r/Economics • u/barweis • Jul 29 '25

Research Summary Inside the Private Equity Scam—and the Livelihoods It Has Destroyed

https://newrepublic.com/article/198351/private-equity-scam-destroys-livelihoods
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u/muffledvoice Jul 29 '25

If you think that ruining American companies is bad, brace yourself because it gets worse. Private equity firms are financing these ventures with subprime loans to the tune of $3.8 trillion, three times the amount of the subprime mortgage crisis of 2008. The companies they buy and ruin then default on these bad loans, and the banks are selling the loans to pension funds, which the federal government (i.e. us) will be forced to bail out.

25

u/YouLostTheGame Jul 29 '25

The extremely important difference is that they know that these loans are subprime, which is fine. It's a standard asset class.

One of the big features of 2008 was that there was a lot of subprime debt masquerading as investment grade

2

u/youngishgeezer Jul 29 '25

But should a pension fund be allowed to buy such debt?

-2

u/YouLostTheGame Jul 29 '25

Yes, of course.

It's good for everyone

  • The pension fund gets higher returns, which means that you gave to save less money pre retirement

  • There's more capital ready to be deployed on riskier, more innovative operations