Gretchen Morgenson & Joshua Rosner — These Are the Plunderers - with Jeff Gerth

00:54:55
https://www.youtube.com/watch?v=iH54wH4JfXU

Sintesi

TLDRIn einer Diskussion über ihr neues Buch 'These Are the Plunderers' beleuchten Gretchen Morgensen und Joshua Rosner die schädlichen Praktiken von Private-Equity-Firmen. Diese Firmen, die sich teils mit dubiosen Methoden bereichern, stehen im Zentrum einer Kontroverse um die wirtschaftliche und soziale Folgen ihrer Aktionen. Ein besonderer Fokus liegt auf den negativen Effekten im Gesundheitswesen, einschließlich der erhöhten Sterblichkeit in von Private-Equity geführten Pflegeheimen. Das Buch untersucht, wie solche Praktiken über drei Jahrzehnte zu einer Ausbeutung der Volkswirtschaft geführt haben. Zudem wird aufgezeigt, wie Pensionsfonds und andere institutionelle Investoren Teil dieses Systems sind. Die Autoren thematisieren die mangelnde Transparenz und Verantwortung der Finanzakteure, die von spekulativen Transaktionen profitieren, während die breite Öffentlichkeit benachteiligt wird.

Punti di forza

  • 📚 'These Are the Plunderers' thematisiert die Praktiken von Private-Equity-Firmen.
  • ⚖️ Fokus auf die juristische und finanzielle Verantwortungslosigkeit im Unternehmensbereich.
  • 🏥 Negative Auswirkungen von Private Equity im Gesundheitswesen.
  • 💸 Pensionsfonds sind bedeutende Investoren in Private Equity.
  • 📈 Diskussion über die ökonomische Ausbeutung der USA über drei Jahrzehnte durch Private Equity.
  • 🏦 Unfaire Geschäftspraktiken werden aufgedeckt.
  • 🚨 Ein Spitzenthema ist die Rolle von Private Equity bei Unternehmensübernahmen.
  • 👨‍⚕️ Besondere Betroffenheit im Bereich der Pflegeheime und Gesundheitsversorgung.
  • 🔍 Buch bietet einen investigativen Einblick in die Praktiken der Wall Street.
  • 🤝 Mangelnde Transparenz und Verantwortung der Akteure wird kritisiert.

Linea temporale

  • 00:00:00 - 00:05:00

    Bitte schalten Sie Ihre Mobiltelefone aus und sprechen Sie in das bereitgestellte Mikrofon, wenn die Fragerunde beginnt. Nach der Fragerunde gibt es eine Buchsignierung mit den Autoren Gretchen Morgensen und Joshua Rosner, die ihr Buch 'These Are the Plunderers' über die Auswirkungen von Private Equity auf die amerikanische Wirtschaft vorstellen.

  • 00:05:00 - 00:10:00

    Gretchen Morgensen und Joshua Rosner erörtern die Geschichte und die Praktiken von Private-Equity-Firmen, die darauf abzielen, Unternehmen mit viel Fremdkapital zu übernehmen, Kosten zu senken und die Unternehmen innerhalb einer kurzen Frist gewinnbringend zu verkaufen. Ihre Methoden führen oft zu erheblichen wirtschaftlichen und personellen Schäden, die im Buch thematisiert werden.

  • 00:10:00 - 00:15:00

    Der Fokus des Buches liegt darauf, die Schäden und die Personen zu beleuchten, die durch solche Private-Equity-Transaktionen betroffen sind. Häufig sind es die Pensionsfonds, Arbeitnehmer und kleinere Gemeinden, die die negativen Folgen dieser Geschäftsmodell zu spüren bekommen, während die Milliardäre im Rampenlicht stehen.

  • 00:15:00 - 00:20:00

    Josh Rosner hebt hervor, dass viele der schädlichen Auswirkungen von Private-Equity-Geschäften von der breiten Öffentlichkeit kaum wahrgenommen werden, da diese Geschäfte in weniger transparenten und kontrollierten Märkten stattfinden. Gretchen Morgensen lobt die Fähigkeiten ihres Co-Autors bei der Recherche, die die Grundlage für die Fallstudien im Buch bildete.

  • 00:20:00 - 00:25:00

    Die Autoren diskutieren über die Vernachlässigung lebenswichtiger Investitionen im Gesundheitswesen durch Private-Equity-Firmen, die sich auf kurzfristige Gewinne konzentrieren und auf Kosten von Qualität und Langfristigkeit operieren. Der Versuch, in regulierte Branchen wie die Gesundheitsversorgung einzudringen, birgt massive Risiken für die betroffenen Patienten und Einrichtungen.

  • 00:25:00 - 00:30:00

    Ein Beispiel ist der Anstieg der Sterblichkeitsrate in von Private-Equity besessenen Pflegeheimen aufgrund von Sparmaßnahmen. Trotz strenger Regulierung finden diese Firmen Mittel und Wege, die Aufsicht zu umgehen. So ermöglichen es ihnen komplexe Unternehmensstrukturen, größere rechtliche Haftung zu vermeiden.

  • 00:30:00 - 00:35:00

    Private Equity greift stark in regulierte Branchen ein und nutzt diese für Gewinnsteigerungen. Der Fall von Blackstone, das angeblich nichts von illegalen Aktivitäten in ihren Schlachthof-Reinigungsfirmen wusste, verdeutlicht das moralische Dilemma und die rechtliche Abschottung dieses Geschäftsmodells.

  • 00:35:00 - 00:40:00

    Die Diskussion thematisiert auch prominente Figuren der Private-Equity-Branche wie Josh Harris und David Rubinstein und ihre umstrittenen Geschäftspraktiken. Harris’ Kauf des Washingtoner Fußballteams wirft Fragen über die Nutzung öffentlicher Mittel für Private Gewinne auf.

  • 00:40:00 - 00:45:00

    Besorgniserregend sind auch Praktiken wie der Verkauf von Immobilienbesitz zur Gewinnrealisierung bei gleichzeitiger Belastung der erworbenen Unternehmen durch Mietzahlungen, wie im Fall des Pflegeheim Betreibers ManorCare beschrieben wird. Mit ihren Investitionen steigern sie die Gesundheitskosten in den USA erheblich.

  • 00:45:00 - 00:54:55

    Auf die Frage nach der Reaktion auf das Buch sagen die Autoren, dass Whistleblowing in der Private-Equity-Branche selten ist, da die Akteure kaum altruistisch motiviert sind. Die aktuelle Marktdynamik und die Intransparenz machen es schwierig, die Auswirkungen dieser Investitionen auf lange Sicht zu durchschauen und zu regulieren.

Mostra di più

Mappa mentale

Mind Map

Domande frequenti

  • Wer sind die Autoren des Buches 'These Are the Plunderers'?

    Die Autoren sind Gretchen Morgensen und Joshua Rosner.

  • Worüber handelt das Buch 'These Are the Plunderers'?

    Es untersucht, wie eine kleine Gruppe von Wall-Street-Finanzierern die US-Wirtschaft mit Schulden und fragwürdigen Praktiken ausnutzt.

  • Was ist ein Hauptthema der Diskussion?

    Die negativen Auswirkungen von Private-Equity-Praktiken auf die Wirtschaft und Gesellschaft.

  • Welche Beispiele für die Auswirkungen von Private Equity wurden genannt?

    Erhöhte Sterblichkeit in Pflegeheimen und Probleme in der Gesundheitsversorgung.

  • Welche Rolle spielen Pensionsfonds bei den Investitionen in Private Equity?

    Pensionsfonds investieren in Private Equity und haben Anreize, diese Investitionen zu verschweigen.

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    um so everyone can hear your question
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    and following the Q a we will have a
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    signing over here at this table so if
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    you have not already bought the book we
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    have many copies behind our registers
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    which our booksellers can help you
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    purchase and that's going to be at the
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    front of the store and we ask you to
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    personalization once the event is
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    complete we kindly ask that you please
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    fold up your chairs and lean them
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    against something sturdy so now without
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    further Ado I I'm excited to welcome
  • 00:00:41
    Gretchen morgensen and Joshua Rosner
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    today to discuss their new release these
  • 00:00:46
    are the plunderers how private Equity
  • 00:00:48
    ruins and wrecks America in this book
  • 00:00:51
    Pulitzer prize-winning journalist and
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    best-selling author Gretchen morgensen
  • 00:00:55
    with co-author Joshua Rosner unmasked
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    the small group of celebrated Wall
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    Street financers who use excessive debt
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    and dubious practices to undermine our
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    nation's economy while enriching
  • 00:01:06
    themselves private Equity these are the
  • 00:01:09
    plunderers as an important book that
  • 00:01:10
    lucidly and maddeningly traces the
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    30-year history of corporate takeovers
  • 00:01:15
    in America revealing the many ways that
  • 00:01:17
    these billionaires have bled our economy
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    Gretchen morgensen is the senior
  • 00:01:21
    Financial reporter for the NBC News
  • 00:01:23
    investigative unit a former stockbroker
  • 00:01:26
    she won the Pulitzer Prize in 2002 for
  • 00:01:28
    her reporting on Wall Street previously
  • 00:01:31
    at the New York Times of the Wall Street
  • 00:01:33
    Journal she and co-author Joshua Rosner
  • 00:01:35
    wrote The New York Times bestseller
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    reckless endangerment how I outsize
  • 00:01:39
    ambition greed and Corruption lead to
  • 00:01:42
    economic Armageddon about the mortgage
  • 00:01:44
    crisis Joshua Rosner is managing
  • 00:01:46
    director at independent research
  • 00:01:48
    consultancy Graham Fisher and Company
  • 00:01:50
    advising Regulators policy makers and
  • 00:01:53
    institutional investors on Banking and
  • 00:01:55
    Financial markets he has been
  • 00:01:56
    interviewed on PBS CBS NBC CNN Bloomberg
  • 00:02:00
    CNBC and Fox News and featured in or
  • 00:02:03
    written for the New York Times Wall
  • 00:02:05
    Street Journal Reuters The Economist
  • 00:02:08
    Barons and Huffington Post Morgan and
  • 00:02:10
    Rosner will be in conversation with Jeff
  • 00:02:12
    girth a veteran investigative reporter
  • 00:02:14
    who spent three decades at the New York
  • 00:02:16
    Times in 1999 he won a Pulitzer Prize
  • 00:02:19
    for reporting with New York Times
  • 00:02:20
    colleagues on the corporate sale of
  • 00:02:22
    American Technology to China with U.S
  • 00:02:25
    government approval despite National
  • 00:02:26
    Security risks now a freelance writer in
  • 00:02:29
    January the Columbia journalism review
  • 00:02:30
    published Gertz encyclopedic look at one
  • 00:02:33
    of the most consequential moments in
  • 00:02:35
    American Media history the U.S media's
  • 00:02:37
    coverage of Trump's alleged role in
  • 00:02:38
    Russia's meddling in the 2016 election
  • 00:02:40
    everyone please join me in welcoming
  • 00:02:42
    Gretchen Joshua and Jeff the politics
  • 00:02:44
    and prose
  • 00:02:46
    foreign
  • 00:03:01
    welcome
  • 00:03:04
    good to see everyone
  • 00:03:06
    um I'm gonna be moderating and
  • 00:03:08
    I guess first I want to make a little
  • 00:03:10
    disclosure Gretchen and I
  • 00:03:12
    former colleagues competitors no and
  • 00:03:17
    still friends well we did compete for a
  • 00:03:19
    while
  • 00:03:25
    is this better okay great
  • 00:03:29
    um let's start why why did you guys
  • 00:03:32
    decide to do this book and why now
  • 00:03:35
    well first of all what we wanted to try
  • 00:03:38
    to explain was what has been happening
  • 00:03:41
    over the last 30 years really since the
  • 00:03:45
    takeovers of in Corporate America sort
  • 00:03:47
    of burst onto the scene with the RJR
  • 00:03:50
    Nabisco deal in the late 80s
  • 00:03:54
    and it's continued on until this day and
  • 00:03:58
    it will continue but it has taken on
  • 00:04:01
    some aspects that we really felt were
  • 00:04:04
    important to explain to connect the dots
  • 00:04:07
    so people know that sort of Devastation
  • 00:04:10
    that has occurred because of these
  • 00:04:13
    transactions and because of the way
  • 00:04:16
    they're structured so for starters let's
  • 00:04:19
    begin by explaining what these
  • 00:04:22
    transactions are and what private Equity
  • 00:04:24
    is it really is the old-fashioned
  • 00:04:27
    leveraged buyouts from the 1980s where
  • 00:04:32
    financiers use a lot of debt to buy a
  • 00:04:36
    company
  • 00:04:37
    and then they hope to make it more
  • 00:04:41
    efficient and sell it within five to
  • 00:04:45
    seven years and so it has a couple of
  • 00:04:48
    aspects that are quite
  • 00:04:50
    damaging one is the heavy use of debt
  • 00:04:54
    and the other is the short-term nature
  • 00:04:57
    of the purchase so what we wanted to do
  • 00:05:00
    here and now
  • 00:05:03
    is to explain
  • 00:05:05
    who is on the other side of these
  • 00:05:08
    transactions who are hurt by them
  • 00:05:11
    because we know all about the folks who
  • 00:05:15
    are
  • 00:05:16
    celebrated and almost worshiped by some
  • 00:05:20
    of the financial media who are the
  • 00:05:22
    billionaires Behind these transactions
  • 00:05:25
    we learn about them all the time in the
  • 00:05:27
    media
  • 00:05:29
    but what we don't learn about are the
  • 00:05:31
    people who are hurt by their activities
  • 00:05:34
    the people whose pensions are devastated
  • 00:05:38
    the people who are fired
  • 00:05:41
    the people who really don't earn the
  • 00:05:45
    returns that they pretend to to make so
  • 00:05:49
    we're really focusing on the impact of
  • 00:05:52
    these financiers and their transactions
  • 00:05:55
    and we've had 30 years to study and now
  • 00:06:00
    we can begin to really quantify the
  • 00:06:03
    damage
  • 00:06:04
    yeah and I would add that you know we
  • 00:06:07
    all have become very aware that there's
  • 00:06:11
    something going on that is the
  • 00:06:13
    devastation of Main Street the killing
  • 00:06:16
    of small business the killing of
  • 00:06:17
    innovation and yet we're all sort of
  • 00:06:21
    unaware of exactly what's driving it yes
  • 00:06:24
    there are big box stores and companies
  • 00:06:26
    that are have gone public and so we've
  • 00:06:28
    seen consolidation and haven't seen a
  • 00:06:30
    lot of enforcement of Anti-Trust laws as
  • 00:06:33
    we once did
  • 00:06:35
    but we're also sort of missing that
  • 00:06:37
    there's this less transparent less clear
  • 00:06:40
    more hidden part of the markets that
  • 00:06:43
    don't have the reporting requirements
  • 00:06:45
    that don't have the transparency that
  • 00:06:47
    don't have the market oversight and
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    Market disciplined and in fact there's
  • 00:06:52
    an Unholy alliance between the people
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    whose money they manage pensions
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    endowments and the managements
  • 00:07:02
    themselves and there's not really the
  • 00:07:04
    accountability
  • 00:07:07
    before we get to sort of the meat and
  • 00:07:10
    potatoes
  • 00:07:12
    I'd like the two of you to just explain
  • 00:07:14
    how you sort of work together
  • 00:07:16
    collaborate I mean
  • 00:07:18
    you're a journalist you're sort of a
  • 00:07:20
    financial analyst you did a book
  • 00:07:22
    together you know more than a decade ago
  • 00:07:25
    how do you divide up the reporting the
  • 00:07:28
    writing what happens if you disagree
  • 00:07:30
    about something uh give us a little bit
  • 00:07:32
    of the sausage meal we have a really
  • 00:07:34
    disagree we never disagree we're lucky
  • 00:07:36
    that way I don't know why we never
  • 00:07:39
    really don't ever disagree but so Josh
  • 00:07:42
    is a really amazing
  • 00:07:44
    um researcher and really fantastic
  • 00:07:46
    analyst whom I met when I was at the New
  • 00:07:49
    York Times
  • 00:07:50
    um trying to understand
  • 00:07:51
    what would become the mortgage crisis
  • 00:07:54
    and Josh really put his finger on that
  • 00:07:57
    well before anybody else did he wrote a
  • 00:08:01
    very important academic paper on that
  • 00:08:03
    that was completely predictive of what
  • 00:08:06
    was going to happen so then I became
  • 00:08:08
    aware of just how uh perspicacious he is
  • 00:08:13
    and
  • 00:08:14
    when it came time to try to explain how
  • 00:08:18
    and why the 2008 crisis had occurred I
  • 00:08:21
    said do you want to do a book together
  • 00:08:22
    and if I remember correctly I think I
  • 00:08:25
    think our decision was only if we pull
  • 00:08:28
    no punches and don't really care if it
  • 00:08:30
    sells a copy and that was our first
  • 00:08:32
    massive agreement on right sort of a
  • 00:08:35
    writing decision and we also amazingly
  • 00:08:37
    stayed friends after the process which
  • 00:08:40
    is not always the case with co-authors
  • 00:08:43
    so yeah and so okay so how do we do it
  • 00:08:47
    you know and I think it depends so on
  • 00:08:49
    Reckless it really was much more of a
  • 00:08:52
    collaborative writing process on this
  • 00:08:54
    book it was much more Gretchen writing
  • 00:08:56
    and me doing a lot of the research
  • 00:08:57
    Gretchen doing a lot of the healthcare
  • 00:08:59
    research most of the healthcare research
  • 00:09:01
    yeah I know I noticed in reading the
  • 00:09:03
    footnotes that Gretchen did a lot of the
  • 00:09:07
    interviewing
  • 00:09:09
    um though you show up
  • 00:09:10
    a little bit but so you did more sort of
  • 00:09:14
    the legwork and the the Josh is a really
  • 00:09:17
    amazing Digger and so he'll come he'll
  • 00:09:19
    say oh I've got a great example we've
  • 00:09:21
    got to do this story you know so what we
  • 00:09:23
    were looking for were ways to
  • 00:09:25
    really
  • 00:09:27
    um personify and really personalize the
  • 00:09:31
    impacts that these transactions have on
  • 00:09:34
    everyday people and so there are quite a
  • 00:09:38
    few to choose from you know it's not
  • 00:09:40
    like there aren't but
  • 00:09:42
    choosing the right ones and that that
  • 00:09:44
    had really all of the compelling factors
  • 00:09:47
    that would really
  • 00:09:49
    tell the story and make people
  • 00:09:52
    understand just what the impact of these
  • 00:09:55
    Financial financiers are and that's and
  • 00:09:56
    it really is it's these are stories
  • 00:09:59
    hopefully you'll read the book but these
  • 00:10:01
    are stories of obviously not only
  • 00:10:03
    employees they're stories of towns
  • 00:10:06
    they're stories of Industries they're
  • 00:10:08
    stories of great Devastation pillage and
  • 00:10:12
    plunder where the public is completely
  • 00:10:16
    unaware because for the most part
  • 00:10:18
    I would suspect everyone in this room
  • 00:10:20
    has interacted with a private Equity
  • 00:10:22
    firm's product today and I would suspect
  • 00:10:26
    that almost none of the people in this
  • 00:10:28
    room are aware of which companies they
  • 00:10:31
    supported today that are owned by
  • 00:10:32
    private equity
  • 00:10:33
    all right so you use the word plunder
  • 00:10:36
    which of course is the title of your
  • 00:10:38
    book it's a it's a strong evocative word
  • 00:10:43
    how did you come up with the title and I
  • 00:10:45
    I know
  • 00:10:47
    coincidentally I guess there's another
  • 00:10:49
    book out with a similar title
  • 00:10:52
    um not as well done as this book I
  • 00:10:54
    should add but
  • 00:10:56
    um so how did you come up with the title
  • 00:10:58
    or was that the Publisher's brainchild
  • 00:11:00
    or give us a little bit of that was
  • 00:11:03
    probably the longest part of the world
  • 00:11:05
    but we agreed that this this is this is
  • 00:11:09
    a um an approach that is so devastating
  • 00:11:12
    for
  • 00:11:13
    I I like to call it the circle of pain
  • 00:11:16
    is very large for everyone in these
  • 00:11:21
    transactions except for the people who
  • 00:11:24
    are doing them and so
  • 00:11:27
    what does that mean that means that
  • 00:11:30
    these people are extracting
  • 00:11:32
    wealth from everyone along the way in
  • 00:11:37
    the process and to me that sounds like
  • 00:11:40
    plundering okay you know let's call it
  • 00:11:43
    like we see it why it means words and
  • 00:11:47
    and and there's been such a a perversion
  • 00:11:50
    even of
  • 00:11:51
    the leveraged buyouts since the Gordon
  • 00:11:54
    gecko greed is good ERA of the 80s where
  • 00:11:58
    the goal used to be to take a part of a
  • 00:12:00
    company private to right size it cut
  • 00:12:04
    costs improve efficiencies and then make
  • 00:12:07
    your money by selling it back to the
  • 00:12:09
    market in five to seven years we've
  • 00:12:11
    actually jumped way past that now it's
  • 00:12:13
    about how we can take the money out of
  • 00:12:16
    the company
  • 00:12:17
    over the next five to seven years so we
  • 00:12:20
    don't really care if it survives or not
  • 00:12:22
    and that is plunder
  • 00:12:25
    um
  • 00:12:26
    so I one of the things I thought most
  • 00:12:29
    interesting in the book The sort of from
  • 00:12:32
    afar people think of private Equity is
  • 00:12:35
    going in buying up a company and
  • 00:12:39
    downsizing and squeezing and just sort
  • 00:12:41
    of
  • 00:12:42
    getting the most you can out of it but
  • 00:12:45
    you write a lot about the movement of
  • 00:12:49
    private Equity into areas like health
  • 00:12:51
    care
  • 00:12:52
    and nursing homes one of the things I
  • 00:12:55
    thought was most interesting that I
  • 00:12:58
    didn't know about and that everybody
  • 00:13:00
    here
  • 00:13:02
    has some intersection with or hopefully
  • 00:13:04
    not emergency rooms the extent to which
  • 00:13:07
    private Equity controls
  • 00:13:10
    the operation of emergency rooms at
  • 00:13:12
    hospitals so it's not just you know it's
  • 00:13:16
    bad enough that somebody loses their job
  • 00:13:18
    because private Equity comes in and
  • 00:13:21
    Cuts corners
  • 00:13:22
    but when you're talking about patience
  • 00:13:25
    and you're talking about health care
  • 00:13:27
    that's that's really at another level so
  • 00:13:30
    talk a little bit about how private
  • 00:13:32
    equity
  • 00:13:33
    started to move into this area and what
  • 00:13:36
    some of the consequences are well health
  • 00:13:38
    care is such an enormous part of our
  • 00:13:42
    country's GDP it's currently 17 percent
  • 00:13:46
    of the gross domestic product
  • 00:13:49
    so um these folks who run these firms
  • 00:13:53
    they look for big pools of money that
  • 00:13:56
    they can tap into so Healthcare is an
  • 00:13:59
    obvious example of that
  • 00:14:01
    but it is also an obvious example of a
  • 00:14:05
    business of an industry of a practice
  • 00:14:08
    that should put Patients First and not
  • 00:14:12
    profits and so you have this deep seated
  • 00:14:15
    conflict between what you want to
  • 00:14:19
    actually have as an outcome which is
  • 00:14:22
    better health care
  • 00:14:24
    you know better mortality whatever
  • 00:14:27
    outcome you're looking for you have that
  • 00:14:29
    pitted against higher profits and the
  • 00:14:33
    two just do not meet the two just are
  • 00:14:37
    incompatible
  • 00:14:39
    and so when they started going into it's
  • 00:14:43
    quite interesting because when private
  • 00:14:45
    Equity started to go into health care it
  • 00:14:48
    was in the early sort of 2000 2005
  • 00:14:52
    period and we actually actually at that
  • 00:14:57
    moment had a member of Congress asking
  • 00:15:00
    for a report on what would happen
  • 00:15:04
    if the United States had a pandemic
  • 00:15:09
    and what this report found
  • 00:15:12
    was that hospitals needed to invest
  • 00:15:15
    in ventilators in PPE they needed to
  • 00:15:20
    invest they were they were going to be
  • 00:15:22
    behind the eight ball if there was ever
  • 00:15:24
    a pandemic now the pandemic this was
  • 00:15:26
    2005 or six the pandemic was off in the
  • 00:15:29
    future
  • 00:15:30
    but in fact it proved to be correct this
  • 00:15:33
    report we did need more ventilators more
  • 00:15:36
    PPE but at the time of the report
  • 00:15:41
    nobody wanted to make those Investments
  • 00:15:43
    and part of the reason why is because
  • 00:15:45
    private Equity had decided that Health
  • 00:15:47
    Care was going to be one of their main
  • 00:15:50
    sources of income and gains for them so
  • 00:15:53
    they started buying up
  • 00:15:55
    doctor's practices they started getting
  • 00:15:59
    into these staffing companies that staff
  • 00:16:02
    emergency departments and so they've
  • 00:16:05
    made tremendous I mean a trillion
  • 00:16:07
    dollars of investments in health care
  • 00:16:11
    so that now they have really they have
  • 00:16:14
    immense dominance in many parts of the
  • 00:16:17
    industry and we are seeing the impacts
  • 00:16:22
    there is one study that we cite in the
  • 00:16:24
    book which was devastating about nursing
  • 00:16:26
    homes which found that over a period of
  • 00:16:29
    time I think it was a 10-year period
  • 00:16:33
    the mortality rates of residents of
  • 00:16:36
    nursing homes that are owned by private
  • 00:16:38
    Equity were 10 percent greater than
  • 00:16:42
    those owned by other owners even for
  • 00:16:46
    profit owners the private Equity owners
  • 00:16:50
    had 10 percent greater mortality rates
  • 00:16:53
    twenty thousand lives were estimated to
  • 00:16:56
    have been lost and the academics that
  • 00:16:59
    did the study said
  • 00:17:01
    it was because of cutting staff cutting
  • 00:17:05
    costs and these are the kinds of
  • 00:17:07
    conflicts that you have with health care
  • 00:17:10
    and and I think it's really important
  • 00:17:12
    just to step back and set the stage it's
  • 00:17:15
    one thing
  • 00:17:16
    when you're taking over
  • 00:17:18
    a consumer brand you know a food
  • 00:17:21
    manufacturer a few Food business and
  • 00:17:25
    you're trying to maximize returns and
  • 00:17:29
    cut costs there are certain sectors of
  • 00:17:32
    the economy that we've always seen as
  • 00:17:34
    sort of sacred Education Health Care
  • 00:17:38
    these are industries that were never
  • 00:17:40
    intended to be run to maximize profits
  • 00:17:43
    they were actually intended to be run
  • 00:17:45
    for outcomes
  • 00:17:47
    and so we became late and late later and
  • 00:17:50
    later and later in this leveraged buyout
  • 00:17:53
    cycle so what started as arbitraging
  • 00:17:55
    things like private Market valuations
  • 00:17:57
    versus Public Market valuations to take
  • 00:18:00
    over companies like rgr RJR ended up
  • 00:18:03
    moving into energy ended up moving into
  • 00:18:06
    other areas and we became
  • 00:18:08
    late cycle there's no longer a
  • 00:18:11
    target-rich environment and so the last
  • 00:18:13
    areas where there's a lot of margin for
  • 00:18:15
    them to extract became things like
  • 00:18:18
    education and health care and they've
  • 00:18:20
    done so
  • 00:18:21
    and also don't forget Jeff that Medicare
  • 00:18:25
    is an enormous Factor here and we have
  • 00:18:28
    seen a tremendous number of Medicare
  • 00:18:31
    fraud cases involving private Equity
  • 00:18:34
    companies well that that gets me to
  • 00:18:37
    my next question which is
  • 00:18:40
    Health Care is very heavily regulated
  • 00:18:43
    how in your book I think does a really
  • 00:18:46
    interesting job of describing some of
  • 00:18:49
    the corporate structuring
  • 00:18:51
    that goes on
  • 00:18:53
    to sort of cauterize the wound or keep
  • 00:18:57
    the regulation
  • 00:18:58
    sort of at Bay can can you go into that
  • 00:19:01
    a little bit because it seems counter
  • 00:19:04
    intuitive that they're moving into an
  • 00:19:07
    area of the economy that's so heavily
  • 00:19:09
    regulated and yet they still continue to
  • 00:19:12
    operate in the same fashion but that
  • 00:19:14
    that largely goes to the concentration
  • 00:19:18
    issues and so we've got a regulatory and
  • 00:19:23
    statutory structure that is not
  • 00:19:25
    right-sized for this world this
  • 00:19:27
    environment we're still looking at
  • 00:19:29
    transactions on a you know local level
  • 00:19:32
    and so you need to actually consolidate
  • 00:19:36
    um above is it 50 million or 100 50 it's
  • 00:19:39
    100 billion uh 400 million before it
  • 00:19:42
    actually ends up a control of a local
  • 00:19:44
    economy and so
  • 00:19:46
    you're you've been watching the
  • 00:19:48
    consolidation of regions where they can
  • 00:19:50
    stab below that threshold so they're not
  • 00:19:52
    triggering any Federal
  • 00:19:55
    uh um oversight well but also say
  • 00:20:00
    nursing homes so like Carlisle owned a
  • 00:20:03
    nursing home chain I don't know hundreds
  • 00:20:05
    however many nursing homes and if there
  • 00:20:07
    are problems at the nursing home they're
  • 00:20:10
    heavily regulated whether it's through
  • 00:20:12
    Medicare or the local state or or
  • 00:20:15
    whatever but
  • 00:20:17
    if I'm remembering correctly from your
  • 00:20:19
    book there the they structure it so that
  • 00:20:22
    each nursing home
  • 00:20:23
    is separately owned so go into that
  • 00:20:26
    corporate structure of these
  • 00:20:27
    transactions is always done to protect
  • 00:20:30
    the private Equity Firm and to keep the
  • 00:20:33
    private Equity Firm away from any kind
  • 00:20:36
    of you know regulatory action any you
  • 00:20:39
    know bankruptcy I mean if they are
  • 00:20:41
    touched in those kinds of in bankruptcy
  • 00:20:43
    cases but
  • 00:20:45
    uh the nursing home industry for
  • 00:20:47
    instance each nursing home is a separate
  • 00:20:49
    LLC and so if you have you know in The
  • 00:20:53
    Manor Care situation you have a company
  • 00:20:57
    that is directing you know 50 to 100
  • 00:21:00
    nursing homes to do something a certain
  • 00:21:02
    way which in this case the government
  • 00:21:04
    alleged was fraudulent
  • 00:21:07
    um
  • 00:21:08
    particular nursing home is a separate
  • 00:21:11
    entity and so trying to tie them all
  • 00:21:14
    together and get up to the parent or get
  • 00:21:17
    up to the private Equity Firm is
  • 00:21:19
    extremely challenging in some ways it's
  • 00:21:21
    it's not a this isn't a perfect example
  • 00:21:24
    but it's almost an inversion of what we
  • 00:21:26
    see in the banking industry right where
  • 00:21:29
    most banks operate at the federal level
  • 00:21:31
    through a bank holding company and the
  • 00:21:33
    bank holding company is required by law
  • 00:21:36
    by regulation to be a source of strength
  • 00:21:39
    for the subs here we actually have no
  • 00:21:42
    expectation of the parent being a source
  • 00:21:45
    of strength which allows the parent to
  • 00:21:47
    bankrupt that company let it go after
  • 00:21:50
    they've taken all they can out of it you
  • 00:21:52
    also have a situation Jeff where
  • 00:21:55
    when there is bad news about a company
  • 00:21:58
    that is private Equity owned the private
  • 00:22:01
    Equity owner almost always claims
  • 00:22:04
    ignorance I had no idea this was going
  • 00:22:08
    on gambling in the casino I mean so
  • 00:22:11
    we've recently seen some absolutely
  • 00:22:14
    horrific stories about
  • 00:22:16
    a company
  • 00:22:18
    that cleans slaughterhouses called pssi
  • 00:22:23
    and they were hiring children to work in
  • 00:22:28
    this operation of cleaning
  • 00:22:31
    slaughterhouses at night
  • 00:22:34
    and this was a company owned is a
  • 00:22:36
    company owned by Blackstone one of the
  • 00:22:39
    most if not the most prestigious private
  • 00:22:41
    Equity firms in the country
  • 00:22:43
    and so private you know Blackstone says
  • 00:22:46
    we had no idea they are hiring children
  • 00:22:49
    to clean these slaughterhouses well the
  • 00:22:52
    the whole business model unfortunately
  • 00:22:55
    you see incentivizes people to take
  • 00:22:58
    these kinds of risks it incentivizes
  • 00:23:00
    managers to push the envelope because
  • 00:23:03
    they know they need to make the number
  • 00:23:05
    they know they need to have earnings go
  • 00:23:08
    up X percent because they want to sell
  • 00:23:11
    that company in five years or or more
  • 00:23:14
    often not even necessarily care about
  • 00:23:16
    selling it but special dividend money
  • 00:23:19
    out of that company back to right the
  • 00:23:22
    private Equity so there's all of these
  • 00:23:24
    perverse incentives actually involved
  • 00:23:27
    here it sounds like what you're
  • 00:23:28
    describing is
  • 00:23:30
    the risk taking takes place across the
  • 00:23:33
    Enterprise but the accountability if
  • 00:23:37
    something goes wrong is stuck with the
  • 00:23:39
    loan operator and if things go well the
  • 00:23:42
    money the profits flow upstream and it's
  • 00:23:45
    important it's not just about debt the
  • 00:23:47
    debt isn't with the private Equity Firm
  • 00:23:49
    when they buy a company with debt the
  • 00:23:52
    debt is on the company that they're
  • 00:23:54
    buying so they are forcing the company
  • 00:23:57
    to raise costs they're forcing the
  • 00:23:59
    company to have a harder time remaining
  • 00:24:01
    solvent and we watch and we go through
  • 00:24:05
    several of these examples but in one of
  • 00:24:08
    the examples in the book there's a
  • 00:24:09
    company
  • 00:24:11
    Miranda which is an aluminum company
  • 00:24:13
    where they piled it up with debt and
  • 00:24:16
    within six months six months all of the
  • 00:24:19
    equity that they put into the deal
  • 00:24:20
    they'd already extracted in special
  • 00:24:23
    dividend so they had they were at that
  • 00:24:25
    point playing with the casinos money
  • 00:24:28
    since we're here in Washington
  • 00:24:31
    I wanted to ask you about a couple of
  • 00:24:33
    local
  • 00:24:35
    private Equity folks one of whom is
  • 00:24:38
    a savior here about to buy the football
  • 00:24:43
    team Josh Harris
  • 00:24:45
    you go into him a little bit in your
  • 00:24:47
    book he was with Apollo and one of the
  • 00:24:50
    co-founders
  • 00:24:52
    I find it interesting that the NFL
  • 00:24:56
    prohibits private Equity firms from
  • 00:24:59
    buying a football team
  • 00:25:01
    somehow The Regulators can't get their
  • 00:25:05
    hands on private Equity but the NFL's
  • 00:25:07
    figured out how to keep them at Bay
  • 00:25:10
    but so Josh Harris is
  • 00:25:13
    on the verge of buying the football team
  • 00:25:16
    and I can't help but point out that
  • 00:25:19
    according to ESPN
  • 00:25:21
    he's bringing in some investors and he's
  • 00:25:24
    promising them that the state of
  • 00:25:26
    Virginia is going to contribute up to a
  • 00:25:29
    billion and a half dollars for a stadium
  • 00:25:31
    in Virginia
  • 00:25:33
    so that he could pay for himself correct
  • 00:25:36
    so talk a little bit about about Josh
  • 00:25:39
    Harris and we'll get to a couple of
  • 00:25:41
    other local Washington private Equity
  • 00:25:43
    folks but let's let's start with Josh
  • 00:25:45
    because he's in the news right now well
  • 00:25:48
    I'm not a football person so I can't
  • 00:25:50
    really help you on the football team but
  • 00:25:52
    I do know that these folks um you know
  • 00:25:54
    buy
  • 00:25:56
    um uh Toys these are you know the
  • 00:25:58
    football team is of course it has huge
  • 00:26:00
    cachet and once you've you know been in
  • 00:26:03
    private equity for quite a while you've
  • 00:26:05
    generated a lot of money and so you have
  • 00:26:07
    to deploy that money and what better way
  • 00:26:09
    to do that than to buy a football team
  • 00:26:12
    and then you know you are
  • 00:26:15
    upping the Andy and importance in
  • 00:26:17
    American society that's talked a little
  • 00:26:19
    bit though about his background right so
  • 00:26:21
    so transfer us as a as a as a um you
  • 00:26:25
    know co-founder of Apollo with Leon
  • 00:26:27
    black
  • 00:26:28
    um was really on the scene of a very
  • 00:26:31
    early on we start the book with the um
  • 00:26:33
    the failure of a life insurance company
  • 00:26:36
    in California called executive life
  • 00:26:38
    which is many years ago 1991 and
  • 00:26:42
    um Apollo scooped up the assets of this
  • 00:26:45
    company
  • 00:26:46
    um along with a French bank they were
  • 00:26:48
    advising and made a quick three billion
  • 00:26:51
    dollars almost overnight and so this is
  • 00:26:55
    what put Apollo on the map with another
  • 00:26:57
    Washington luminary
  • 00:27:00
    oh yes arranging the sale at essentially
  • 00:27:03
    a 50 this was John hiramendi who is the
  • 00:27:06
    uh a representative from California
  • 00:27:08
    congressman from he was he was the
  • 00:27:10
    California insurance commissioner who
  • 00:27:13
    chose that rather than selling it off in
  • 00:27:16
    pieces or maximizing value he was going
  • 00:27:19
    to sell off the executive life portfolio
  • 00:27:21
    essentially in one Fell Swoop at what
  • 00:27:25
    was you know a Bargain Basement price
  • 00:27:27
    leaving about three billion dollars of
  • 00:27:29
    profit on the table that was realized
  • 00:27:31
    almost immediately upon and the people
  • 00:27:33
    who were the policyholders got the shaft
  • 00:27:37
    um but anyway so this was the basis of
  • 00:27:39
    the founding of Apollo right sort of the
  • 00:27:42
    original sin one of my uh sources
  • 00:27:45
    described it as and so you know we think
  • 00:27:48
    that's an important story to tell
  • 00:27:50
    because the people on the other side of
  • 00:27:52
    that transaction were left with much
  • 00:27:56
    less in the way of what they were owed
  • 00:27:58
    in their policy um these were disabled
  • 00:28:01
    people who had taken on annuities that
  • 00:28:03
    were to pay for their care for the rest
  • 00:28:05
    of their life these were people who had
  • 00:28:07
    put money into their policies for
  • 00:28:09
    decades and then got a fraction of what
  • 00:28:12
    they were owed but Apollo got this nice
  • 00:28:15
    um chunk of change and so you know he
  • 00:28:17
    does that for the next 30 years and now
  • 00:28:20
    we can buy the Washington commanders and
  • 00:28:22
    then at the end of your book he
  • 00:28:24
    reappears
  • 00:28:25
    as a antagonist to Leon black the one of
  • 00:28:30
    the other co-founders to the bottom
  • 00:28:33
    right so yeah
  • 00:28:36
    yeah
  • 00:28:37
    um let's go to another
  • 00:28:39
    sort of well-known Washington private
  • 00:28:42
    Equity figure David Rubinstein
  • 00:28:45
    um Carlisle
  • 00:28:47
    um so talk a little bit about you have
  • 00:28:51
    an interesting quote in your book from
  • 00:28:53
    David Rubinstein about private equity
  • 00:28:56
    and you know his philanthropy is well
  • 00:28:59
    known but
  • 00:29:00
    sort of his financial operations or
  • 00:29:04
    maybe less well known so talk a little
  • 00:29:05
    bit about David Rubinstein well the
  • 00:29:08
    example that we do we really detail in
  • 00:29:12
    the book is the Manor Care transaction
  • 00:29:15
    which was nursing homes that were based
  • 00:29:17
    in Ohio they were really very well run
  • 00:29:21
    they did not have any Mortgage Debt on
  • 00:29:24
    the properties they owned all the real
  • 00:29:26
    estate uh the company made a tremendous
  • 00:29:29
    amount of money it had a higher
  • 00:29:32
    percentage of Medicare pay and private
  • 00:29:35
    pay than most of its competitors so it
  • 00:29:38
    was a very well-run company they bought
  • 00:29:40
    it
  • 00:29:41
    there was quite a bit of upset and worry
  • 00:29:44
    that this was going to be the
  • 00:29:46
    traditional private Equity you know
  • 00:29:48
    um operation where they were going to
  • 00:29:50
    start firing people and reducing care
  • 00:29:52
    and actually
  • 00:29:54
    um Carlisle made a pledge to all the
  • 00:29:58
    states in which they were operating that
  • 00:30:00
    they would keep the patient care at a
  • 00:30:03
    very high level they would invest in the
  • 00:30:05
    company they did nothing of the sort
  • 00:30:07
    what ended up happening was they did a
  • 00:30:10
    an extraction transaction where they
  • 00:30:13
    sold all the real estate under the
  • 00:30:16
    nursing homes to a real estate
  • 00:30:19
    investment trust they got all their
  • 00:30:22
    money out
  • 00:30:23
    then Manor Care had to start paying rent
  • 00:30:27
    to The Entity that owned the real estate
  • 00:30:30
    immediately it goes to a point where
  • 00:30:33
    they have to they have to pay 40 million
  • 00:30:36
    dollars a month in rent that they didn't
  • 00:30:38
    have
  • 00:30:39
    so all of a sudden the company is really
  • 00:30:43
    behind the aid polls struggling at the
  • 00:30:45
    same time the care is going down the
  • 00:30:47
    drain the Washington Post did an amazing
  • 00:30:49
    expose on this and found the the number
  • 00:30:52
    of complaints and Medicare issues Rose
  • 00:30:56
    26 percent after Carlisle took them over
  • 00:31:00
    and so ultimately the company went
  • 00:31:02
    bankrupt
  • 00:31:04
    Carlisle made their money they got more
  • 00:31:07
    than their money out of it and that was
  • 00:31:10
    a you know transaction that is
  • 00:31:12
    characteristic of the kind of extraction
  • 00:31:15
    that that we're talking and it's really
  • 00:31:18
    important to conceptually step back for
  • 00:31:20
    a second and think about the fact that
  • 00:31:22
    as Gretchen pointed out earlier
  • 00:31:24
    Healthcare is 17 of GDP
  • 00:31:27
    and we all know that health care costs
  • 00:31:28
    have become unsustainable that the rate
  • 00:31:31
    of inflation of Health Care is
  • 00:31:33
    unmanageable
  • 00:31:35
    but that's largely because of the
  • 00:31:38
    Takeover of the industry of private
  • 00:31:40
    Equity setting aside the pharmaceutical
  • 00:31:42
    side which has its own issues as well
  • 00:31:44
    but when you're stripping assets and
  • 00:31:47
    then raising costs on the underlying
  • 00:31:49
    real estate
  • 00:31:51
    by definition the practices have to
  • 00:31:53
    increase cost so in a real world would
  • 00:31:56
    it be 17 of GDP no
  • 00:31:59
    but it's driven by the debt funding and
  • 00:32:01
    the extraction of wealth that forces the
  • 00:32:03
    increase in costs
  • 00:32:05
    uh one last Washington character Jerome
  • 00:32:09
    Powell
  • 00:32:10
    chairman of the Federal Reserve he too
  • 00:32:13
    comes from private Equity talk a little
  • 00:32:15
    bit about his background where he
  • 00:32:20
    he was at Carlisle also
  • 00:32:23
    um and uh you know he operated there I
  • 00:32:26
    think from in the 2000s mid-2000s
  • 00:32:29
    um
  • 00:32:31
    you know I the one thing that I think
  • 00:32:33
    that we the point we want to make in the
  • 00:32:36
    book that is Jermaine
  • 00:32:40
    is that when kovitz struck in 2020 and
  • 00:32:44
    when the markets both the Bond Market
  • 00:32:47
    corporate bond market and the stock
  • 00:32:48
    markets plummeted because no one knew
  • 00:32:51
    what was going to happen this was
  • 00:32:52
    completely unknown territory for us
  • 00:32:54
    everybody was upset and worried what are
  • 00:32:57
    we going to do then the economy
  • 00:32:59
    basically ground to a halt
  • 00:33:02
    there was a moment when the Federal
  • 00:33:04
    Reserve made a decision that was quite
  • 00:33:07
    unusual quite unique had never been done
  • 00:33:09
    before and that was to backstop with 750
  • 00:33:13
    billion dollars
  • 00:33:15
    the corporate bond market the corporate
  • 00:33:18
    bond market which is where private
  • 00:33:20
    Equity gets its money
  • 00:33:22
    and so this was not necessarily that the
  • 00:33:26
    Fed was buying corporate bonds but they
  • 00:33:28
    were offering to backstop it and that
  • 00:33:31
    put a floor on the market and that made
  • 00:33:35
    everyone aware that there was only a
  • 00:33:37
    certain level below that right Bonds
  • 00:33:40
    were not going to fall and so that
  • 00:33:43
    really helped these private Equity
  • 00:33:46
    Titans to continue
  • 00:33:48
    to raise money in that market
  • 00:33:51
    and it was extraordinary because
  • 00:33:54
    corporate bonds had never been subject
  • 00:33:57
    to a purchase program by the Federal
  • 00:34:00
    Reserve
  • 00:34:01
    okay before we get to questions from the
  • 00:34:05
    audience I wanted to ask you about
  • 00:34:08
    the aftermath uh to your book the
  • 00:34:11
    reaction one of the things we were
  • 00:34:13
    talking about just before
  • 00:34:16
    was uh
  • 00:34:18
    normally as a journalist when you do a
  • 00:34:21
    story or an expose or a book
  • 00:34:23
    people oftentimes come forward and you
  • 00:34:27
    were remarking about the paucity of
  • 00:34:29
    whistleblowers and private Equity
  • 00:34:32
    talk a little bit about that and why
  • 00:34:35
    it's so hard as a journalist to sort of
  • 00:34:39
    get people inside the industry to talk
  • 00:34:41
    about it
  • 00:34:43
    well I think I think as I said to you
  • 00:34:46
    earlier you know people who go into
  • 00:34:48
    private Equity are not altruists
  • 00:34:51
    they are looking to maybe you know the
  • 00:34:54
    best case scenario is they want to pay
  • 00:34:56
    back their student loan debt maybe or
  • 00:34:58
    something like that but they're not the
  • 00:34:59
    kind of people who are going to raise
  • 00:35:01
    their hand and say
  • 00:35:03
    there's something bad going on here it's
  • 00:35:05
    hurting people I don't want to do it
  • 00:35:08
    anymore I want to talk to a journalist
  • 00:35:09
    about it and again remember one of the
  • 00:35:13
    big distinctions are public markets
  • 00:35:15
    versus private markets and so in public
  • 00:35:17
    markets information does get out right
  • 00:35:20
    there is the incentive for people to
  • 00:35:23
    stand up and say it's actually not
  • 00:35:24
    exactly as it looks right right and that
  • 00:35:26
    doesn't really exist in that piece of
  • 00:35:28
    the world
  • 00:35:29
    so reaction and I'm sorry I'm sorry go
  • 00:35:31
    ahead and
  • 00:35:34
    there are enablers here that I think are
  • 00:35:36
    worth touching on which are the pension
  • 00:35:38
    plans the endowments right who also
  • 00:35:41
    that's where a lot of the money is
  • 00:35:43
    coming from to invest people's future
  • 00:35:45
    retirement funds right and they have an
  • 00:35:49
    incentive to keep their mouth shut and
  • 00:35:52
    they have an incentive to play the
  • 00:35:54
    mismarking of accounting on the
  • 00:35:57
    valuations
  • 00:35:59
    that may be occurring because
  • 00:36:03
    everyone in this industry is playing on
  • 00:36:06
    a five to seven year cycle rather than
  • 00:36:08
    on a quarterly cycle so they get to Mark
  • 00:36:10
    to model not necessarily Mark to Market
  • 00:36:13
    and so everyone has an incentive to keep
  • 00:36:16
    the game going and to keep the game
  • 00:36:18
    going you need to make sure that
  • 00:36:20
    everyone is quiet right I'll just say
  • 00:36:22
    one thing about reaction
  • 00:36:24
    um you know
  • 00:36:26
    anybody has watched Warren Buffett and
  • 00:36:30
    Charlie munger's annual meeting the
  • 00:36:32
    annual meeting that they just had last
  • 00:36:34
    May in Berkshire in Omaha they go into
  • 00:36:39
    quite a bunch of detail about private
  • 00:36:42
    equity and they are extremely critical
  • 00:36:44
    of it so don't take our word for it
  • 00:36:46
    Charlie Munger and Warren Buffett are
  • 00:36:49
    there on the Deus saying that private
  • 00:36:51
    Equity is not marking their Holdings
  • 00:36:53
    accurately that private Equity is too
  • 00:36:56
    expensive too opaque it doesn't make
  • 00:37:00
    sense for people to buy it it was quite
  • 00:37:02
    interesting that the Oracle of Omaha and
  • 00:37:07
    his colleague Charlie
  • 00:37:08
    were quite going out on a limb on
  • 00:37:11
    private Equity all right a last question
  • 00:37:14
    one of the reviews of your book
  • 00:37:19
    um
  • 00:37:20
    raised a criticism that it was like too
  • 00:37:23
    much anecdote and not enough
  • 00:37:25
    you know in depth about the private
  • 00:37:28
    Equity as a whole I would encourage
  • 00:37:31
    people to read the book and you can come
  • 00:37:33
    to your own conclusion about whether
  • 00:37:35
    that's a a fair characterization or not
  • 00:37:37
    but I I'd like for you to you know maybe
  • 00:37:40
    address it and also the author who wrote
  • 00:37:43
    that turns out to have that that's a key
  • 00:37:47
    piece of it private Equity guide there's
  • 00:37:50
    a back story to that so no talk about
  • 00:37:52
    that a little well I would just say
  • 00:37:54
    private Equity is so pervasive there are
  • 00:37:57
    law firms there are financers I mean
  • 00:37:59
    it's very pervasive and there are going
  • 00:38:01
    to be people who are going to come after
  • 00:38:03
    us for criticizing it and that's fine
  • 00:38:05
    I'm fine with that by the way because
  • 00:38:06
    you didn't say it pervasive we were
  • 00:38:09
    talking about emergency rooms earlier
  • 00:38:11
    40 percent of all emergency rooms are
  • 00:38:14
    currently owned by private actors I'm
  • 00:38:16
    sorry so when you start thinking about
  • 00:38:18
    the scale that's that's part of why the
  • 00:38:21
    pushback is going to always be coming
  • 00:38:23
    from everyone and I'm sure everyone here
  • 00:38:25
    has or knows of an experience of going
  • 00:38:28
    to an emergency room and finding that
  • 00:38:32
    some of the doctors that took care of
  • 00:38:34
    you or someone you know that they
  • 00:38:36
    weren't in network or the added costs
  • 00:38:39
    and this this is you know I think really
  • 00:38:41
    something the book goes into in a lot of
  • 00:38:45
    depth and as far as anecdotes Jeff I
  • 00:38:47
    mean seriously they don't want the
  • 00:38:49
    anecdotes they don't want to hear the
  • 00:38:52
    stories of the school children in New
  • 00:38:54
    Madrid Missouri who did not have school
  • 00:38:56
    books because naranda was bankrupted and
  • 00:39:00
    couldn't pay its taxes and so the tax
  • 00:39:04
    base in this small Missouri Town
  • 00:39:08
    did completely shriveled and school
  • 00:39:12
    children and school teachers went
  • 00:39:14
    without Health Care insurance because of
  • 00:39:17
    this they don't want to hear about the
  • 00:39:19
    anecdotes because the anecdotes are
  • 00:39:22
    really what tell the story and they
  • 00:39:24
    don't want that out there right well but
  • 00:39:26
    I think the book also has a lot of
  • 00:39:29
    studies in a research oh yeah that show
  • 00:39:32
    that it's not just anecdotes right but
  • 00:39:34
    they don't I guess they don't like that
  • 00:39:36
    either so uh
  • 00:39:38
    why don't we start with some questions
  • 00:39:40
    here my name is Carolyn poplin I'm a big
  • 00:39:43
    fan
  • 00:39:44
    um thank you two years ago David
  • 00:39:46
    Rubinstein sat right there where you are
  • 00:39:49
    now
  • 00:39:50
    I went after him
  • 00:39:53
    um because
  • 00:39:54
    well I graduated from you know law
  • 00:39:57
    school with the clintons I don't know
  • 00:39:58
    what kind of what school they went to I
  • 00:40:01
    know what kind of school Yale was when I
  • 00:40:03
    was there
  • 00:40:05
    um and I don't know how they turned out
  • 00:40:06
    the way they did
  • 00:40:08
    um after 12 years of law practice I
  • 00:40:10
    decided that was a waste of time and I
  • 00:40:12
    went into medicine because that was
  • 00:40:14
    something real I mean physiology is
  • 00:40:18
    physiology you can't argue with facts
  • 00:40:20
    and I discovered to my horror that
  • 00:40:23
    private Equity was already there and was
  • 00:40:26
    destroying American medicine now you can
  • 00:40:29
    do something about private Equity you do
  • 00:40:32
    what Elizabeth Warren says you abolish
  • 00:40:34
    it we don't have to have this
  • 00:40:38
    um you can do something about medicine
  • 00:40:40
    you take the excuse me the money
  • 00:40:43
    out of it you take the money out of it
  • 00:40:45
    so it's not a profitable investment
  • 00:40:47
    medicine is a calling it's not a
  • 00:40:50
    business uh that's not what medicine is
  • 00:40:53
    supposed to be about any more than
  • 00:40:54
    education is supposed to be about and
  • 00:40:57
    you make it unprofitable to invest and
  • 00:40:59
    that will be the end of that the trouble
  • 00:41:02
    is
  • 00:41:03
    Pension funds
  • 00:41:05
    universities what are they supposed to
  • 00:41:07
    invest in
  • 00:41:09
    well but let's start there for a second
  • 00:41:11
    because you know part of the reason that
  • 00:41:13
    the Pension funds and the private equity
  • 00:41:15
    and the endowments are there is actually
  • 00:41:18
    the liquidity
  • 00:41:19
    right so when you look at what the
  • 00:41:21
    Pension funds hold right now it's north
  • 00:41:24
    in most cases uh certainly with
  • 00:41:27
    endowments it's north of 50 percent to
  • 00:41:29
    75 percent of their funds are an
  • 00:41:33
    illiquid Investments real estate
  • 00:41:36
    could be private Equity right part of
  • 00:41:39
    the value there is
  • 00:41:40
    that they get to rely on Actuarial
  • 00:41:42
    assumptions of returns rather than
  • 00:41:44
    actually having to acknowledge that
  • 00:41:46
    they're not making the returns that they
  • 00:41:49
    want they don't have a daily market
  • 00:41:50
    value but they have to pay out
  • 00:41:53
    on a yes on an Actuarial basis but
  • 00:41:56
    you're always running in accrual
  • 00:41:58
    remember we've got declining populations
  • 00:42:01
    um and so you're hoping you're stealing
  • 00:42:04
    from Peter to pay Paul right and
  • 00:42:07
    eventually it'll catch up to us
  • 00:42:09
    and that's actually one of our great
  • 00:42:11
    concerns because they're also now buying
  • 00:42:15
    the insurance companies private Equity
  • 00:42:17
    firms oh no all bought major Insurance
  • 00:42:19
    life insurance companies
  • 00:42:21
    so that they actually are taking over
  • 00:42:24
    those retirement funds as well they're
  • 00:42:26
    co-investing with their own investors
  • 00:42:28
    they're putting the retirement monies
  • 00:42:31
    into some of their own products
  • 00:42:33
    okay which are not necessarily rated AAA
  • 00:42:37
    right and so it almost feels like they
  • 00:42:40
    understand that the final game is a
  • 00:42:43
    bailout
  • 00:42:44
    get it to a systemic level because
  • 00:42:47
    that's the way you're going to get out
  • 00:42:49
    because the the
  • 00:42:52
    most of the most of the endowments and
  • 00:42:54
    pension fund managers
  • 00:42:57
    apparently I paid on net asset value not
  • 00:42:59
    on a regular Mark and so it's in
  • 00:43:02
    everyone's interest
  • 00:43:04
    to keep up the facade as long as they
  • 00:43:07
    can my late husband ran the pbgc under
  • 00:43:10
    Clinton by the way so yeah he bailed he
  • 00:43:14
    had to rescue a lot of Pensions that
  • 00:43:16
    went belly up that's right intentionally
  • 00:43:19
    yeah I mean the pensions were fine they
  • 00:43:22
    were doing fine they were defined
  • 00:43:23
    benefit plans that's how pensions should
  • 00:43:26
    be in this country
  • 00:43:28
    but
  • 00:43:29
    we need but but it's all right sorry
  • 00:43:33
    Elizabeth Warren we need to abolish
  • 00:43:36
    private Equity it can be abolished I'm
  • 00:43:39
    an attorney I can tell you that
  • 00:43:43
    thank you for your thoughts and your
  • 00:43:47
    passion
  • 00:43:49
    um I don't remember what her name is but
  • 00:43:51
    she scares me
  • 00:43:53
    I'm also an attorney but uh does
  • 00:43:56
    everybody have if you don't have a book
  • 00:43:57
    you should grab one because I am private
  • 00:44:00
    Equity so anybody want to Boo or throw
  • 00:44:02
    things at me have at it
  • 00:44:05
    um and I of course take some exception
  • 00:44:08
    what you say but there's also a fair
  • 00:44:09
    amount of truth especially when you talk
  • 00:44:11
    about Barbarians at the gate and and
  • 00:44:13
    various things like that there is bad
  • 00:44:16
    private Equity I wanna right and I want
  • 00:44:19
    to make clear and I think Gretch and I
  • 00:44:21
    tried to make clear we're really talking
  • 00:44:22
    about a very specific type of private
  • 00:44:24
    equity and it really is the debt funded
  • 00:44:26
    about the lbos that's right and I think
  • 00:44:29
    that was somewhat misleading here and
  • 00:44:32
    within this discussion anyways because I
  • 00:44:35
    like to think that we do a lot of good
  • 00:44:38
    but you talk we've talked about the
  • 00:44:39
    pension plans and the college endowments
  • 00:44:41
    which in fact support my company as well
  • 00:44:44
    and if you get a pension here or if you
  • 00:44:47
    ever got a scholarship it's because of
  • 00:44:49
    those types of Investments
  • 00:44:51
    um you didn't talk a lot about insurance
  • 00:44:53
    companies but they too are investors in
  • 00:44:56
    this space and yeah we can skip over a
  • 00:44:59
    theme because that may go over some
  • 00:45:01
    people's heads here but
  • 00:45:03
    um the the I don't mean that insulting
  • 00:45:06
    insulting um uh it's just deep in the
  • 00:45:09
    weeds but
  • 00:45:11
    we for example I'd like to give one
  • 00:45:14
    example
  • 00:45:15
    um where for those of you companies that
  • 00:45:17
    you may know Armstrong Flooring recently
  • 00:45:20
    filed for bankruptcy and the floor
  • 00:45:22
    underneath here may be Armstrong
  • 00:45:24
    Flooring you walk into hospitals in a
  • 00:45:25
    lot of hospitals right that company is
  • 00:45:28
    going to be completely liquidated we
  • 00:45:30
    came in and bought that company shut
  • 00:45:33
    down three of the plants admittedly but
  • 00:45:35
    kept two of them open and saved probably
  • 00:45:38
    a thousand jobs but people don't focus
  • 00:45:41
    on that they don't talk about that
  • 00:45:43
    because of this lbo
  • 00:45:46
    bad news what was the structure uh the
  • 00:45:49
    structure there was we brought in a
  • 00:45:52
    strategic they had other
  • 00:45:53
    flooring plants so they could buy the
  • 00:45:56
    name effectively and because of the
  • 00:45:58
    amount of business that had fallen off
  • 00:46:00
    they kept the plants operating that
  • 00:46:02
    could still support some business that
  • 00:46:04
    the company by itself couldn't because
  • 00:46:06
    of the overhead associated with the
  • 00:46:07
    business we went ahead and liquidated
  • 00:46:09
    the plants um the Machinery equipment
  • 00:46:12
    the flooring collected out the
  • 00:46:14
    receivables and that is what brought the
  • 00:46:18
    most value
  • 00:46:19
    to the employees and to the creditors of
  • 00:46:23
    that particular company we did the same
  • 00:46:25
    thing with Lionsgate films which many of
  • 00:46:27
    you may know right that Studio was on
  • 00:46:30
    the verge of bankruptcy and collapse and
  • 00:46:33
    now look at it you've got the Hunger
  • 00:46:35
    Games and Stars Network and all this
  • 00:46:38
    sort of stuff
  • 00:46:39
    so I know there's people behind me that
  • 00:46:41
    want to ask these questions but I think
  • 00:46:43
    the main point here is that it would be
  • 00:46:45
    good and I've not read your book it'd be
  • 00:46:47
    good I hope your book talks about some
  • 00:46:50
    of the good things that private Equity
  • 00:46:52
    does and how it's long dated this going
  • 00:46:55
    quarter to quarter to quarter in the
  • 00:46:57
    public markets is a Bad Thing hold on it
  • 00:47:00
    isn't though necessarily long data
  • 00:47:02
    that's kind of the point that we were
  • 00:47:03
    making so what was the structure of the
  • 00:47:06
    transactions debt to equity do you have
  • 00:47:08
    a Target maximum debt that you're
  • 00:47:09
    willing to put on a company do you
  • 00:47:11
    actually keep the equity in the company
  • 00:47:14
    do you extract Equity do you special
  • 00:47:16
    dividend prior to a termination
  • 00:47:19
    transaction we don't do those things now
  • 00:47:22
    the case of lionsgate's a public company
  • 00:47:24
    we've been holding on to that now for oh
  • 00:47:26
    God I don't know 11 maybe more years and
  • 00:47:29
    are still in it and we'll get out by
  • 00:47:32
    sawing the stock in the case of
  • 00:47:35
    Armstrong that was a shorter data
  • 00:47:38
    transaction because it was really about
  • 00:47:40
    the Strategic coming in who's operating
  • 00:47:42
    it on a long-term basis and it was not
  • 00:47:45
    overloaded with debt right so we're not
  • 00:47:46
    talking about 90 debt we're talking
  • 00:47:48
    about traditional 65 to 75 percent it's
  • 00:47:51
    like you put a lot more Equity into it
  • 00:47:52
    than these folks normally do in the lbos
  • 00:47:55
    and so that's a different model and
  • 00:47:56
    leave it there and don't special
  • 00:47:58
    dividend to yourself to get out quickly
  • 00:48:00
    that's which we don't do right that's
  • 00:48:01
    we're not focusing on but the answer is
  • 00:48:04
    in the law like if it I I actually agree
  • 00:48:07
    with her on the medical side that
  • 00:48:10
    you know you have for-profit hospitals
  • 00:48:13
    should there be for-profit hospitals
  • 00:48:16
    but I got to let the people behind me
  • 00:48:18
    ask questions I want to point out in In
  • 00:48:20
    fairness I won't let the authors make
  • 00:48:23
    this point I'll make it that if you do
  • 00:48:25
    read the book they they went to the
  • 00:48:28
    trade uh group The American Investment
  • 00:48:31
    Council and there are some examples in
  • 00:48:33
    the book of of positive outcomes and
  • 00:48:36
    jobs created and things like that so uh
  • 00:48:39
    we're probably you know more
  • 00:48:41
    proportionally focused on the negative
  • 00:48:43
    here but if you read the book The if
  • 00:48:46
    there's some more balance yes we
  • 00:48:48
    certainly asked for as many examples as
  • 00:48:50
    they would like to give us and but we're
  • 00:48:52
    talking about a different story I was
  • 00:48:54
    just very concerned by the young ladies
  • 00:48:56
    comment here about
  • 00:48:58
    um you know ban all private Equity you
  • 00:49:00
    hear me Elizabeth Warren
  • 00:49:02
    all right so thank you the more the
  • 00:49:04
    merrier what
  • 00:49:07
    my company is
  • 00:49:14
    buying for KKR but we we manage around 6
  • 00:49:17
    billion compared to their anywhere from
  • 00:49:20
    150 to 300 billion so we're sort of
  • 00:49:23
    small
  • 00:49:24
    thank you
  • 00:49:27
    perhaps you might be interested in your
  • 00:49:30
    next book
  • 00:49:31
    uh about a program which I will call the
  • 00:49:35
    junior varsity
  • 00:49:37
    of these funds small business investment
  • 00:49:41
    companies
  • 00:49:42
    which are overseen by the small business
  • 00:49:45
    administration and they get to play
  • 00:49:48
    around with a considerable amount of
  • 00:49:52
    money from the federal government
  • 00:49:55
    and uh some of what you're saying I have
  • 00:49:58
    seen in the sbic program I must also say
  • 00:50:03
    that I've sometimes seen with the
  • 00:50:05
    gentleman ahead of me has also seen
  • 00:50:09
    thank you all right
  • 00:50:17
    hi I work with the small businesses and
  • 00:50:20
    micro talk to him
  • 00:50:23
    micro Equity is supposed to be something
  • 00:50:26
    that's a good thing that happens to
  • 00:50:28
    small businesses because globally very
  • 00:50:31
    often they are uh you know they borrow
  • 00:50:34
    at the rate of 25 30 and so on so forth
  • 00:50:37
    in developing countries particularly so
  • 00:50:40
    the World Bank and others came up with
  • 00:50:42
    this great idea of how micro Equity is
  • 00:50:45
    supposed to be good but they are doing
  • 00:50:46
    the same thing
  • 00:50:48
    to small businesses that you know the
  • 00:50:50
    big guys are doing so is there no good
  • 00:50:53
    at all in in private Equity because you
  • 00:50:56
    just said we are only talking about a
  • 00:50:58
    certain type of private equity which is
  • 00:51:01
    the lbos and so on but when they try to
  • 00:51:03
    copy that model down to you know the
  • 00:51:06
    small businesses they seem to be having
  • 00:51:07
    the same set of practices
  • 00:51:12
    well there are you know those business
  • 00:51:16
    development companies
  • 00:51:19
    bdc's are actually sort of The Unsung
  • 00:51:22
    problem of the system in my mind at this
  • 00:51:24
    point and that is sort of it becomes
  • 00:51:27
    it's a little bigger than the
  • 00:51:29
    microfinance that you're talking about
  • 00:51:30
    but yeah we've gotten into a world where
  • 00:51:33
    there's a lot of Leverage the fractional
  • 00:51:36
    Reserve System if you want to talk about
  • 00:51:37
    the fundamental problem here is sort of
  • 00:51:40
    the fractional Reserve System which you
  • 00:51:42
    know speak English what is that well you
  • 00:51:44
    put your money into a bank you're
  • 00:51:46
    essentially funding this same business
  • 00:51:48
    through your banking right so at the end
  • 00:51:51
    of the day you put your money into a
  • 00:51:52
    bank as a deposit
  • 00:51:54
    if you think that your dollar is sitting
  • 00:51:56
    in a bank account it actually isn't the
  • 00:51:57
    bank has loaned it out 20 times okay
  • 00:51:59
    you're Jimmy Stewart now
  • 00:52:02
    right and so that's sort of what you're
  • 00:52:04
    talking about is a problem of rent
  • 00:52:06
    seeking behavior in the system I don't
  • 00:52:08
    know how you cure that broadly other
  • 00:52:10
    than through
  • 00:52:12
    regulation but you're right that there
  • 00:52:14
    are predators in that world and small
  • 00:52:17
    businesses are
  • 00:52:19
    victimized routinely and I have written
  • 00:52:22
    about some of them and it's because they
  • 00:52:24
    can least afford it yes at least afford
  • 00:52:26
    it and it's the American dream and you
  • 00:52:28
    know they're just really Sweat Equity
  • 00:52:30
    and working you know no it's not the
  • 00:52:32
    American dream it happens in India it
  • 00:52:34
    happens in Bangladesh it happens
  • 00:52:37
    owning your own business is such a dream
  • 00:52:40
    for so many people and those small
  • 00:52:42
    businesses by definition are also paying
  • 00:52:45
    much much much higher rates right for
  • 00:52:48
    their Capital right that's why they
  • 00:52:50
    thought that micro Equity would be a
  • 00:52:51
    better option but you know they're
  • 00:52:53
    literally between a rock and a hard
  • 00:52:54
    place
  • 00:52:55
    thank you well thank you thanks for
  • 00:52:57
    coming
  • 00:52:59
    last chance for questions here we go one
  • 00:53:01
    more
  • 00:53:04
    can you mention can you address carried
  • 00:53:06
    interest in how it's treated
  • 00:53:10
    the the book does go into this but give
  • 00:53:13
    us the capsule version
  • 00:53:18
    well no I mean carried interest is a you
  • 00:53:21
    know tax break that is it has been
  • 00:53:24
    impossible to undo
  • 00:53:26
    it did not start with private Equity it
  • 00:53:28
    started with real estate
  • 00:53:31
    um it is unfair
  • 00:53:34
    to the max because you know and Warren
  • 00:53:38
    Buffett will say this uh until he's blue
  • 00:53:41
    in the face but that it is not fair that
  • 00:53:44
    people who are you know this wealthy
  • 00:53:47
    pays such a you know modest amount of
  • 00:53:51
    taxes
  • 00:53:52
    their rage is so much lower than a bus
  • 00:53:56
    driver or teacher secretary but every
  • 00:54:00
    time anyone tries to do anything about
  • 00:54:02
    the carried interest tax treatment
  • 00:54:06
    the lobbying dollars flood in and
  • 00:54:09
    nothing gets done
  • 00:54:11
    and so it's usually you know it's been a
  • 00:54:14
    priority for our last three presidents
  • 00:54:16
    to close that loophole right
  • 00:54:18
    right it never gets done
  • 00:54:20
    um do I have faith that it will get done
  • 00:54:23
    no
  • 00:54:24
    um it does seem to be something that is
  • 00:54:28
    impossible too but but again they're the
  • 00:54:31
    benefit of Crews not to the private
  • 00:54:32
    Equity Firm
  • 00:54:34
    but to the partners in the private
  • 00:54:35
    Equity so that's that's a little
  • 00:54:38
    tangential in some sense
  • 00:54:41
    deeply unfair
  • 00:54:43
    all right well that wraps it up thank
  • 00:54:46
    you so much for coming thank you
  • 00:54:48
    [Applause]
  • 00:54:52
    thank you everyone for joining us for
  • 00:54:54
    this barrier
Tag
  • Private Equity
  • Wirtschaft
  • Gretchen Morgensen
  • Joshua Rosner
  • Gesundheitswesen
  • Pflegeheime
  • Finanzen
  • USA
  • Kritik
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