Wall Street Bailout

States Risk Repeat of Wall Street Bailout with Private Equity Infrastructure Deals

A major increase in responsible infrastructure investment is critical to job creation and a U.S. economic recovery

WASHINGTON, DC – Increasing investment in infrastructure projects is critical to America’s economic recovery, but states that partner with private equity firms on deals risk a repeat of the Wall Street bailout, according to a draft of a policy discussion paper authored by one of the nation’s largest labor unions.

As states and the federal government seek ways to create jobs, generate revenue, and fix crumbling roads and bridges, momentum is building to address America’s infrastructure crisis. The policy discussion paper by SEIU, the nation’s second largest union of public sector employees, outlines the risks to states of doing deals with under-regulated private equity buyout firms whose risky financial strategies could put taxpayer dollars, and valuable state assets and services at risk.  The report is online at behindthebuyouts.org

Private equity buyout deals typically involve large amounts of debt, increasing the risk of default if economic conditions fail to generate the revenue needed to make debt payments.  If private equity-owned infrastructure projects default, taxpayers will be forced to pick up the tab, bailing out the financiers. In addition, most private equity deals are structured to generate short-term profits for the firms and their investors, a formula often at odds with taxpayers’ interest in steady, long-term state revenues and quality services.

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