Washington and Wall Street: A History of Entanglement
Once upon a time, Wall Street and the hallowed halls of Washington DC pressed flesh as begrudging allies. That consensus has been increasingly cast into the shredder of history by an uneasy relationship unfolding between the political behemoths and private equity titans.
Increasing Scrutiny on Private Equity
When the curtains rose on the global financial stage a decade ago, the business wizards of private equity landed roles with scant regulatory intervention. They galloped through golden fields untouched by ravenous taxmen, snatching up business after business and aggressively restructuring them into lean, cash-generating machines. We’re looking at you, KKR, Bain Capital and Blackstone.
From Love Affair to Cold Shoulders
Fast forward to the increasingly anti-Wall Street sentiment today. The once rosy relationship transforms into a blazing rivalry between Washington and the kings of Wall Street. The private equity industry helmed by giants like Apollo Global Management and TPG is having spotlight beamed on them – and it’s not doing them any favors.
The Implications of this Shifting Dynamic
So, why does this matter? This shifting dynamic determines the clan of capitalist barons dictating the future of our economy.
The regulations or lack thereof influences investment patterns, which in turn shape corporate behavior and affect the portfolio companies. This has trickle-down ramifications. It impacts you, me, and the guy next door who got laid off after a mysterious company with no office took over his.
The Rise of Regulation
The rumble for regulation is becoming deafening as heavyweight politicians set private equity in their crosshairs. For example, Senator Elizabeth Warren’s proposed “Stop Wall Street Looting Act” — a legislative affair clearly not written by PR flacks at Goldman Sachs — aims to bring transparency and accountability to private equity strategies.
Change is Coming, and It Will Be No Fun
There’s a high chance there’s more change to come. Much of it will be to the chagrin of our private equity moguls though. To them, I say: Pop open a bottle of your finest Pinot Noir and brace yourselves. For the rest of us, let’s just grab a popcorn and witness this financial clash of the titans unfold.