PEC Hits K Street

A new trade group, the Private Equity Council just hit our nation’s capital. Its purpose will be to conduct research and provide information about the industry to policy makers and others interested in understanding what private equity is, how it operates and the increasingly important role this alternative asset class plays in the U.S. and global economy. This new consortium of private investment houses is reflective of their rapid growth under Bush administration.

Who is involved? You may recognize some of names if you read the business papers.

Apollo Management, Bain Capital, The Blackstone Group, The Carlyle Group, Hellman & Friedman, Kohlberg Kravis Roberts & Co. (KKR), Madison Dearborn Partners, Providence Equity Partners, Silver Lake Partners, Texas Pacific Group and Thomas H. Lee Partners.

Many of America’s finest corporations are going private with the aid of these firms. A number of these private equity corporations already have heavy political hitters on the inside as managers or board members. Ex-Senator Tom Daschle is on the board of Apollo Management and The Carlyle Group with its “A list” of insiders already has a Pennsylvania Avenue address. Pete Peterson of The Blackstone Group is also Chair of the influential Council on Foreign Relations. The two founders of Silver Lake Partners have official or Democratic sounding credentials. One even advised President Bill Clinton on the economy and health care.

At least one Texas Pacific Group founder had roots with the famous Texas Bass family, known for their investment canny. Another serves on the board of Neiman Marcus. Thomas H. Lee Partners founder bears the same name as his company. Mr. Lee will speak at Brandeis University in February 2007 to the Alumni Club of New York City. His bio notes he also manages a hedge fund called Blue Star LLC. I guess one investment vehicle isn’t enough.

One might think these politically connected companies wouldn’t need a trade association or lobbying group. Most can pick up the phone and connect to most any elected official in short order. But according to the press release, the PEC will launch research, public affairs and government outreach initiatives to explain the multiple contributions private equity makes to investors, to companies and their employees, to the economic well-being of communities and to public employee pension funds.

Two markets stand out as I read their laundry list of initiatives, “government outreach” and “public employee pension funds”. Yes, they want more of “our money” as President Bush calls it. Taxes fund government programs and public employee pension funds.

What they don’t want you to know are the reduced reporting requirements private companies have as they are no longer public companies. They do note the incredible growth the industry has enjoyed under the Bush years with this statement.

In 2006, private equity managers around the world will raise more than $300 billion. Today the estimated available capital of the private equity industry exceeds $700 billion.

As hospital uncompensated care in 2004 stood at $26.9 billion, it seems embarrassing that America provides innovative ways for private equity firms to make boatloads of money but can’t ensure its citizen’s receive health care…