An AFL-CIO attorney lashed out at legislators trying to repeal several aspects of the Dodd-Frank financial reform law yesterday, including the proposal that would require most private equity firms to register as investment advisers with the Securities and Exchange Commission.
During a House Financial Services Committee hearing on March 16, Damon Silvers, policy director and special counsel to the AFL-CIO, lobbed the most animated pro-Dodd-Frank arguments during the hearing, which otherwise was dominated by legislators criticizing the mammoth financial reform law.
Silvers, frequently and dramatically waving a stack of papers for effect, called the committee’s repeal efforts “cynical” and testified that private equity firms do in fact pose a systemic risk because of their increasing size, the number of companies they own and the amount of debt banks are providing to buy companies. Debt-heavy buyouts have cost “tens of thousands” of jobs in recent years, he said.
Silvers said a bill proposal that would repeal the registration requirement “should be called the no accountability for leveraged buyouts act.”
But the bill, the Small Business Capital Access and Job Preservation Act, does have some bi-partisan support. Robert Hurt, Republican of Virginia, is co-sponsoring the bill with Jim Cooper, Democrat of Tennessee. And Rep. Gary Peters, Democrat of Michigan, said at the hearing he also helped develop it. The committee has not voted on the bill and there is no vote scheduled, a committee spokesperson told Buyouts. After the committee votes on the bill it could go to the full House for a vote.
Speaking on behalf of the industry, Pam Hendrickson, the COO of The Riverside Company, argued to the committee that the private equity industry poses no systemic risk to the economy. If one of its portfolio companies fails, she said, it doesn’t create a run-on-the-bank, or ripple effect with other companies Riverside owns. She also said it would cost Riverside between $350,000 and $500,000 in the first year to comply with the registration requirement, in part because the firm would have to hire a compliance officer.
“Instead of imposing additional costs and regulatory burdens, we should be…supporting a system that has steadily provided critical capital to small and growing businesses,” she said.
Not surprisingly, Republicans on the committee who commented on the registration requirement during the hearing were supportive of the repeal legislation, saying registration requirements would impede job growth. Most Democrats, meanwhile, were skeptical, though more timid than Silvers. Rep. Stephen Lynch, Democrat of Mass., for example, said he was “astounded” that legislators are already chipping away at financial reform so soon after the Great Recession.
The bill is seeking to repeal the Dodd-Frank proposal that would require any buyout firm with $150 million or more in assets under management to register as an investment adviser with the Securities and Exchange Commission.