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Groups Urge Fed Not to Weaken Main Street Lending Programs for PE Firms

Better Markets was one of 17 prominent organizations that united to urge the Federal Reserve to not weaken the rules preventing private equity firms from getting public funds through the Main Street Lending Programs.
 
Better Markets, the AFL-CIO, Center on Economics and Policy Research, Public Citizen, Americans for Financial Reform, others, sent a letter to the Federal Reserve in which they stated that the Fed must not weaken its rules for MSLP as those funds are meant to help legitimate businesses devasted by the pandemic and not private equity firms or their affiliates.
 
Better Markets President and CEO Dennis Kelleher says the Fed must focus on using public funds to save the many legitimate Main Street businesses that were viable and thriving but for the pandemic.
 
“Those public funds should not be used to bail out PE firms and their predatory business model that is based on extremely high leverage, which operate on the brink of bankruptcy in the ordinary course to maximize the owners’ short-term profits,” Kelleher says. “PE firms suck the lifeblood out of their portfolio companies through a blizzard of sales, spinoffs, restructurings, recapitalizations, and dividend payments as well as an array of monitoring and other fees. They should not be bailed out of their business gambles that would not likely have survived even a mild cyclical downturn.”
 
Kelleher adds that if the Fed moves forward with using public funds to bail out PE firms and their owners, it must “require that the PE firms, funds and sponsors be jointly and severally liable with their respective portfolio companies for repaying any and all public funds and take other actions to limit rewarding the predatory PE business model and reduce the moral hazards that such actions by the Fed will inevitably create.”

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