Private Equity Is Everywhere
Private equity won the financial crisis, argues Bloomberg Businessweek in a provocative new package. The economy, the political climate — everything’s combined to be a plus for private equity, which now has trillions of dollars under management and is involved in essentially every industry and sector. There are 8,000-plus private equity-backed companies, Bloomberg says, and private equity has been responsible for some of the highest-profile bankruptcies (Toys R Us, Gymboree, Payless, etc.) in recent years, wiping out millions of jobs. In fact, a new study from Harvard Business School and the University of Chicago has found that a company averages job losses of more than 4 percent in the two years after it is bought by private equity, when compared to control companies. Axios reports that the study also found that productivity rises 8 percent after a private equity buyout, a “big silver lining” for the industry.
Next City has previously reported on a bill to rein in private equity’s abuses. Both the House and Senate versions of the bill have been referred to committees, with no further action taken at this time.
Philadelphia Bans Cashless Stores
Retailers in Philadelphia must accept cash as of October 1 — it is the first major city to take the step of banning cashless stores, CBS reports.
Business owners say that going cashless speeds up transactions and makes them less of a target for theft, but advocates for cash point out that requiring a credit or debit card excludes the unbanked.
The law covers most retailers. Among sectors with exceptions to the provision are parking garages, Internet purchases and “wholesale clubs that operate on a membership model.”
As Next City has reported, many other cities, including New York, Chicago and Washington, D.C., have looked into banning cashless stores. Philly is the first to get its ban across the finish line.
How California’s Banking Policies Could Spread
California has enacted a slew of progressive financial policies in the last few years. From public banking to data privacy to payday loan caps, the state is making waves. And according to a think piece in American Banker, those policies are likely to spread to other blue states. Writes American Banker’s Kevin Wack, “New York, New Jersey, Illinois, Colorado and Washington are among the states where Democrats are now solidly in control of state government. Lawmakers in Democratic-leaning states have already turned to California for leadership on issues from student loan servicing to small-business lending.”
A few examples: A state law enacted last year requires servicers of student loans to be licensed by the California Department of Business Oversight, in an attempt to improve accountability. New York and New Jersey have introduced similar legislation.
The state also passed a law that required small-business lenders to make standardized interest-rate disclosures, as lenders must do for consumers. The law hasn’t yet taken effect, but New York has already introduced similar legislation.
As for public banking, since 2017 12 states besides California have introduced public banking legislation, conducted feasibility studies or introduced a ballot measure. These states will watch California closely as public banks appear, secure approvals from regulators, and open for business.
This article is part of The Bottom Line, a series exploring scalable solutions for problems related to affordability, inclusive economic growth and access to capital. Click here to subscribe to our Bottom Line newsletter. The Bottom Line is made possible with support from Citi Community Development.