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Plunder

Plunder

Private Equity's Plan to Pillage America
by Brendan Ballou 2023 368 pages
4.09
1k+ ratings
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Key Takeaways

1. Private equity firms are transforming America's economy through predatory practices

"With its reliance on debt and fees and its focus on short-term profits, private equity is part of the reason why the quality of care at your dentist's office is going down and why your doctor seems perennially overbooked."

Predatory business model. Private equity firms typically buy companies using borrowed money, then extract value through tactics like:

  • Loading companies with debt
  • Selling off assets
  • Cutting costs aggressively
  • Charging high management fees

This model often leads to:

  • Declining quality of goods/services
  • Job losses
  • Bankruptcy of acquired companies

Private equity's reach now extends across industries:

  • Retail
  • Healthcare
  • Housing
  • Prisons
  • Financial services

2. The housing market has been reshaped by private equity's aggressive acquisitions

"In 2011, no landlord in America owned more than a thousand single-family home rental properties. By 2013, Blackstone bought more than that in a single day, at a cost of over $100 million."

Massive rental acquisitions. After the 2008 financial crisis, private equity firms capitalized on foreclosed homes:

  • Bought hundreds of thousands of single-family homes
  • Converted them to rentals
  • Often with government support (e.g. Fannie Mae)

This has led to:

  • Reduced homeownership rates, especially for minorities and young people
  • Increased rents and fees for tenants
  • Declining quality of rental properties

Private equity firms have also targeted:

  • Mobile home parks
  • Apartment complexes
  • Student housing

3. Retail bankruptcies are often engineered by private equity for profit

"Fully 70 percent of the retail stores that closed in the first quarter of 2019 were owned by such firms."

Extracting value through bankruptcy. Private equity firms often acquire retail chains, then:

  • Load them with debt
  • Sell off real estate assets
  • Cut costs aggressively
  • Charge high fees

When retailers go bankrupt:

  • Private equity firms often still profit
  • Workers lose jobs and severance
  • Suppliers and creditors go unpaid

Examples of private equity-driven retail bankruptcies:

  • Toys "R" Us
  • Payless ShoeSource
  • Sears
  • J.Crew

4. Private equity ownership of nursing homes has led to declining care and increased deaths

"Private equity ownership was associated with over twenty thousand premature deaths in nursing homes over twelve years."

Profit over care. When private equity firms acquire nursing homes, they often:

  • Reduce staffing levels
  • Cut costs on supplies and maintenance
  • Increase fees for residents

This results in:

  • Higher mortality rates
  • More health code violations
  • Declining quality of life for residents

Private equity tactics in nursing homes:

  • Using complex corporate structures to avoid liability
  • Extracting profits through real estate deals
  • Resisting regulatory oversight

5. Healthcare costs are rising due to private equity's focus on profits over patient care

"After Blackstone-owned Envision took over staffing at nearly two hundred emergency rooms, most—and in some extraordinary cases, all—of their bills became out-of-network surprises."

Inflating medical bills. Private equity firms have acquired:

  • Physician practices
  • Emergency room staffing companies
  • Ambulance services

This has led to:

  • Surprise out-of-network billing
  • Higher costs for patients and insurers
  • Pressure on doctors to increase procedures/billing

Private equity's impact on healthcare:

  • Consolidation of medical practices
  • Focus on high-margin procedures
  • Reduced access to care in some areas

6. Private equity is expanding into risky financial practices with little oversight

"Private equity firms are lending money to companies through the 'private credit' markets, which function as something of an alternative to the stock markets, albeit with far less transparency."

Systemic financial risk. Private equity firms are increasingly:

  • Engaging in private lending
  • Acquiring insurance companies
  • Accessing retirement funds

This expansion creates risks:

  • Less transparency than traditional finance
  • Potential for overleveraged companies
  • Conflicts of interest

Regulatory concerns:

  • Private equity often operates outside traditional banking regulations
  • Firms may be "too big to fail" without adequate oversight
  • Potential for economic instability if private credit markets collapse

7. The prison system has become a lucrative target for private equity exploitation

"If you're incarcerated today, the food you eat at the cafeteria or buy at the commissary may be served by the Keefe Group or Trinity Services Group, both of which are owned by the private equity firm H.I.G. Capital."

Profiting from incarceration. Private equity firms have acquired companies providing:

  • Prison phone services
  • Food services
  • Healthcare
  • Commissary items

This has resulted in:

  • Exorbitant costs for inmates and families
  • Declining quality of services
  • Increased financial burden on low-income communities

Examples of private equity in prisons:

  • Charging up to $25 for a 15-minute phone call
  • Serving low-quality or insufficient food
  • Providing inadequate healthcare

8. Private equity wields enormous influence in Congress to protect its interests

"Since 1990, the industry has given over $896 million to congressional candidates and members."

Lobbying power. Private equity firms use their wealth and connections to:

  • Influence legislation
  • Block regulatory efforts
  • Secure favorable tax treatment

Key issues private equity lobbies on:

  • Preserving the carried interest tax loophole
  • Blocking surprise medical billing legislation
  • Accessing retirement funds

Private equity's political influence extends beyond donations:

  • Hiring former government officials
  • Providing lucrative post-government careers
  • Shaping public policy narratives

9. Legal and regulatory systems often favor private equity at the expense of workers and consumers

"Private equity firms have both created and benefited from changes in the law and the legal profession."

Tilted playing field. Private equity benefits from:

  • Weakened antitrust enforcement
  • Bankruptcy laws that favor creditors
  • Forced arbitration agreements

This results in:

  • Difficulty holding firms accountable
  • Reduced worker and consumer protections
  • Increased economic inequality

Legal tactics used by private equity:

  • Complex corporate structures to avoid liability
  • Forum shopping for favorable bankruptcy courts
  • Lobbying for regulatory exemptions

10. Grassroots efforts and policy changes are needed to curb private equity's worst excesses

"A better world is possible. We just need to demand it."

Path to reform. Potential solutions include:

  • Strengthening antitrust enforcement
  • Closing the carried interest tax loophole
  • Improving transparency in private markets

Key policy proposals:

  • The Stop Wall Street Looting Act
  • Restrictions on leveraged buyouts
  • Enhanced protections for workers in bankruptcies

Grassroots efforts making an impact:

  • Organizing by former Toys "R" Us employees
  • Campaigns against private equity ownership of housing
  • Increased scrutiny of private equity in healthcare

Last updated:

FAQ

What's Plunder: Private Equity's Plan to Pillage America about?

  • Focus on Private Equity: The book delves into how private equity firms operate, highlighting their profit-driven tactics and the impact on sectors like healthcare, housing, and retail.
  • Economic Inequality: It argues that private equity exacerbates economic inequality by extracting wealth from companies and employees, often compromising quality and care.
  • Government Complicity: Brendan Ballou discusses how government policies have facilitated the rise of private equity, often at the expense of public welfare.

Why should I read Plunder: Private Equity's Plan to Pillage America?

  • Understanding Modern Economics: The book offers insights into the private equity industry, a significant yet misunderstood part of the economy affecting daily life.
  • Awareness of Consequences: It highlights the negative impacts of private equity, such as job losses and reduced service quality in essential sectors.
  • Call to Action: Ballou encourages readers to engage in advocacy and policy changes to curb private equity's excesses, offering a hopeful message of reform.

What are the key takeaways of Plunder: Private Equity's Plan to Pillage America?

  • Tactics of Extraction: Private equity firms use strategies like sale-leasebacks and dividend recaps to extract money, often leading to company decline.
  • Impact on Vulnerable Populations: The book emphasizes how private equity targets industries serving the poor, worsening their struggles.
  • Need for Reform: Ballou outlines a reform agenda, suggesting collective action and policy changes to mitigate private equity's negative societal impacts.

What are the best quotes from Plunder: Private Equity's Plan to Pillage America and what do they mean?

  • “We must break the Money Trust or the Money Trust will break us.”: This quote underscores the urgent need to address the power of financial institutions, including private equity.
  • “Private equity surrounds you.”: It highlights the pervasive influence of private equity in everyday life, affecting sectors like healthcare and housing.
  • “A better world is possible. We just need to demand it.”: Ballou's hopeful message encourages collective action to reclaim control from private equity firms.

How do private equity firms make money according to Plunder: Private Equity's Plan to Pillage America?

  • Leveraged Buyouts: Firms buy companies using a mix of their own, investors', and borrowed money, which the acquired company must repay.
  • Extraction of Fees: They charge management and transaction fees, draining resources from the businesses they acquire.
  • Short-Term Focus: Prioritizing short-term profits often leads to cost-cutting measures that harm product and service quality.

What are the tactics of private equity firms discussed in Plunder: Private Equity's Plan to Pillage America?

  • Sale-Leasebacks: Selling a company’s real estate and leasing it back provides cash but burdens the company with rent obligations.
  • Dividend Recaps: Firms force companies to take on debt to pay dividends to themselves, leaving the company financially vulnerable.
  • Strategic Bankruptcies: Pushing companies into bankruptcy can shed debts and pension obligations, benefiting firms financially.

How does Plunder: Private Equity's Plan to Pillage America illustrate the impact of private equity on healthcare?

  • Quality of Care Decline: Private equity ownership in nursing homes leads to reduced staffing and increased health code violations.
  • Financial Exploitation: High fees and debt extraction compromise care quality, leading to preventable deaths.
  • COVID-19 Consequences: The pandemic worsened issues, with private equity-owned facilities facing higher infection and mortality rates.

What role does government play in the rise of private equity according to Plunder: Private Equity's Plan to Pillage America?

  • Regulatory Support: Government policies have facilitated private equity's growth, often prioritizing corporate interests over public welfare.
  • Political Contributions: Significant political contributions influence legislation and regulation, allowing firms to operate with less oversight.
  • Pension Fund Investments: Public pension funds, meant to protect workers, are often major investors in private equity, creating a cycle of exploitation.

How does Plunder: Private Equity's Plan to Pillage America address the issue of economic inequality?

  • Wealth Redistribution: Private equity extracts wealth from companies and employees, redistributing it to wealthy firm owners.
  • Targeting Vulnerable Industries: Focusing on industries serving low-income populations exacerbates economic disparities.
  • Call for Collective Action: Ballou emphasizes the need for reform to address inequalities and hold private equity accountable.

What solutions does Plunder: Private Equity's Plan to Pillage America propose to combat the negative effects of private equity?

  • Regulatory Reforms: Implement stricter regulations, including transparency requirements and limits on excessive fees.
  • Strengthening Antitrust Laws: Revive antitrust enforcement to prevent harmful rollups and monopolistic practices.
  • Community Engagement: Encourage organizing and advocacy to protect workers and consumers from predatory practices.

How does Plunder: Private Equity's Plan to Pillage America define private equity?

  • Investment Strategy: Private equity involves acquiring companies, often with borrowed money, to restructure them for profit.
  • Focus on Short-Term Gains: Firms prioritize short-term profits, leading to layoffs and reduced service quality.
  • Lack of Accountability: Operating with limited oversight, private equity can engage in practices harmful to workers and consumers.

What is the carried interest loophole, and why is it significant in Plunder: Private Equity's Plan to Pillage America?

  • Tax Advantage: Allows private equity executives to pay lower tax rates on income classified as capital gains.
  • Political Influence: Firms lobby to protect this loophole, demonstrating significant influence over lawmakers.
  • Economic Inequality: Contributes to growing inequality by allowing wealthy executives to pay lower taxes, widening the wealth gap.

Review Summary

4.09 out of 5
Average of 1k+ ratings from Goodreads and Amazon.

Plunder is a well-researched exposé on private equity firms' exploitative practices across various industries. Readers praise Ballou's accessible writing and thorough analysis of how these firms negatively impact healthcare, housing, and retail. Many found the book eye-opening and infuriating, highlighting the need for regulation. Some critics noted repetitiveness and potential bias. The final chapters offering solutions and actionable steps were particularly appreciated. Overall, reviewers recommend this book for understanding the far-reaching consequences of unchecked private equity in America.

Your rating:

About the Author

Brendan Ballou is a federal prosecutor with extensive experience in the Justice Department. He served as Special Counsel for Private Equity in the Antitrust Division, bringing valuable insights to his book. Ballou's background includes work in private practice and the National Security Division, where he advised the White House on counterterrorism policies. His diverse experience in law and government provides a strong foundation for his analysis of private equity's impact on various sectors of the American economy. Ballou's educational background includes degrees from Columbia University and Stanford Law School, further establishing his credentials in the field.

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