Today, Congresswoman Maxine Waters (D-CA), Chairwoman of the House Financial Services Committee, delivered the following opening statement at a full Committee hearing entitled, “America for Sale? An Examination of the Practices of Private Funds.”
As Prepared for Delivery
Today this Committee convenes for a hearing to examine the impact of private funds on businesses and workers.
While there are some examples of private equity firms playing a beneficial role in the U.S. economy, there are far too many examples of private equity firms destroying companies, and preying on hardworking Americans to maximize their profits. Today we are going to take a hard look at those practices and examine whether Congress should take action to prevent the predatory practices of some private equity firms and hedge funds.
After the devastation of the foreclosure crisis in which millions of people lost their homes through no fault of their own, private equity firms swooped in and purchased hundreds of thousands of foreclosed homes at discounted prices. In many cases, they converted these homes to rentals, charged excessively high rents, and became absentee landlords without community ties.
Private equity firms increasingly hold ownership of our hospitals, nursing homes and emergency services. In 2018 alone, private equity firms spent a total of $10.4 billion buying up hospitals and medical clinics, a drastic increase from the $250 million it spent in 2009 on those industries. A New York Times investigation found that an ambulance company owned by private equity, Rural/Metro, had slower response times under private equity ownership, and undertook “more aggressive billing practices.” According to the report, “Rural/Metro once sent a $761 collections notice to an infant girl born in an ambulance.”
In the retail industry, ten of the last fourteen companies that have declared bankruptcy were owned by private equity firms. For example, Toys “R” Us was acquired by private equity firms and a real estate investment trust in 2005. By 2018, Toys “R” Us had declared bankruptcy, laid off all 30,000 of its employees, and closed all of its stores. Meanwhile, the company’s private equity owners had pocketed $470 million in fees and interest payments from the company. Today, we will hear testimony from Ms. Giovanna De La Rosa, a former Toys “R” Us employee and advocate.
These are just a few examples of the harm that private equity firms have caused. Unfortunately, the private equity firms the Committee invited to testify at this hearing today declined to send representatives to engage and answer questions about their activities.
So, I would like to thank Drew Maloney, President and CEO of the American Investment Council, which is a trade group that represents private equity firms, for joining us today and testifying on behalf of the industry. But while he will testify on private equity as an industry, Mr. Maloney will not be able to adequately speak to the practices or activities of certain or specific firms.
So, while we will get started with this today, we’re going to have to determine what other actions we may take in order to get the information that we think we need in order to make some determination about what exactly is going on in our society with private equity firms.