The newest threat to the middle class: Why private equity is becoming a public problem

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http://www.salon.com/2014/06/05/the_newest_threat_to_the_middle_class_why_private_equity_is_becoming_public_problem_partner/



A few weeks ago, a top official at the Securities and Exchange Commission reported on what he called a “remarkable” amount of potentially illegal behavior in the private equity industry — aka the industry that buys up, changes and sells off smaller companies.

In its evaluation of private equity firms, the SEC official declared that half of all the reviews discovered “violations of law or material weaknesses in controls.” The announcement followed an earlier Bloomberg News report on how the agency now believes “a majority of private equity firms inflate fees and expenses charged to companies in which they hold stakes.”

At first glance, many probably dismiss this news as just an example of plutocrats bilking plutocrats. But that interpretation ignores how such malfeasance affects the wider economy.

One way to understand that is through the simmering debate over pension obligations in states and cities across the country.