Elizabeth Warren: Private Equity Guts Everything from Red Lobster to Hospitals

[Gaugamela]

The pump ‘n dump robber barons are like termites eating away the house from the inside until it collapses. These useless parasites will self-rationalize until they’ve killed the host, and then they’ll stick their blood-gored face in the wind, smelling out their new victims.

K-Mart, Sears, PayLess, ToysRUs. What happened to all these stores?

Private equity.

From Red Lobster to nursing homes and apartment complexes, here’s what happens: Private equity marches in, a few wealthy investors buy the outfit, load it up with debt, strip out the assets, and suck money out of it until it collapses.

Then, after thousands upon thousands of workers have been laid off, after pensions get raided, after stores close, those private equity firms walk away with their pockets stuffed with cash.

Over and over again, they buy up businesses doing just fine and run them into the ground. In fact, companies bought by private-equity firms are 10 times more likely to go bankrupt than those that aren’t.