On the Tucker Carlson Show last month, Peter Thiel, when asked about the 2020 Democrat candidates, said he is “most scared by Liz Warren.”
Thiel is right, and here’s why:
Elizabeth Warren’s favorite image for businesses is that they “suck” profits out of American society like vampires. Her latest targets are private-equity firms that invest in struggling companies, often replace management and bet on a turnaround. She wants to put them out of business.
“The Stop Wall Street Looting Act,” as Ms. Warren calls her new bill, would impose new taxes, legal liabilities and regulations that would make it more costly and risky for investors to try to revive businesses. It would also effectively rewrite the bankruptcy code.
Ms. Warren describes private equity as “bleeding the company dry and walking away enriched even as the company succumbs.” Perhaps she’s trying to appeal to “Twilight” and “Buffy” loving millennials. But her garlic-wielding caricature overlooks that private-equity managers lose money if their investments fail….
…Private equity has turned around Dunkin’ Donuts, Hilton hotels, Dollar General and many other companies, though most success stories aren’t known to consumers while failures grab headlines….
Private-equity firms make long-term investments in underperforming companies and aim to create value—and turn a profit—by fixing inefficiencies. They raise capital from institutional investors like college endowments and public pension funds, which they often supplement with debt, to buy out public shareholders….
The irony is that public pension funds have been increasing their investments in these vampires, er, private-equity funds as they shoot for higher returns to finance generous worker retirements. The 10-year average annual return for private equity is 10.2%—13.63% in Ms. Warren’s home state—compared to 8.5% for stocks and 6.7% overall. Why does the Senator want to hurt union retirees?
Senator Warren describes herself as a “capitalist to the bones.” She must have a strange definition of capitalism. Every policy she proposes would increase government control over the private economy.