1855: The Quiet Billion-Dollar Machine Behind Job Loss, Higher Rents, and Vanishing Services

Summary

Episode 1855: The Quiet Billion-Dollar Machine Behind Job Loss, Higher Rents, and Vanishing Services

Podcast: So Money with Farnoosh Torabi
Host: Farnoosh Torabi
Guest: Megan Greenwell, Author of Bad Company: Private Equity and the Death of the American Dream
Release Date: July 21, 2025

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Introduction

In Episode 1855 of So Money, host Farnoosh Torabi delves into the opaque world of private equity and its profound impact on various sectors of the American economy. Joined by veteran journalist Megan Greenwell, the discussion uncovers how private equity firms influence job markets, housing, healthcare, and more, often to the detriment of workers and communities.

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Understanding Private Equity

Megan Greenwell opens the conversation by explaining the mechanics of private equity:

"Private equity funds pool money from outside investors—like university endowments, public pension funds, sovereign wealth funds, ultra-wealthy individuals—and combine that with bank loans to buy companies." ([10:19])

She distinguishes private equity from venture capital, emphasizing that private equity typically involves leveraged buyouts aiming for full control of companies. This model often leads to significant debt burdens on the acquired companies, prioritizing profit extraction over sustainable business growth.

Farnoosh Torabi adds:

"This is a corruption of what our free market capitalism system was supposed to be because you end up with all of the power, all of the information and none of the risk in the hands of these firms." ([13:34])

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Case Study: Deadspin Acquisition

Drawing from her personal experience, Megan recounts the acquisition of Deadspin by a private equity firm, Great Hill Partners:

"On literally day one that I started to suspect. We were excited to be bought, but all of a sudden, there are these guys walking around our office asking the dumbest questions in a very harsh, critical way." ([04:56])

The immediate shift in company culture and strategy signaled trouble. Despite Deadspin's existing success metrics, the new CEO dismissed data-driven approaches, focusing solely on profit extraction. Within months, the company was downsized drastically and ultimately sold to a Malta-based shell company, repurposing Deadspin to drive traffic to offshore online casinos ([08:52]).

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Impact on Communities and Industries

Megan transitions to discussing the broader implications of private equity ownership through the stories of real individuals:

1. Liz and Toys R Us:

   • Liz, an Indigenous Alaskan and dedicated Toys R Us employee, believed in the stability and community roots of the company. The takeover by private equity resulted in massive debt, leading to store closures without prior employee notification.
   • Farnoosh notes:

     "A crying customer runs up to her and says, what am I going to do without you? And that's how she found out that this huge American institution was liquidating just because they were buried under so much debt." ([16:58])

2. Roger and Healthcare:

   • Roger, a small-town doctor in rural Wyoming, witnessed his hospital’s decline under private equity ownership. Promised improvements never materialized, leading to critical services like labor and delivery being shut down.
   • Megan describes:

     "He found a PowerPoint from years ago that revealed that this was their plan the entire time. They wanted to strip all of the services." ([30:26])

These narratives highlight how private equity’s pursuit of profit undermines essential services and destabilizes communities.

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Accountability and Potential Solutions

Farnoosh emphasizes the need for systemic change rather than placing the onus solely on consumers:

"It's less about lecturing people to make ethical choices and more about just making people aware." ([19:21])

Suggestions for Accountability:

1. Regulatory Measures:

   • Elizabeth Warren's proposed Stop Wall Street Looting Bill aims to regulate or dismantle exploitative practices within private equity.

2. Financial Responsibility:

   • Farnoosh advocates for private equity firms to share the burden of the debt they impose, ensuring they are accountable if companies fail:

     "If the company goes under, you have to pay back the money." ([34:14])

3. Tax Reforms:

   • Closing the carried interest loophole would subject private equity earnings to standard income tax rates, reducing their financial incentives to prioritize short-term profits over long-term sustainability.

4. Local and State-Level Interventions:

   • Implementing measures like rent control can deter private equity from acquiring and exploiting housing markets ([36:19]).

Megan highlights successful instances where communities have pushed back, such as Liz and her group lobbying public pension funds to cease investments in unethical private equity practices ([19:21]).

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Inspiring Change Through Local Action

Farnoosh underscores the importance of grassroots movements and local governance in combating the pervasive influence of private equity:

"Local elected officials are seeing this as a problem, realizing that they can't necessarily rely on Congress to do something about it, but saying we want our community to be healthier and so we're going to think about creative solutions." ([26:30])

Megan shares her enthusiasm about starting a local news platform to foster community-driven solutions and resist external private equity pressures:

"I'm just learning about how much power local residents actually have, you know, in steering the decisions that are being made about even private equity." ([25:23])

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Conclusion

Episode 1855 of So Money offers a compelling examination of the hidden forces shaping America’s economic landscape. Through Megan Greenwell’s incisive analysis and poignant personal stories, listeners gain a deeper understanding of how private equity impacts everyday lives. The discussion not only exposes the systemic issues but also highlights avenues for resistance and change, empowering individuals and communities to advocate for more equitable and sustainable economic practices.

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Notable Quotes with Timestamps:

• Farnoosh Torabi:

  "This is a corruption of what our free market capitalism system was supposed to be because you end up with all of the power, all of the information and none of the risk in the hands of these firms." ([13:34])

• Megan Greenwell:

  "Private equity... has quietly reshaped entire industries. Healthcare, housing, local news, retail, daycare, even emergency services." ([02:42])

• Farnoosh Torabi:

  "Deadspin did look like a good opportunity for them to make money. It just, I didn't realize that didn't require making our business stronger." ([08:00])

• Megan Greenwell:

  "20% of all companies owned by private equity go bankrupt." ([31:30])

• Farnoosh Torabi:

  "There's a lot of interesting work being done on the state and local level. When people overlook that in favor of just 'we have to do it for the entire country,' they miss opportunities to make change." ([26:30])

---

About the Book: Bad Company: Private Equity and the Death of the American Dream

Megan Greenwell’s Bad Company serves as a critical lens into the shadowy operations of private equity firms and their detrimental effects on American industries and communities. Through meticulous reporting and heartfelt storytelling, Greenwell illuminates the human cost of profit-driven acquisitions, making a compelling case for increased transparency and accountability in the private equity sector.

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Thank you for tuning in to So Money with Farnoosh Torabi. Stay informed, stay empowered, and strive for a more equitable financial future.

Transcript

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[Megan Greenwell]

Sew Money Episode 1855 the Quiet Billion dollar machine behind job loss, higher rents and vanishing services.

[Farnoosh Torabi]

You're listening to so Money with award winning money guru Farnoosh Torabi. Each get a 30 minute dose of financial inspiration from the world's top business minds, authors, influencers, and from Farnoosh herself. Looking for ways to save on gas.

[Capital One Bank Guy]

Or double your double coupons.

[Farnoosh Torabi]

Sorry, you're in the wrong place.

[Megan Greenwell]

Seeking profound ways to live a richer, happier life.

[Capital One Bank Guy]

Welcome to SO money.

[Farnoosh Torabi]

Even if you're making all the best choices in the world, you can't control if your landlord is taken over by a private equity firm, or if your children's preschool is taken over or your grandmother's nursing home. Private equity is big in public utilities now and obviously none of us have a choice in who our public utility providers are. So I think it's less about lecturing people to make ethical choices and more about just making people aware. Because private equity for so long has had the disproportionate share of the information and I want people to feel like they know what's going on and that they can push back in some cases.

[Megan Greenwell]

Welcome to SO Money everyone. I'm Farnoosh Tarabi. To kick off the week, we are pulling back the curtain on one of.

[Roger]

The most powerful and least understood forces.

[Megan Greenwell]

Shaping our economy, private equity. My guest is Megan Greenwell, a veteran journalist and former editor in chief of Deadspin, whose new book Bad Company, Private Equity and the Death of the American Dream is both a searing expose and a deeply human investigation. Through vivid storytelling and meticulous reporting, Megan shows how private equity firms, often operating in the shadows, have quietly reshaped entire industries. Healthcare, housing, local news, retail, daycare, even emergency services. At the heart of the book are four Americans, Liz, Roger, Natalia and Lauren, whose lives were upended by private equity backed takeovers of the institutions they depended on. Their stories reveal how a business model designed to extract maximum profits for investors has left devastation in its wake for working families and entire communities. This is a conversation about capitalism, inequity, and the hollowing out of the American dream. But it's also about resilience and how we can fight back. Here's Megan Greenwell. Megan Greenwell, welcome to SO Money.

[Farnoosh Torabi]

Oh, thank you so much for having me.

[Megan Greenwell]

Yes. I'm so fascinated by your new book. It's called Bad Company, Private Equity and the Death of the American Dream. You really just say it. You're not like, not beating around the bush here. And so we're going to get into it. We're going to talk about private equity, its impact on our nation. It's often very silent, but if we're ever curious about why things are changing in our community, why some businesses shut down and never return, you. You have not just sort of a macro look at private equity, but you really do a wonderful job of getting very granular about how it is showing up in everyday lives. And including yours, including yours. You have a very personal experience with the impact of private equity. Formerly at Deadspin, you were the editor in chief there, which was taken over, I understand, by a private equity firm. What were the early signs that something was amiss or.

[Farnoosh Torabi]

Mm.

[Megan Greenwell]

You know, at first everyone's excited. Maybe we have an acquirer. What happened?

[Farnoosh Torabi]

Yeah, it was literally day one that I started to suspect. I'm not sure this is going so well. You're right. We were excited to be bought. We knew the company needed to change hands. But on that very first day, all of a sudden, there are all these guys and they were all guys walking around our office and asking like the dumbest questions, but not even asking them with a spirit of curiosity, asking them in this very harsh, critical way. So literally the first day, our new CEO asked me, why are you the right person for this job? And I was, here's how much I've grown. Traffic. Here's how much I've grown. The ambition of what we do. By any metric, we are successful in getting more successful that seems to be the answer. And he goes, huh, I guess we'll see. And I was like, oh, no, I think we're in trouble here. And like, still within the first week, they started telling us to change the types of content we were producing. And, and there was no business case for the instructions they were giving us. Right. So they were telling us to get rid of some of our most profitable kinds of content. And I would say trying to be open minded, trying to come at them with a good spirit. I would say, oh, you think that we should get rid of that? But actually the data show, blah, blah, blah. And they would say, we don't care, we told you to get rid of it. And so that really made clear that it wasn't just that they were bad owners for us because they didn't understand what we did. It's that they didn't care about what was good for the business. They were never trying to build the fundamentals of a healthy business. They were trying just trying to get theirs and get out.

[Megan Greenwell]

So what was the attraction? There are. Private equity is a multibillion dollar industry. They obviously saw something in acquiring Deadspin. What was it?

[Farnoosh Torabi]

I think for them, Deadspin looked like a good opportunity to make money for the firm, which was different than making money for Deadspin. Right. So the foundation of any leveraged buyout, 70 to 80% of that deal is going to be made up of loans. And the parent private equity firm is not responsible for those loans, only the portfolio company. So I think in the case of Deadspin for Great Hill Partners, the private equity firm that bought us, it looked like we're taking out these loans. We're not going to be responsible for them. We can downsize, take our management fees, take our dividends, all of these financialization tricks that are how most companies make money now rather than actually selling goods and services. And they clearly didn't care if Deadspin was driven into the ground in the process. That was the core thing I realized, was that we didn't have to make money for them to make money. And so I think Deadspin did look like a good opportunity for them to make money. It just, I didn't realize that didn't require making our business stronger.

[Megan Greenwell]

Wow, where is Deadspin today? And maybe fast track us a little bit. And so we can understand the before and after.

[Farnoosh Torabi]

Sure. So I left the company after about three months and the rest of the staff followed me out the door about two months after that. They rebuilt part of the staff, I think they got up to maybe five or seven people compared to a staff of 20 or 25. And that staff was frankly not as good. Didn't manage to build the audience back, and got sued several times. And as a result of all of that, the private equity firm sold Deadspin again to a shell company based in Malta that oversees online. Online casinos. So they now use Deadspin to drive traffic to these offshore online casinos.

[Megan Greenwell]

Wow. Wow.

[Farnoosh Torabi]

Yeah.

[Megan Greenwell]

Did you ever reach out to the private equity company and get comments, say, hey, I'm writing this book. This is how I saw this all kind of crumble. What your take.

[Farnoosh Torabi]

So I was really specific that I didn't want the book to be about my experience. I am just like, so not a personal writer. I'm not a memoir person. I really admire people who can do that. But I wanted to root this book in the experiences of other people. So it is a very narrative approach. I follow four people for two years, but I really only mentioned my own experience at Deadspin in a paragraph or so at the beginning in the introduction to set things up. I just did not write about that. So, no, I've never spoken to them again.

[Megan Greenwell]

Yeah, I understand. And we're going to get into Liz, Roger, Natalia and Lauren. These are the four individuals, real people that you followed to take this from macro level to a personal level. But before we get into that, I think it's important to just have us explain what the private equity industry is, for those of us who don't fully understand it, how a typical acquisition works. We, we know from the story you just told, like the fallout sometimes of that. But these are leveraged buyouts and they're increasing in all industries, not just media, but like real estate and hospitals and affordable housing. So tell us a little bit about how this all works, this private equity industry.

[Farnoosh Torabi]

Yeah. So the first thing I would say is for anybody who, like, feels intimidated by how technical this stuff is, I wrote this book for you because that's who I was before starting this project. I knew private equity was big and important. I could not have told you a single thing about how it worked. And so I just started reading and I wanted to write a book that was narrative, that was storytelling, and that sort of made it accessible for people who maybe wouldn't necessarily read like a 300 page primer into this industry. So basically, the way leveraged buyout works are private equity funds pool money from outside investors. So university endowments, public pension funds, sovereign wealth funds, ultra wealthy individuals. Now they're trying to get 401k money as well. And so they pool that money together and combine it with bank loans to buy companies. So I think people often confuse private equity and venture capital. And one of the big differences is private equity is almost always buying companies outright. So leveraged buyouts are for full control, whereas VC is more about taking an ownership stake in exchange for getting a return on that investment if the company does well. But as I say, the company in the pre. In the case of private equity does not actually have to do well for the private equity firm to win out. Because the basic structure of private equity payments is known as 2 and 20. The 20 is you get. The private equity firm gets 20% of all profits over a certain threshold. So obviously that's tied to performance that requires the company to do well. But the 2 is a 2% annual management fee, 2% of the entire value of the deal every single year, regardless of whether the company is doing well or doing poorly. So in the case of Toys R Us, two private equity firms, KKR and Bain Capital, bought Toys R Us for around $6 billion. And as the company was on its deathbed, they were still collecting 2% of $6 billion every single year. Not to mention all the other ways they find to make money. Selling off the real estate is a big one. You saw that in the Toys R Us deal, they get a cut of that. Toys R Us had formerly owned all of its own real estate. Now they have to pay rent and the private equity firm is just profiting that whole time. So I think that was what really got me interested in the subject is I did not write. This is like not an anti capitalist screed. This is very much. I actually think this is a corruption of what our free market capitalism system was supposed to be because you end up with all of the power, all of the information and none of the risk in the hands of these firms. And so it's very close to impossible for them to lose on a deal in a real way. But meanwhile, the workers, the companies and the communities that rely on those companies lose out over and over again.

[Megan Greenwell]

Yeah, this transitions us nicely into. And you already mentioned Toys R Us, which is the next thing I wanted to get into. And this is a story that you followed through a person named Liz. What did her experience reveal about what happens when a business is no longer rooted in its community?

[Farnoosh Torabi]

Yeah, Liz was such an interesting story to me because she's Indigenous Alaskan from the Tlingit tribe, and she had never lived outside of Alaska, but moved to the Pacific Northwest outside of Portland, Oregon, because her husband wanted to go to pharmacy school, and there was no pharmacy school in the entire state of Alaska, so they had no choice. And Liz had worked in retail her entire adult life and is a researcher at heart. And so she was sort of like, great, I'm going to find the job that will be stable enough, that will pay enough, that will have flexible enough scheduling, that it will support our family of five while my husband's at school. And for several years, that worked out great. Toys R Us was the company she had handpicked as the best option for their family. She had started working there in Alaska. They helped her transfer to Oregon when they moved. And Liz is such an interesting example of the American dream to me, because her husband was trying to build a better life for their family by going to school. And this was what she had to do to get them through that period. And she, like most workers I talked to, had no idea that Toys R Us was owned by a private equity firm. Right. Her paycheck said Toys R Us. Her bosses seven levels above her all worked for Toys R Us. And so until things started going really poorly, she had no idea that any of this was happening. And she had no idea that her company was doomed from the first day she started working there because of this $5 billion in debt.

[Megan Greenwell]

How did the bottom fall out for her?

[Farnoosh Torabi]

So Liz was a very high performing employee, a customer favorite. There's an anecdote in the book about how a customer named her baby after Liz.

[Megan Greenwell]

What was her job exactly at Toys R Us?

[Farnoosh Torabi]

So she had several jobs. Her last job was actually at Babies R Us, the spinoff. And she was a floor supervisor. So she wasn't technically a manager, but she had some supervisory responsibility while also being an expert in, like, how do you install car seats, stuff like that. And her manager had always said, look, our store's doing great. Even if the chain is going down in some sense, overall, they're obviously going to keep the most profitable stores. And we are running one of the most profitable stores. And she actually found out from a customer. It had been reported in the media for months that Toys R Us was in serious trouble. But her manager kept telling her not to worry about it. And she found out from a customer while she was at work that the company was going under and liquidating entirely because they hadn't even told their employees before it got out in the media. So a crying customer runs up to her and says, what am I going to do without you? And that's how she found out that this huge American institution was liquidating just because they were buried under so much debt.

[Megan Greenwell]

What is the alternative for companies like, let's just stick with Toys R Us. What would have been the other route for them to take that would have been more fruitful for their employees and would have allowed them to endure?

[Farnoosh Torabi]

Yeah, realistically in that moment there wasn't a better option because Toys R Us needed to be sold. And because the game is rigged so far in favor of private equity, they that means they can afford to bid more on any given company in the vast majority of cases. And so then if you're the board of a company, you have a fiduciary responsibility to take the best offer. And in that case, all of the like top three offers, the best ones, were from private equity firm. And in that moment, no, there was no other option and Toys R Us was struggling. I do not claim that private equity created the root problems in the retail industry or at that company in particular or in any of the industries I write about. But there was a path to survival for Toys R Us. I think you can see that with how many other specialty chains have continued to survive and thrive even in the age of Amazon. Right. Like you look at Home Depot, which is doing well, you look at Sephora, all of these companies, you know what worked well for them was they focused on offering something that you couldn't get online, plus building out really robust web presence to go head to head with Amazon. And Toys R Us did not have the money to invest in any of these types of things because of this debt. So it's not that they could have made a better choice in the moment necessarily. But I do think that it's a good example of why this system should be regulated a little more tightly, such that private equity firms can't just come in over and over and offer orders of magnitude more money than anybody else only to drive the companies under.

[Megan Greenwell]

You say you wrote this book for the everyday person. What can the everyday person do? Is it just be more educated about this and patronize accordingly or like how it feels like we're in such a powerless spot, especially in this administration which has been gung ho about deregulation.

[Farnoosh Torabi]

Yeah, it's a tricky one and I am like loathe to put too much on individual choices because I don't think it should be like everybody's responsibility to shop only at companies that are not private equity owned. And one of the arguments I outlined.

[Megan Greenwell]

We even know which ones those are exactly so hard.

[Farnoosh Torabi]

And even if you're making all the best choices in the world you can't control if your landlord is taken over by a private equity firm, if your children's preschool is taken over or your grandmother's nursing home. Private equity is big in public utilities now and obviously none of us have a choice in who our public utility providers are. So I think it's less about lecturing people to make ethical choices and more about just making people aware because private equity for so long has had the disproportionate share of the information and I want people to feel like they know what's going on and that they can push back in some cases. So Liz, when Toys R Us went under, joined with a group of laid off workers and they went and lobbied in front of public pension funds to say, look, you should stop investing in private equity until they agree to treat their workers better. And in both Washington and Minnesota, the boards agreed and did temporarily stop investing in KKR until they agreed to pay these workers some severance. So that was a, yeah, it was like a really cool moment of something working and not needing to rely on Congress to make it work, which I think is really important. There's also a lot of work to be done in just like reinventing some of these industries. Right. So I write about my own industry, which is journalism. And in that case the worker I write about left Gannett, which was a private equity controlled newspaper company and went to work for this boom of local news startup, nonprofit newsroom. And I think there's going to have to be a lot of creative work like that to build a healthier model if we're going to find our way out of this. I don't think you can just regulate private equity away and then all of a sudden everything will be fine.

[Roger]

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[Megan Greenwell]

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[Roger]

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[Roger]

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[Megan Greenwell]

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[Roger]

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[Megan Greenwell]

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[Megan Greenwell]

Yeah, I mean, as you're speaking, it makes me more excited because I just started a local news platform here in my town in Montclair, New Jersey, and we are always having these brainstorms of how to think more outside the box. And we're actually for profit philosophically. We just feel like we want to make this just be perfect, profitable. We want to prove that you can like do this thing and not be at the behest of donors all the time. And I, even through our work, we're learning about how much power local residents actually have, you know, in steering the decisions that are being made about even private equity. Right. Like did you know that development down the road, which was previously owned by resident landlords, private landlords, that there could be a giant private equity firm acquiring it? That's going to lead to some to protest and maybe even write letters to us or other. And I think that can do something. But I don't think our elected leaders and even our appointed leaders want to necessarily make decisions that are not in favor with the constituents and taxpayers. So to be loud about that, I think is very powerful.

[Farnoosh Torabi]

I think that's right. And I'm glad you brought up the importance of doing things locally, because I think one thing that often discourages people is that they don't see a lot of hope for pushing progressive financial regulation through Congress. 88% of members of the House and Senate take private equity donations. So that is by no means a Republican only problem that is both sides of the aisle. But there is a lot of interesting work being done on the state and local level. And I think when people overlook that in favor of just we have to do it for the entire country all at once, they miss some valuable opportunities to make some change. Right. There is a lot of. A lot of value in starting small and then helping that expand through and through. I'm going to talk in August to a group of local elected officials in Virginia where the housing section of my book takes place. And private equity owned housing is a huge problem in Virginia and in many other places. There was a study that just came out that said in Raleigh, North Carolina, 35% of all apartment units are now owned by private equity. So this is a big and growing issue. And it was really cool to me that these, like local elected officials are seeing this as a problem, realizing that they can't necessarily rely on Congress to do something about it, but saying we want our community to be healthier and so we're going to think about creative solutions. That's cool and inspiring.

[Megan Greenwell]

Yeah, that's wonderful. That's really great. Tell us a little bit about Roger's story. Roger, through him, you cast a light on how private equity is impacting hospitals and healthcare. Tell us what happened there. What did you learn about how private equity is changing healthcare, not just for patients, but for providers as well?

[Farnoosh Torabi]

Yeah. Roger is such a great character to me. He's in his mid-80s now, and he moved to rural Wyoming from suburban Texas just because he really wanted to be a small town doctor. And that is not a job a lot of people want. Rural clinics and hospitals are very understaffed because people coming out of med school don't want to go to those sorts of communities.

[Megan Greenwell]

They got student loans.

[Farnoosh Torabi]

Yeah, exactly. And so Roger should have been treated like an absolute unicorn. He was this pa. He was this doctor who cared very deeply about his patients and was willing to make real sacrifices for this life. And when his hospital in Riverton, Wyoming got taken over by a private equity firm, I think what really destroyed Roger about the experience was that they lied to him over and over again, both as a provider, but also when he was a board member. They lied about their intentions. So the last OB GYN on staff left the hospital for a different job and they said, yeah, yeah, no, we're trying to replace that person. We're working on it. It's just hard to recruit. But in the meantime, they couldn't deliver a baby at this hospital, which meant there was nowhere for 30 miles to deliver a baby. And they just kept not hiring anybody. Nobody could deliver a baby. And two years later, they still hadn't restored the labor and delivery ward. And then he found a PowerPoint from years ago that revealed that this was their plan the entire time they Wanted to strip all of the services. There's another character in that section of the book whose kid was dancing on the coffee table in Sock, fell off, needed stitches on his head like one of the most classic childhood injuries. And he couldn't get stitches because it was after 5pm at a hospital. And so I think Roger was in.

[Roger]

America, by the way.

[Farnoosh Torabi]

Yes. I think Roger felt really personally betrayed because he had dedicated his entire life to this place. He wanted nothing more than to guarantee robust medical care to his neighbors. And this private equity firm just came in and treated him and the entire hospital like a widget that could just be discarded at any moment.

[Megan Greenwell]

What do you think? If someone from the private equity industry is listening to this and they're like, no, she's got it all wrong, this Megan Greenwald. Actually, it's this. And it's getting misconstrued in the media. What is? And there might be people who are drinking the Kool Aid, right? In private equity, they're obviously making a lot of money, and that helps. But what do you think is their perspective on all of this? Do you think they're going in with the intention of making sure that a child does not get stitches after 5pm I think that they hope that they can all make money, buy this industry, buy this company and everyone. I think that they go in probably with some good intentions. But tell me, what do you think? What do you think they're thinking?

[Farnoosh Torabi]

I think you're right. Private equity, the best case scenario for them is they do lead a company to a very lucrative exit. Obviously, they will make more money by doing that than by liquidating the company. So I don't argue that they are excited to cut everybody's medical services and make it a place where you can't get to stitches. That said, you know, as far as I can tell, nobody from Apollo Global Management, which owned the hospital in Riverton, Wyoming, ever set foot in that community. And so I just don't think they feel particularly invested in whether that is a functioning hospital or not. Private equity talks about what it does by saying, we come in, we fix up struggling companies, essentially, like house flipping, right? We can replace all the floors, strengthen the foundation, and then flip it for a profit, and that benefits everybody. The problems with that are several, but one is that if that's what you're saying, then great, take on some of the risk yourself. If you're positioning yourself as this swashbuckling hero, great. Just put your money where your mouth is and share the responsibility for the loans that you have. Decided to take out. That's the argument that I've, like as many private equity people as I've talked to, I've never heard a compelling response to why can't you simply share in the burden of the loan? And then the other issue is 10 times as many companies owned by private equity firms enter bankruptcy proceedings as other kinds of companies. 20% of all companies owned by private equity go bankrupt. So if that is the stated intent that you are saving companies, you are failing. That is an astronomical number that is so much higher than any other kind of company. You are not doing a good job at your stated purpose. My argument is essentially that stated purpose is not their actual purpose. The actual purpose is to make money for themselves, for the shareholders, for the investors. And at that, they're quite good. But the idea that they are saving companies is just not supported by the evidence.

[Megan Greenwell]

Yeah. Wow. So you mentioned earlier a little bit about kind of the accountability that's needed. But if you had to expand on that, if to expand on that, what would real accountability for private equity firms look like? Legally, politically, socially?

[Farnoosh Torabi]

Yeah. So there are several ways you could do it. The most extreme is Elizabeth Warren has proposed what she calls the stop Wall street looting bill over and over again. And it never gets out of committee because nobody else has any interest in regulating private equity. But that would functionally regulate the industry out of existence. I don't think you have to go that far. If I could wave a magic wand and make one change, it would just be, you have to share responsibility for the debt. That's it. If the company goes under, you have to pay back the money. There are also other things, like Trump, in both his first term and now his second, has said he wants to see the carried interest loophole. Close interest is a classification that allows private equity firms and other big finance firms to treat their income not as regular income, but as essentially deferred payments, which comes with a dramatically lower tax rate. So were that loophole to be closed, as Trump says he wants it to be, that would make a serious dent in how. How free private equity's reign is. It wouldn't mean they can't operate. They talk about it as though it would ruin their ability to do their jobs at all. I don't believe that's true, but it would seriously impact the amount of money they have to play with and would potentially make them more conservative about which deals they will take on. There are all sorts of things. Also, there are things like rent control in cities is a big factor that can keep private equity from swallowing up too much housing because if they can't keep raising the rent over and over, they're not interested. I think rather, I think the more likely solution is like a piecemeal approach where we're going at this from a variety of different fronts, rather than something like the Warren bill that would just aim to destroy the industry in one fell swoop.

[Megan Greenwell]

Yeah, yeah. I think there, there's so much that at a, again, at a local level, at a state level, you can set up guardrails, right, for the various industries, the various infrastructures that you have to say, like even just that example you gave of rent control. Right. That it's not poking at directly at private equity, but it's making it less exciting for them to come in and acquire those sorts of enter to engage in those enterprises. So what a great book. Megan Greenwell, a veteran journalist, former editor in chief of Deadspin. Your book is called Bad Company, Private Equity and the Death of the American Dream. Thank you so much.

[Farnoosh Torabi]

Oh, thank you.

[Megan Greenwell]

Thanks so much to Megan Greenwell for joining us. Her book is called Bad Company, Private Equity and the Death of the American Dream. Thanks for tuning in as always, and I hope your day is so Money.

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