Behind the News: Rule by Private Equity w/ Megan Greenwell

Private equity firms operate by buying companies largely with borrowed money, leaving the acquired company responsible for repaying debts, while the firms themselves contribute little capital. This practice, exemplified in the Toys R Us collapse, burdens companies with debt and costs, such as through sale-leaseback deals where owned real estate is sold and then rented back, saddling companies with new rent expenses.

The real harm surfaces in sectors like healthcare, retail, journalism, and housing, where private equity prioritizes extracting value over sustaining services or workers. For instance, rural hospitals face cuts to basic services like maternity care, and newspapers suffer deep staff layoffs without innovation or improvement.

Even the pension funds intended to secure workers' retirements invest in private equity, paradoxically using workers' own funds to fuel the extraction that harms many of them. Meaningful political regulation is scarce due to massive private equity political donations to both major parties, making change difficult without broader political shifts.

• Private equity buyouts use mostly borrowed money, with the company itself responsible for repayment.
• Firms invest little of their own money but benefit regardless of the company's financial health.

• Sale-leasebacks transfer a company's real estate ownership to investors and charge rent to that same company.
• This boosts profits for private equity but burdens the operating company with new costs and debt.