US coronavirus stimulus offers taxpayer cash to buyout firm companies

[Celerity]

Private equity appears to have won access to federal stimulus funds through the Federal Reserve- with strings attached

https://www.penews.com/articles/us-coronavirus-stimulus-offers-taxpayer-cash-to-buyout-firm-companies-20200416

Private equity firms won a victory in getting access to stimulus funds intended to blunt the economic pain of the coronavirus, after missing out on their first effort to secure government cash for their businesses. The Federal Reserve last week detailed plans to fund $2.3tn in aid to companies affected by the virus, with few restrictions on private equity firms seeking assistance for companies they own, according to analysis by experts and lobbyists.

But while the Fed’s plan has few roadblocks for private equity, taking advantage could come with risks—from both a business and a reputational standpoint. Private equity groups praised the Fed’s planned intervention, with the American Investment Council, the largest industry lobbying group, calling it “a step in the right direction.”

The Fed plans to backstop the markets for large companies’ debt, and to fund $600bn in loans to midsize businesses. The interest-deferred loans can be for as much as $25m. Groups critical of private equity practices slammed the Fed’s plans for lacking safeguards against misuse. The AFL-CIO and the American Federation of Teachers were among more than a dozen groups that last week signed a letter warning that allowing private equity firms access to stimulus money would mean giving a “taxpayer subsidy” to a “predatory business model”.

Private equity is likely to have “almost unlimited access” to the Fed’s loan program, said Marcus Stanley, policy director for Americans for Financial Reform, a progressive group that advocates for stricter regulations on Wall Street. “For somebody with a bunch of lawyers and a lot of money you have to be sitting there drooling looking at this,” he said.

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