 0:06:01.240 --> 0:06:04.360 rent an apartment, there is a good chance that you 0:06:04.520 --> 0:06:08.760 ultimately paid a private equity firm. And just as you 0:06:08.839 --> 0:06:12.799 are seeing bad consequences in veterinary care, in medical care, 0:06:13.040 --> 0:06:16.600 in the housing market, at least part of those problems, 0:06:16.640 --> 0:06:20.599 I would argue are the consequence of private equity and 0:06:20.720 --> 0:06:23.600 the unique problems that that business model has, which I'm 0:06:23.600 --> 0:06:24.440 happy to get into. 0:06:24.880 --> 0:06:27.600 So let's talk about this for a moment, because there 0:06:27.880 --> 0:06:29.719 are a couple of things that are coming to mind, 0:06:29.760 --> 0:06:32.680 and I think that one of them is a lawsuit 0:06:32.720 --> 0:06:36.159 that I'm remembering that came up following the height of 0:06:36.200 --> 0:06:41.880 the pandemic, where nursing homes in New York where I 0:06:41.920 --> 0:06:48.440 am were found to have, oh, I don't know, covered 0:06:48.520 --> 0:06:54.280 up the number the number of deaths of COVID related 0:06:54.360 --> 0:06:57.400 deaths in New York in the nursing homes. Then come 0:06:57.440 --> 0:06:59.880 to find out, like a little bit down in the article, 0:07:00.480 --> 0:07:05.560 is that these nursing homes were being run by private 0:07:05.600 --> 0:07:09.320 equity firms and not by who we thought that they 0:07:09.320 --> 0:07:11.960 were going to be. And so when I think about 0:07:12.160 --> 0:07:16.360 private equity, I think about the fine print that we 0:07:16.480 --> 0:07:19.840 all just kind of scroll down, whether it's I'm purchasing 0:07:19.920 --> 0:07:22.880 something or I'm looking at my credit card statement that 0:07:22.960 --> 0:07:24.920 says do you agree, and I'm like yes, because I 0:07:24.920 --> 0:07:26.720 don't have the seven days it's going to take me 0:07:27.120 --> 0:07:31.040 nor the degrees in order to understand what I'm agreeing 0:07:31.040 --> 0:07:34.160 to in the fine print. And so talk to us 0:07:34.280 --> 0:07:39.240 how it is that these private equity firms can buy 0:07:39.360 --> 0:07:43.240 up places that we use on a regular basis, services 0:07:43.240 --> 0:07:45.760 companies that are providing services that we use on a 0:07:45.800 --> 0:07:51.440 daily basis, But we don't actually know that the people 0:07:51.480 --> 0:07:55.000 who are in charge know what the hell that they're 0:07:55.000 --> 0:07:56.840 doing other than making money. 0:07:57.640 --> 0:08:00.080 It's a great question, and it's a complicated question. The 0:08:00.120 --> 0:08:04.920 answer is complicated. So let's talk about the example that 0:08:05.000 --> 0:08:08.200 you started with, which is nursing homes. So there's no 0:08:08.320 --> 0:08:11.320 good or no definitive sort of statistics on this, but 0:08:11.360 --> 0:08:15.240 I've seen estimates that private equity firms own between ten 0:08:15.280 --> 0:08:18.560 and fifteen percent of the entire nursing home industry, and 0:08:18.600 --> 0:08:24.360 the consequences have been often disastrous. According to one study, 0:08:24.480 --> 0:08:28.400 there have been tens of thousands of premature deaths at 0:08:28.560 --> 0:08:34.079 nursing homes because of private equity ownership. We've seen lots 0:08:34.080 --> 0:08:38.160 of anecdotal cases of private equity firms buying up a business, 0:08:38.360 --> 0:08:42.319 buying up a nursing home, and then patient care suffering 0:08:43.760 --> 0:08:47.640 health complaints, rising complaints about rodents and vermin and nursing 0:08:47.640 --> 0:08:51.120 homes and people dying. The basic problem that we've got 0:08:51.280 --> 0:08:54.640 is it is very hard to hold private equity firms 0:08:55.160 --> 0:08:59.800 responsible for the consequences of their actions. And I think 0:08:59.800 --> 0:09:02.800 this is an important point because it helps to explain 0:09:03.320 --> 0:09:07.360 why private equity firms are different than many other kinds 0:09:07.400 --> 0:09:11.600 of companies. So if a nursing home was owned by 0:09:11.640 --> 0:09:15.720 a public company and somebody dies there, the family of 0:09:15.720 --> 0:09:18.040 that resident or the state of that resident could generally 0:09:18.080 --> 0:09:20.600 sue the parent company would be very easy to figure 0:09:20.600 --> 0:09:23.200 out who owns it, and be very easy comparatively to 0:09:23.240 --> 0:09:27.600 hold them responsible. That's not necessarily true for private equity 0:09:27.600 --> 0:09:32.200 firms because of their ownership structures, where they advise what 0:09:32.240 --> 0:09:35.320 are called funds that are owned by quote unquote limited 0:09:35.320 --> 0:09:38.840 partners that then own assets through several shell companies. It 0:09:38.880 --> 0:09:41.760 can be hard to figure out, even to your point, 0:09:41.880 --> 0:09:45.199 whether a private equity firm owns a business, and then 0:09:45.240 --> 0:09:47.280 even if you can figure that out, to hold them 0:09:47.360 --> 0:09:50.480 legally responsible for the actions of that business. And so 0:09:50.640 --> 0:09:54.360 you have a business model where private equity firms can 0:09:54.440 --> 0:09:58.040 often benefit if things go well at a nursing home, 0:09:58.080 --> 0:10:01.720 at any other kind of business, walk away legally or 0:10:01.760 --> 0:10:05.840 financially if things go poorly and at the risk of 0:10:05.880 --> 0:10:09.280 going on for a long time for your fairly you know, 0:10:09.360 --> 0:10:14.520 straightforward question. You mentioned the fine print. One of the 0:10:14.559 --> 0:10:18.440 things that I think private equity firms have been extraordinarily 0:10:18.440 --> 0:10:22.120 good at is identifying the fine print that's going to 0:10:22.160 --> 0:10:25.360 benefit them the most. So to stick on the example 0:10:25.400 --> 0:10:30.199 of nursing homes, yeah, private equity firms were have often 0:10:30.280 --> 0:10:35.720 put in forced arbitration clauses into contracts to be admitted 0:10:35.760 --> 0:10:37.680 into a nursing home. So if you go to a 0:10:37.760 --> 0:10:40.360 nursing home, they would, you know, require you to sign 0:10:40.360 --> 0:10:44.280 agreement saying you couldn't you know, bring a suit if somebody, 0:10:44.320 --> 0:10:46.520 you know, if something happens to you at this nursing home. 0:10:47.640 --> 0:10:50.440 There was rulemaking under the Obama administration to try to 0:10:50.480 --> 0:10:53.160 throw that get that away that was enjoying. The Trump 0:10:53.200 --> 0:10:57.200 administration did a significantly less ambitious rule all, which is 0:10:57.200 --> 0:11:01.760 to say that I think oftentimes private equity executives aren't 0:11:01.800 --> 0:11:04.520 necessarily that good at running a business, but they are 0:11:04.679 --> 0:11:08.240 really good at identifying and developing the fine print that 0:11:08.320 --> 0:11:08.840 you mentioned. 0:11:13.880 --> 0:11:16.240 So now I want to go into your book where 0:11:16.240 --> 0:11:20.840 you talk about, you know, the pillaging that is happening 0:11:21.280 --> 0:11:24.320 in you know, in America by private equity firms. What 0:11:24.400 --> 0:11:26.079 do you mean by that? 0:11:26.240 --> 0:11:26.280 Is? 0:11:26.760 --> 0:11:31.640 Is it that one we don't really understand what it 0:11:31.679 --> 0:11:34.840 is that we're consuming and who we're consuming it from. Right, 0:11:36.120 --> 0:11:40.840 we as consumers don't have the ability then if something 0:11:40.880 --> 0:11:44.400 were to go wrong. Let's stick with the nursing home. 0:11:44.840 --> 0:11:48.680 If a loved one were to prematurely pass away, that 0:11:48.920 --> 0:11:51.760 there is no real recourse that we can take. But 0:11:51.840 --> 0:11:54.680 we didn't know that when we placed our loved one 0:11:54.720 --> 0:11:59.480 into this facility, right, we just assumed that they knew 0:11:59.640 --> 0:12:01.920 how to provide care, that it was going to be 0:12:01.960 --> 0:12:04.400 the best care that we could afford, and that if 0:12:04.440 --> 0:12:08.640 something terrible were to happen then they would be held liable. 0:12:09.840 --> 0:12:12.320 Well, it's kind of all of the above. So I 0:12:12.360 --> 0:12:14.559 think let me give the general answer and then I'll 0:12:14.559 --> 0:12:17.920 get into the specifics. So when I talk about the 0:12:17.960 --> 0:12:20.679 flaws of the private equity business model, I really am 0:12:20.720 --> 0:12:23.360 talking about three things. One is that private equity firms 0:12:23.840 --> 0:12:25.840 tend to buy up businesses and hold them for just 0:12:25.880 --> 0:12:27.920 a few years. And you know, if you own a 0:12:27.920 --> 0:12:31.000 business for just a few years, that changes your perspective 0:12:31.040 --> 0:12:32.800 on it. It changes whether you're going to invest in 0:12:32.840 --> 0:12:35.360 your employees and your infrastructure, if you're going to treat 0:12:35.400 --> 0:12:39.520 your customers and your patients. Well, that's problem one. Problem 0:12:39.559 --> 0:12:42.280 two is that private equity firms tend to load up 0:12:42.280 --> 0:12:45.160 companies with a lot of debt and extract ourn fees. 0:12:45.640 --> 0:12:48.320 And so you might have a business that was functional, 0:12:48.320 --> 0:12:53.160 a functional nursing home, functional, you know, doctors clinic, but 0:12:53.280 --> 0:12:55.880 suddenly there's so much debt that the business has to 0:12:55.960 --> 0:12:59.480 pay off, has to service, that it can't invest in 0:12:59.520 --> 0:13:03.000 its future, in its operations, in its employees. And then 0:13:03.040 --> 0:13:04.760 the third thing is what we were just talking about, 0:13:04.840 --> 0:13:07.680 and which you alluded to in your question, which is 0:13:07.720 --> 0:13:13.679 insulation from liability, where private equity firms can typically capture 0:13:13.720 --> 0:13:17.200 the financial upside if things go well and then walk 0:13:17.240 --> 0:13:19.880 away if they don't. And let me give you sort 0:13:19.880 --> 0:13:23.840 of one concrete example here, which is one that it 0:13:23.920 --> 0:13:27.720 really sticks with me I've used many times, is the 0:13:27.720 --> 0:13:31.000 private equity acquisition of Friendlies, which was this diner chain 0:13:31.040 --> 0:13:31.720 in the northeast. 0:13:31.800 --> 0:13:35.400 Oh, I have one. I had one growing up in 0:13:36.120 --> 0:13:39.280 my community. It's actually still there. Please, oh kindy good? 0:13:39.440 --> 0:13:42.840 Yeah, well so, unfortunately it is one of the rare 0:13:42.880 --> 0:13:45.320 ones that is still there because I believe in two 0:13:45.400 --> 0:13:50.120 thousand and seven, Sun Capital bought up the diner chain, 0:13:51.120 --> 0:13:54.800 executed a bunch of fairly standard tactics in the private 0:13:54.800 --> 0:13:59.080 equity playbook, executed layoffs and so forth, ultimately pushed the 0:13:59.080 --> 0:14:05.400 company into bankrupt But in bankruptcy, it was able to 0:14:05.480 --> 0:14:10.040 execute this really weird tactic where it sold the company 0:14:10.200 --> 0:14:13.520 from itself to itself, which sounds like something that only 0:14:13.600 --> 0:14:17.640 lawyers can make up, but it was this complicated transaction 0:14:18.080 --> 0:14:21.760 sells itself from itself to itself emerges from bankruptcy. And 0:14:21.800 --> 0:14:26.440 the reason that it does that is by executing this transaction, 0:14:26.640 --> 0:14:30.600 it's able to push the pension obligations that it had 0:14:31.160 --> 0:14:35.280 to employees and retirees onto what's called the pension Benefit 0:14:35.280 --> 0:14:40.320 Guarantee Corporation, which is this separate, quasi governmental organization, and 0:14:40.360 --> 0:14:43.720 suddenly the private equity firm was able to continue to 0:14:43.800 --> 0:14:47.120 control this business without any of those obligations that it 0:14:47.200 --> 0:14:51.320 had to employees into retirees. And I think that's an 0:14:51.360 --> 0:14:55.040 example of where private equity firms again may or may 0:14:55.080 --> 0:14:57.520 not be that great at running a business. Like I said, many, 0:14:57.600 --> 0:15:00.680 if not most friendlies diners unfortunately have cleared do now, 0:15:02.240 --> 0:15:05.840 but are really good at understanding sort of the gaps 0:15:06.120 --> 0:15:09.040 or sort of holes in the law that allow them 0:15:09.160 --> 0:15:13.440 to essentially capture benefit when things go well, walk away 0:15:13.440 --> 0:15:16.200 when things go poorly. So tell me. 0:15:16.680 --> 0:15:22.600 What position does so a company ideally then that is 0:15:22.680 --> 0:15:26.040 being acquired by a private equity firm, needs to be 0:15:26.080 --> 0:15:28.080 in dire straits, right. 0:15:28.560 --> 0:15:31.520 It's a good question. Oftentimes that's the case. But the 0:15:31.520 --> 0:15:36.000 interesting thing is, oftentimes healthy companies get sold to private 0:15:36.000 --> 0:15:39.480 equity firms and sometimes that works well. You know, success 0:15:39.520 --> 0:15:42.680 builds on success. The private equity firm sells the business. 0:15:42.680 --> 0:15:47.120 Often it succeeds wonderfully, but oftentimes it doesn't. There's a 0:15:47.280 --> 0:15:51.200 really interesting study out there that says that companies that 0:15:51.240 --> 0:15:54.600 are bought by private equity firms are ten times as 0:15:54.680 --> 0:15:57.920 likely to go bankrupt as companies that aren't. And the 0:15:57.920 --> 0:16:01.200 interesting thing is that the economists that did that study 0:16:01.320 --> 0:16:04.200 controlled for exactly the question that you were asking, which 0:16:04.240 --> 0:16:07.920 is our private equity firms just buying up distressed businesses? 0:16:08.160 --> 0:16:10.560 And they looked at a comparative set of businesses, you know, 0:16:10.640 --> 0:16:13.200 of various levels of size and health and so forth, 0:16:13.440 --> 0:16:16.680 and said, no, this, this is robust sort of across 0:16:16.800 --> 0:16:19.920 the kinds of businesses that private equity firms buy. So 0:16:20.080 --> 0:16:23.400 it's not just that private equity firms, you know, sort 0:16:23.440 --> 0:16:27.640 of are attracted to sort of the most failing companies. 0:16:28.040 --> 0:16:31.560 It's that private equity ownership at least sometimes can cause 0:16:31.640 --> 0:16:32.800 those businesses to fail. 0:16:34.880 --> 0:16:39.040 So you're not here as you're in your government capacity. 0:16:39.520 --> 0:16:42.760 But let me ask you this question. Then where does 0:16:42.840 --> 0:16:46.360 government come in Because if it is seemingly right, like 0:16:46.400 --> 0:16:50.640 we're told, oh, the private well let's say this. Republicans 0:16:50.680 --> 0:16:53.480 tell us that the privatization of everything is going to 0:16:53.520 --> 0:16:55.760 be what saves us all, and we all know that 0:16:55.920 --> 0:16:57.760 not to be true. All Their whole idea is to 0:16:57.760 --> 0:17:00.640 shrink government. Government is big. Government is bad, It controls 0:17:00.680 --> 0:17:03.000 your life. YadA YadA, YadA. You shrink it, you get 0:17:03.040 --> 0:17:05.919 rid of that, You privatize everything, and everyone wins, except 0:17:05.920 --> 0:17:09.080 everyone doesn't win. It's the people that are the shareholders. 0:17:09.119 --> 0:17:12.480 It is the CEOs that win everyone else who are 0:17:12.680 --> 0:17:15.600 workers of the working class, which I believe is everyone 0:17:15.600 --> 0:17:19.880 else doesn't. And so I ask, then where does government 0:17:20.000 --> 0:17:22.919 come in to regulate these entities that are actually not 0:17:23.080 --> 0:17:27.560 providing anything other than benefits to themselves to make more 0:17:27.640 --> 0:17:31.720 money and to do so without having any risk whatsoever. 0:17:32.480 --> 0:17:35.719 And the interesting thing is private equity firms are in 0:17:35.800 --> 0:17:39.320 some places actually taking over the role of government, at 0:17:39.400 --> 0:17:43.000 least in some services. So KKR did a bunch of 0:17:43.080 --> 0:17:46.720 joint partnerships or several joint partnerships to take over municipal 0:17:46.760 --> 0:17:51.239 water services. Private equity firms have gotten extremely interested in 0:17:51.280 --> 0:17:56.280 the higher education business, investing in for profit colleges, and 0:17:56.400 --> 0:17:59.760 have also taken over increasing parts of our prison system, 0:18:00.520 --> 0:18:05.119 buying up businesses like prison healthcare companies, prison commissaries and cafeterias, 0:18:05.480 --> 0:18:09.320 and prison phone companies. So it's an interesting intersection where 0:18:09.320 --> 0:18:13.840 private equity firms are actually somewhat taking over some aspects 0:18:13.880 --> 0:18:17.359 that we traditionally deserve for government in terms of what 0:18:17.520 --> 0:18:21.040 the government role should be. I think it ultimately goes 0:18:21.080 --> 0:18:23.760 back to the basic problems that I was talking about, 0:18:23.760 --> 0:18:27.440 where private equity firms invest for the short term load 0:18:27.480 --> 0:18:30.160 companies up with a lot of debt and fees insulate 0:18:30.200 --> 0:18:34.800 themselves from liability. If you can solve those problems, private 0:18:34.800 --> 0:18:37.400 equity can become a much less destructive. It can become 0:18:37.400 --> 0:18:41.560 a productive part of our financial system. The question is 0:18:41.640 --> 0:18:44.520 how do you get there? And I've laid out there 0:18:44.560 --> 0:18:45.919 are a lot of things that can be done at 0:18:45.920 --> 0:18:49.159 the federal level in terms of regulation at the SEC 0:18:49.400 --> 0:18:52.080 and Treasury Department, Federal Reserve, and so forth, you know, 0:18:52.320 --> 0:18:55.480 sort of in the weeds, banking regulation and so forth. 0:18:55.840 --> 0:18:58.959 But there's also a lot that states and localities can 0:18:59.000 --> 0:19:02.679 do here to reign in or ban sort of the 0:19:02.720 --> 0:19:06.520 most abusive tactics that private equity firms engage in. So 0:19:07.200 --> 0:19:10.840 I think that understandably, activists often look to the federal 0:19:10.840 --> 0:19:13.760 government to provide the answer here, but there's actually a 0:19:13.840 --> 0:19:16.480 lot that can be done right in our own communities 0:19:16.600 --> 0:19:19.600 to try to protect local businesses and prevent them from 0:19:19.640 --> 0:19:20.280 being pillaged. 0:19:20.720 --> 0:19:23.120 I mean, because honestly, when I think about it, I 0:19:23.160 --> 0:19:26.240 and I you know, your book is really helpful in 0:19:26.320 --> 0:19:30.359 terms of helping regular people understand what is happening. But 0:19:30.480 --> 0:19:33.479 even in just the businesses that you laid out that 0:19:33.560 --> 0:19:38.440 private equity has taken control of. Are what's the word 0:19:38.480 --> 0:19:41.560 that I want to use that I'm struggling to use, 0:19:43.520 --> 0:19:46.800 you know, are the shit ones? Are the ones that 0:19:47.000 --> 0:19:53.679 absolutely take advantage of people. When you're talking about prison, healthcare, 0:19:53.760 --> 0:19:57.399 when you're talking about municipalities and their water system. The 0:19:57.400 --> 0:20:00.840 only thing that came to my mind was Jackson, Mississippi, 0:20:00.880 --> 0:20:05.399 and Flint, Michigan and other places where you go in again, 0:20:05.440 --> 0:20:08.280 and this is why I asked about is it the 0:20:08.320 --> 0:20:12.040 fact that they look for places businesses and cities and 0:20:12.119 --> 0:20:17.320 areas that are already problem areas right, which largely are 0:20:17.359 --> 0:20:23.080 those areas in businesses and in communities that have a 0:20:23.440 --> 0:20:26.240 high population of black and brown people. Do you know 0:20:26.280 --> 0:20:29.719 what I'm saying? And so there seems to be this 0:20:29.800 --> 0:20:36.760 affinity for these entities to go after populations and places 0:20:37.240 --> 0:20:42.480 that they can abuse and that people won't notice. 0:20:43.160 --> 0:20:45.879 You know. One of the things that sort of surprised 0:20:45.920 --> 0:20:47.800 me in researching this, and I think it gets to 0:20:47.800 --> 0:20:51.560 your question, is I always sort of assume that if 0:20:51.560 --> 0:20:54.320 you're in the business of making money, you go to 0:20:54.640 --> 0:20:59.560 businesses that service wealthy people because that's where your money is. No, exactly, 0:20:59.720 --> 0:21:02.879 and oftentimes private equity firms I think are attracted to 0:21:02.920 --> 0:21:05.800 the exact opposite. You know, we mentioned prison services and 0:21:05.840 --> 0:21:09.040 for profit colleges and so forth. I'd add mobile home 0:21:09.080 --> 0:21:13.480 parks to that. Where private equity firms have found real 0:21:13.520 --> 0:21:18.119 success in large part because you have captive audiences in 0:21:18.119 --> 0:21:22.600 some places literally captive audiences that don't have an alternative. 0:21:22.760 --> 0:21:26.280 And so in those situations, some firms have found real 0:21:26.359 --> 0:21:30.600 success by raising prices cutting the quality of care because 0:21:30.640 --> 0:21:33.720 they know that there really is an alternative for the clientele. 0:21:33.920 --> 0:21:36.399 So I think, I think it's a really interesting or 0:21:36.520 --> 0:21:40.080 you know, concerning issue in that the people who are 0:21:40.080 --> 0:21:43.960 often affected the most by this business model or the 0:21:44.000 --> 0:21:46.439 flaws of the business model are the ones that are 0:21:46.560 --> 0:21:48.040 least able to do something about it. 0:21:52.920 --> 0:21:56.640 Private equity needs to be regulated, and so I'm confused, 0:21:57.280 --> 0:22:00.879 I guess in where where the benefit is. So you 0:22:01.080 --> 0:22:05.520 use the you know, the Obama administration versus the Trump administration, 0:22:05.680 --> 0:22:08.959 and let's look at those two because the fact is 0:22:09.200 --> 0:22:15.080 right that you know, Obama, whom I love, did not 0:22:15.240 --> 0:22:19.160 do well in terms of dealing with the banking crisis, 0:22:19.200 --> 0:22:24.200 in terms of providing those people that caused a series 0:22:24.240 --> 0:22:27.640 of foreclosures around this country for people to lose their 0:22:27.720 --> 0:22:30.440 jobs and all of these things, and given out to 0:22:30.720 --> 0:22:34.359 banks that were too big to fail, right, given out 0:22:34.400 --> 0:22:38.760 to industry too big to fail, right, put the burden 0:22:39.080 --> 0:22:42.440 on the people. Then you have Donald Trump, right, who 0:22:42.480 --> 0:22:45.400 could care less about the people and is all about 0:22:45.560 --> 0:22:49.879 cutting deals and favors for his friends and you know, 0:22:49.960 --> 0:22:54.320 and tax cuts and the like. What I'm saying is 0:22:54.359 --> 0:22:59.040 that there's not a real, seeming big difference between who 0:22:59.160 --> 0:23:02.960 is doing right by the people as it pertains to 0:23:04.080 --> 0:23:08.840 private equity, to corporations and the regulations that are necessary 0:23:09.440 --> 0:23:15.080 so that people consumers know what they're getting into and 0:23:15.240 --> 0:23:19.720 also have the ability to understand how they're being tanken 0:23:19.760 --> 0:23:22.720 advantage of It's like there, it doesn't seem to be 0:23:22.840 --> 0:23:25.240 one way or the other. And you tell me that 0:23:25.320 --> 0:23:31.800 I'm wrong. An administration or party that doesn't get some 0:23:32.000 --> 0:23:38.640 type of advantage right, because the advantage obviously for them 0:23:38.960 --> 0:23:42.200 is either money or what have you. I just I'm 0:23:42.240 --> 0:23:45.600 confused about who is actually fighting for the people. 0:23:46.560 --> 0:23:50.360 Well, the interesting thing is, or maybe it's the unsurprising thing, 0:23:50.440 --> 0:23:52.320 is the people that are fighting for the people are 0:23:52.359 --> 0:23:55.639 the people by the people. Where I've seen sort of 0:23:55.640 --> 0:23:59.200 the biggest success in terms of reining in or sort 0:23:59.200 --> 0:24:02.200 of addressing the problem of the private equity business model 0:24:02.280 --> 0:24:07.240 has come from activists who have focused on very specific issues. 0:24:08.080 --> 0:24:10.560 You know, when you talk about private equity and the abstract, 0:24:11.200 --> 0:24:14.280 not only is it often kind of boring, it's kind 0:24:14.280 --> 0:24:16.800 of overwhelming, you know, it seems like a problem too 0:24:16.840 --> 0:24:20.040 big to sort of tackle. Had on, where I think 0:24:20.040 --> 0:24:25.119 there's been real success has been looking at specific issues. 0:24:25.200 --> 0:24:29.920 So we were talking about prisons earlier. The advocacy work 0:24:30.000 --> 0:24:33.480 done terrain in the cost of prison phone calls done 0:24:33.480 --> 0:24:37.439 by a handful of activities, right, Yeah, enormously successful, you know, 0:24:37.600 --> 0:24:40.119 as you know, you know, started with sort of local 0:24:40.240 --> 0:24:43.600 legislation in cities, then there was state level legislation. Finally 0:24:43.720 --> 0:24:46.679 legislation was passed in Congress to address this, which is 0:24:46.800 --> 0:24:50.639 just extraordinary growth and success. So that's one area. I think. 0:24:50.720 --> 0:24:53.240 Nursing homes have been another area of success in that 0:24:53.560 --> 0:24:57.480 for the first time there's federal rulemaking to establish minimum 0:24:57.680 --> 0:25:00.800 nursing home staffing criteria. You know, that's the work of 0:25:00.960 --> 0:25:04.919 activists to make this happen. So I think, you know, 0:25:04.920 --> 0:25:08.080 I don't want to be overly optimistic or pollyanni ish 0:25:08.080 --> 0:25:11.560 about this, but I do think that when people pick 0:25:11.680 --> 0:25:15.879 specific issues where private equity is active and stick with it, 0:25:16.720 --> 0:25:19.959 I think they can succeed, because we've seen examples of 0:25:20.000 --> 0:25:21.639 success in the recent past. 0:25:22.440 --> 0:25:25.160 Well, tell me this is last question for you, brandan, 0:25:25.480 --> 0:25:31.600 what would sweeping change look like as opposed to siloed 0:25:31.720 --> 0:25:34.119 change industry by industry. 0:25:35.119 --> 0:25:38.399 So I think it ultimately boils down to I've mentioned 0:25:38.400 --> 0:25:40.879