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Comment by OGEnthusiast | Hacker News Reader

I don't understand why we don't just ban private equity. Seems like zero value-add to the actual real economy.

Ban companies from owning other companies? How would that work exactly?

Private equity is a convenient whipping boy for ignorant, low-information HN users who don't understand the basics of how finance works. You can certainly find examples of destructive or unethical behavior if you dig deep enough. What you don't see in the news are all the cases where PE saved companies that would have otherwise gone bankrupt.

You, presumably, have examples of these cases. Could you show them to us, please? (Given your understanding of the evidence available to us "ignorant, low-information HN users", you know you're making a bold claim, which creates a corresponding burden of proof.)

Example: almost every housing development.

Did you read TFA? There are some great examples there for the health care sector, and not just one off sensational examples.

TFA provides examples where private equity has been destructive in the healthcare sector:

> A 2024 Review of Financial Studies paper <https://www.nber.org/papers/w28474> found that private equity acquisition of nursing homes was associated with an ~10% increase in deaths, implying approximately 22,500 additional deaths over the twelve-year sample period.

I was asking for examples where private equity has made things better.

Sorry, I must have misread what you said.

That you did is valuable criticism of my writing. When you get deep enough into "no, you're wrong", "no, you're wrong", it becomes virtually impossible to keep track of who's saying what, unless people actually state their claims explicitly… which I didn't.

To be honest, I should have gotten it from context clues! I had read the whole thread.

> You can certainly find examples of destructive or unethical behavior if you dig deep enough

Dig deep enough? Please. Merely tilt your head slightly upwards, and let your eyes feast on countless examples.

The problem here is that only bad/negative/failed cases make it to discussion.

It's like researching the safety of driving by only looking at local news station websites. It will seem like the only thing those cars do is crash and kill people.

And yet you didn't give one

Sure, people mostly call out private equity when you see a group trying to cobble together local monopoly power over some necessity of life just to extract more from everyone, or trying to financially optimize something by that was never financial before. There are of course many more benign examples that no one pays attention to. But the fact remains that there are PE firms doing massively harmful things to extract wealth.

the PE business model depends on a lot of discretionary financial regulation.

For example, banks are given pretty generous capital rule treatment when they loan money to PE firms to increase leverage. We could stop that. They also get a lot of tax preferences that increase returns to investors and managers.

> ignorant, low-information HN users who don't understand the basics of how finance works

I though HN was a site that welcomed people of all levels of knowledge and shared thoughts, ideas, and resources to help people learn so we can elevate each other. Why are you coming at someone who freely admitted they lack understanding and tossing out a dismissive reply to them instead of saying: "Let me help fill in the knowledge gap here."

I thought HN was a site where users would take 30 seconds to do a modicum of research before wasting everyone's time trying to score points with a lazy, low-effort comment.

When laypeople criticize private equity, what they almost always mean to refer to are leveraged buyouts. I suspect you’d acknowledge that, if a private equity firm sees a strategy to turn around a business operationally but doesn’t produce enough returns to service their debt, they won’t pursue it even though the original owner likely would have.

The rules are arbitrary, the rules can be changed at any time. Finance is simply a construct on top of lower level primitives (primarily the legal framework around property ownership and corporate entity law). Totally fine for folks to ask which rules matter, which don't, and which can be changed and how long it will take. Be curious!

If the President can sign EOs banning private equity/institutional ownership of homes [1], OP's ask does not seem to be that out there imho; again, all of these rules are arbitrary and can change at any time. How do we change rules around ownership? We change laws or how they're applied.

[1] Congressional housing deal faces new hurdle as Trump pushes investor ban - https://www.politico.com/news/2026/02/13/housing-deal-faces-... - February 13th, 2026

> What you don't see in the news are all the cases where PE saved companies that would have otherwise gone bankrupt.

Please provide citations of companies worth saving were saved by PE. I will start with the only one I know: Barnes & Noble.

> Private equity is a convenient whipping boy for ignorant, low-information HN users who don't understand the basics of how finance works. You can certainly find examples of destructive or unethical behavior if you dig deep enough. What you don't see in the news are all the cases where PE saved companies that would have otherwise gone bankrupt.

This is an unnecessarily aggressive comment and not appropriate.

But also, your own comment is information-free. Why don’t you share actual examples and we can determine if those are significant enough to erase the anecdotal evidence from the other side. Virtually all examples of PE I’ve seen are extractive. They don’t result in a better product. They are instead just lazy arbitrage relying on the power of capital, vendor lock-in, switching costs, and the limited capital of their abused customers.

As for “how would that work exactly” - like anything else. We can come up with ways to classify companies as private equity and enact enormous taxes on them. Or pass other types of regulations into law.

I don't think a ban is required. Other countries (in the EU?) have put restrictions on it that prevent the abuses you see in the US. Why don't we do that? Because US Congress has been neutered and that appendage of US politics has withered and died.

Private equity is simply a person (or small group of people) owning a company. Basically every small business in the US.

The problem is not private equity, but that private equity engages in corporate raiding--buy up a company, borrow, extract capital, sell it to suckers who don't see the problems. Dig into practically all malfeasance and you'll find it's someone who benefits from making the future value of something look better than it really is and then leaving the problem for somebody else. At the executive level I think the answer is mandating income above a certain threshold be paid over time based on the future value. (Stuff that's actively traded would be easy: Let's say the cap was $1m. Pay the CEO 10m? No, he gets $1m, plus shares currently worth $1m to be delivered in a year, shares currently worth $1m to be delivered in two years and so on.) And while there is pending income they are categorically prohibited from any transaction that benefits from a drop in share price. Inadvertent (say, bought a fund that shorted the stock) it's a 100% tax rate, deliberate and all pending shares are forfeit. I have no idea of an answer with the PE problem.

Banning people from owning business?

This is just a boogie man media term. There are good owners/investors and bad.

Private Equity doesn’t “own” business in the sense most people understand it.

PE is finalisation of business, its ownership is far more similar to a mortgagee than an owner in every sense of the word.

it seems you are mixing up leveraged buyouts with PE

PE is investing. Limited partners give pool some money, the manager is the general partner, they also put some money into the pool, to align incentives, and that's it.

Everything else is not PE itself, but whatever strategy the fund has, or whatever deal some traders have came up.

Why don't you define private equity so we know what you're referring to

Because the thing you want to ban isn't well-defined.

But do you agree that there are a set of bad actors who fall under the (not well-defined) term of "private equity"?

Is this a definitional quibble or do you not believe there is a problem?

I accept there's a problem. I don't believe there's a simple, one-size-fits-all solution. It'll take years, possibly decades, of regulatory and anti-trust work across every industry. Tons of political will and capital.

It is important definition. As private equity can mean anything not publicly traded.

I do support banning certain financial actions. Like paying dividends with debt. Or structuring deals that achieve same effect. On other hand I would also ban stock buybacks.

It'd be difficult to ban what we commonly describe as private equity (a.k.a. PE firms) without banning the private (a.k.a. random people) from being able to hold equity. Someone smart might be able to ban the kind of investment vehicles that have become the bane of modern productivity but we do still need some mechanism to allow investment.

Well, let's start with banning debt push down and then move on to the next tool used to privatise profit and socialise risks. You know, it used to be that unfair business practices were researched and banned, simple as that. Just throwing up your hands and saying "Well, what to do?" when there's, you know, a whole science in which people are trained, is disingenuous.

they increase productivity, which is one of the most important part of the real economy, separates a lot of grueling manual labor while starving (so the Malthusian state) from having so much economic surplus that we have the opposite of starving in advanced economies.

https://www.nber.org/system/files/working_papers/w26371/w263...

the finding is that on average, target firms add jobs and see improved labor productivity

Private equity is capitalism. That's the capitalism part of the economy.

Im gonna speculate they were referring to the part of private equity where you buy businesses to load them up with debt to buy more businesses ad nauseum

I have no idea why leveraged buyouts are legal. What a bizarre mechanism for acquisition that feels so easy to just shut down with a relatively simple rule.

Restricting a previously purchased business from taking out debt feels harder to regulate, but someone smart could probably figure out a few good rules to stop the majority of abuses.

Do you think non-recourse mortgage (the dominant type in USA) also should be banned? VC finds a bank that borrows them money to buy X, with X as collateral. It is exactly the same. The mass selloff of assets and absurd cost-cutting is caused by new owners not giving a damn about the future of acquired company, its workers nor clients - it has nothing to do with leveraged buyout itself.

That's called a leveraged buyout and isn't restricted to private equity.

You can't load someone else with debt. That's obviously illegal. When you buy a company it isn't "them" anymore. And the new owners have exactly the same rights to borrow money as the old ones.

That's true when the debt is taken it is taken by the company (at the direction of the acquiring firm)... and maybe the bigger issue is that banks should be a whole lot more judicious in extending that debt. But some firms have found a heck of a loophole in buying a company, running an extremely high debt line, paying the acquiring firm (themselves) handsomely and then innocently whistling when the business collapses and a bunch of real economic value is erased.

Doing that to a company isn't an activity that should be rewarded since you're destroying, rather than creating, economic value. It is absolutely an exploit or flaw in our system and no more than one person should have been able to get away with it.

It isn't rewarded. If a business you buy collapses, you lose money. You seem to be falling for the conspiracy theory that private equity wants to collapse businesses.

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