Today, EPI President Thea Lee addressed a letter to Senator Elizabeth Warren (D-Mass.) supporting the “Stop Wall Street Looting Act of 2019”—a comprehensive bill aimed at stemming abusive practices employed by some private equity firms to line their pockets at the expense of workers, institutional investors, creditors, and others with stakes in the companies they acquire.

Lee explains that private equity firms have rigged the system so that they share in the upside benefits, but minimize losses from bad bets—a “heads we win, tails you lose” strategy, enabled by a tax system that encourages equity investors to load companies up with debt. If a portfolio company thrives despite being saddled with debt, it can be resold at a profit. If not, private equity partners recoup some or all of their minimum investment by selling assets and siphoning off cash through fees and debt-funded dividends.

The biggest victims of the private equity business model are often workers, who risk losing not only their jobs, but also back wages, pension benefits, and severance pay, in bankruptcy proceedings tilted in favor of creditors. Consumers are also harmed, as companies they like are driven out of business, market concentration increases, and they are left with worthless gift cards and unfulfilled orders.

The bill would help workers by ensuring that bankruptcy proceedings limit increases to executive compensation and prioritize unpaid wages, severance pay, and contributions to employee benefit plans. It would also help consumers with unredeemed gift cards and unfulfilled services, along with people who purchased, leased, or rented property from the company. Finally, the plan offers many provisions to protect investors, such as requiring detailed disclosure of fees and returns, clarifying that fund managers have a fiduciary duty to pension plans whose assets they manage, and prohibiting preferential treatment to certain limited partners.

“Private equity firms claim to be making better use of the businesses they acquire, but often act like Vikings—pillaging them and leaving a trail of destruction,” said Lee. “This bill addresses serious problems with the private equity business model, without getting in the way of firms that actually work to strengthen the U.S. economy.”