In Slate, Moe Tkackik has an excellent analysis if the proposed Albertsons/Kroger merger, what he calls our “cash-extractive economy.” A judge has paused the deal, which would divert $4 billion from the companies to the private equity partners,
[T]he current norm [is] that views every realm of commercial activity as first and foremost a vehicle for shareholder cash extraction, ultimately strips our workplaces and vital infrastructure of their ability to function normally—well, welcome to America, where everything from the hospitals to the airlines to the dental clinics to the railroads to Boeing has been brought to its knees by the same predictable cycle of gratuitous junk debt imposed to fund gratuitous shareholder payouts that must then be paid off through round after round of gratuitous layoffs and price hikes. Our ruling class spent $882 billion on stock buybacks in 2021—but couldn’t be bothered to fix the leaky roof of the plant that produces a quarter of the nation’s infant formula.
Private equity is a misleading euphemism for the malign force responsible for this great ponzification of our institutions; in the 1980s everyone just called it “corporate raiding” because that’s what it was.For years a sad community of union activists and finance geeks has been laboring tirelessly to outlaw its worst abuses. They’ve taken road trips to New York to rally outside the headquarters of KKR and Apollo and gotten arrested outside BlackRock; testified at congressional hearings and galvanized around a robust law, the Stop Wall Street Looting Act, that would actually target the problem at its root in the systemic abuse of the bankruptcy code.
And for years the struggle to essentially “make stealing illegal again” has culminated in just about nothing. Private equity is more powerful than ever; SWSLA will never make it out of committee, and that’s with Democrats in control of both houses of Congress.
What I’ve learned in years of interviewing workers in private equity–controlled companies is that, no matter how rock-bottom bad things seem, they can always get worse. (Just take it from residents of the KKR-owned chain of nursing homes where health inspectors repeatedly found no staffers at all during their visits to the facilities after the famous private equity firm immortalized in Barbarians at the Gate added an extra $2 billion in debt to the balance sheet.)But what if, as the state AGs are now contending, “Wall Street looting” is already illegal?
Because it chokes off the resources necessary for institutions to meaningfully “compete” in the marketplace, thereby violating a whole host of long-neglected prohibitions on anticompetitive restraints of trade?
What this argument lacks in Old Testament moral outrage, it makes up for in its appeal to a critically important group of attorneys: antitrust enforcers. Unlike bankruptcy or securities law, enforcing antitrust law is the business of elected officials, many of whom have found it an increasingly useful tool for attacking the unchecked power of companies victimizing their constituents.Private equity firms tried to shoplift $4 billion from Albertsons before selling it to Kroger, until a judge stopped them.