Elizabeth Warren’s Anti-Private Equity Bill is Unfounded and Will Hurt Main Street 

Senator Elizabeth Warren (D-Mass.), along with other Democratic senators, re-introduced the Stop Wall Street Looting Act on September 24, 2026. The very name of the bill is an indictment of its sponsors’ grasp (or lack thereof) of the industry. Its title is based on false premises. It treats debt as coercion, profit as extraction, and risk-taking as misconduct. If enacted, it would raise taxes on investment and choke off capital that sustains 13 million Americans who work for private-equity-backed companies.  

Private equity (PE) funds pool money from limited partners (LPs) such as public pensions, endowments, insurance companies, and family offices, and from general partners (GPs) who run the fund and invest their own capital alongside LPs. Funds buy companies through a combination of equity and borrowed money.

 The acquired company, or a target, or portfolio company, then repays the loans from its own earnings, and the fund only profits if the company returns more than the fund paid for it. Leveraged buyouts (LBOs) are financed heavily by debt since debt is a cheaper source of financing than equity. Leverage, or debt, has the potential to amplify returns when a business bought by a PE firm improves earnings, and conversely amplify losses if the business fails, in which case the fund equity or stake in the company bears the loss first, and the GP earns no carried interest on the equity.

GPs typically earn carried interest only after LPs recover the money they put up plus a preferred return. GPs also bear unlimited liability for the fund’s obligations under the law. PE partners have skin in the game every step along the way in a buyout. To label such activity “looting” misunderstands the risks that PE funds assume and must be willing to absorb.  

The bill would tax carried interest as ordinary income, labeling its capital gains tax treatment as a loophole in existing law. Carried interest is already treated like other forms of long-term investment. Whereas most public shares require one year of holding to qualify, underlying assets generating carried interest must be held for three. The bill also aims to tighten the limit on interest deductions for PE-owned companies, even though tax deductions for interest expenses are already capped at 30 percent of cash earnings under section 163(j) of the tax code.

Limiting these deductions only punishes companies for conducting business under a particular structure. Taxing carried interest would have adverse economic consequences. The U.S. Chamber of Commerce estimates a carried interest tax hike could eliminate 4.9 million jobs and cost pension funds up to $3 billion a year.  

The added liability provisions making PE funds and their managers jointly liable for portfolio companies’ debts, legal judgments, and pension obligations are a major disincentive for investment. A fund that owns a company only risks the money it invests. This is the same limited liability exposure every corporate shareholder in America faces. If a portfolio company defaults, the PE fund’s equity is the first form of capital to absorb the losses and is often wiped out.

Putting the fund and its managers on the hook for portfolio company debt shifts default losses from lenders, who voluntarily accepted and priced that risk, onto the fund. Because the fund itself would be liable, one failed company could drain value from the fund’s positive returns elsewhere, with much of those gains belonging to pensions, endowments, and other institutions. Few investors then would assist in buying struggling companies if a single failure could put the entire fund at risk.  

Distressed firms that are in most need of rescue would suffer first and lose potential buyers. Research finds that PE-backed firms restructure faster, avoid bankruptcy more often, and are liquidated less than other highly leveraged firms.

 PE buyers of failed banks also saved the FDIC $3.6 billion in the aftermath of the 2008 financial crisis by reducing resolution costs for the FDIC.  

The bill also seeks to restrict PE’s ability to turn companies around and restructure them. By implementing a two-year restriction on mass layoffs, offshoring, and plant closures, the bill would harm workers the most. Saving companies in need of restructuring sometimes requires layoffs, closing a loss-making plant, or moving production offshore, because the alternative is not the status quo. The alternative is liquidation and every job lost. Research finds employment rises about 13 percent at privately owned companies that are bought out. The same study also finds labor productivity improved by 8 percent relative to controls. Other studies also indicate that workers benefit from PE oversight as per-capita workplace injuries have been shown to fall 11-15% in buyouts taking public companies private. 

The added disclosure mandates also represent a misconception of private equity by confusing private funds with publicly traded companies. LPs perform sophisticated diligence to understand the nature of the contracts they enter into since their investments are locked up in long time horizons and cannot be liquidated easily, with the tradeoff benefit of potential higher returns. Illiquid private companies cannot be priced daily like public shares on an exchange. These annual disclosure mandates echo the Biden SEC’s private funds rule, which was vacated by the Fifth Circuit Court in 2024. What is also concerning is the bill’s insistence on climate and workforce demographic disclosures, which add woke reporting requirements with no bearing on fund or portfolio company performance.  

Finally, Private Equity has an excellent track record of generating above-market returns. That’s why pension funds routinely report private equity as their best performing asset class and participate as LPs. One study found PE generated a 13.5 percent median ten-year return versus 9.7 percent for public stocks across 200 pension funds. Buyout funds tend to beat the S&P 500 by 20-27% over a fund’s life. Undermining Private Equity through onerous regulations only undermines retirement savers who rely on PE fund performance as a pillar of retirement portfolio growth. 

Congress should oppose the Stop Wall Street Looting Act. The bill solves problems that exist only in the authors’ misreading of finance. ATR urges members of congress to reject any legislation that would tax, regulate, and litigate away capital that rescues struggling companies, funds retirements, and employs millions of Americans.