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.

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

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.)

> 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.

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.

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?

It has happened many times throughout the 20th century. It requires mass fear so many people withdraw at the same time.

What if wealth taxes could be paid with shares instead of cash? And the shares went into a sovereign wealth fund? No forced selling, no crash.

Pretty much spot on.

Longbets: “Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S&P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.” - https://longbets.org/362/ (won by Warren Buffett)

Should New York’s $270B pension fund abandon Wall Street? - https://www.semafor.com/article/08/07/2025/new-york-comptrol... - August 7th, 2025 ("Drew Warshaw is running for New York state comptroller, a job most voters would struggle to define but one that includes oversight of the state’s pension fund. If he unseats 18-year incumbent Thomas DiNapoli, Warshaw’s plan is to move much of its nearly $300 billion of investments into ultra-cheap, passive index funds. The New York State and Local Retirement System has more than $90 billion invested in private equity, private credit, real estate, and other complex assets. All promise high returns — catnip for pension managers facing future payouts to retirees — but charge high fees, too. The question facing New York and hundreds of other state and local pension funds, charitable endowments, universities, and government funds around the world: Are these high-priced managers worth the fees they’re charging?")

What Does Nevada’s $35 Billion Fund Manager Do All Day? Nothing - https://www.wsj.com/articles/what-does-nevadas-35-billion-fu... | https://archive.today/ywTFd - October 19th, 2016

The management fees are, broadly speaking, a grift/rake of capital flows and economically inefficient, based on the evidence and the data. The issue at play is that the capital market ecosystem has become a bureaucracy that demands to continue to grow, versus cannibalizing itself in the name of economically efficient capital allocation.

Tangentially, the markets are moving to more trading (24/7/5) versus less because when trades are made, money is made in a Parable of the Broken Window sort of way.

Banking is a basic utility. Penalizing customers of a business for the business going under is bonkers. We learned this lesson during the Great Depression.

Bank shareholders or creditors are engaging in risky behavior and should face the full consequences of bank failures. No bailouts for them.

> Because the taxpayers bail them out. I could define anything as not being risky if I knew taxpayers would bail it out.

I feel like I must be misunderstanding something here because it sounds like you're saying depositing funds in a bank is considered risky behaviour?

There has been a lot of discussion about how the basic setup of banks (borrow short, lend long, collect the spread) is probably not a great idea, and we should just separate these two activities (see Money Stuff). People who want to lend long should do that with their own money, and people who just want to save should be able to do that.

But, at least in the US, regulators keep blocking the 1st step: narrow banking. Let banks offer savings accounts that just stick the money in the Fed, zero risk.

Taxpayers don't bail out bank depositors, the FDIC (which is insurance paid for by the banks) does.

And banks do a lot more than what you described, which I have to assume you know already.

The FDIC insures $200k of deposits because banks are not supposed to be risky. Thats taxpayers bailing out everybody in order to keep banks as "not risky"

In particular the article incorrectly states that the bank was bailed out. It was not. The bank failed. Depositors who were running their non-profit in the Bay Area did not lost all their charitable contributions.

The bank failed because it had placed deposits into US Treasury bonds that were temporarily worth less for sale on the open market than they would be at maturity. When Peter Thiel started a bank run by telling all his investments to pull their funds, that exposed the SCB mismanagement.

When the depositors were bailed out, taxpayers didn't lost anything, it was a wash. We could have paid at bond maturity or now, but it made little difference to us.

Depositors are lending their money to the bank at low interest. They may seek risk in terms of increased yield on their savings account, but FDIC insured banks will have trouble meeting their requirements while offering high yields on their accounts.

Banks provide security for deposits as well as liquidity (velocity of money), and slight inflationary pressure.

Wiping out depositors doesn't prevent much moral hazard since the depositors are unsophisticated, so they are unable to differentiate risk among banks.

It's already unaffordable, enrollment is dropping, and tuition has only continued to go up to offset lower enrollment.

The incentives are not so naively simple

The student loan system is fucked up, so what should happen is an acknowledgement that it's fucked up, forgiving the fucked up loans, and also changing the system to be less fucked up so it won't have to happen again.

other poorer countries just pay all or most tuition for students and own the universities

The solution to that is rebuilding the state and federal funding for higher education with added regulations on where and how that money can be spent (perhaps even putting tuition caps in play).

The reason universities are so expensive is there is no limit on how much they can charge for tuition and no requirements on how much they pay their professors. It allows them to dump a huge portion of their funds into the marketing and athletic departments.

I know of a few religious universities who's mission is mainly to educate (so their well educated members can pay back more money to the church). While they do subsidize the educational costs, it isn't by as much as you'd think and it does result in some very cheap education.

There's no reason the government couldn't do exactly the same thing. It did right up until reagan.

Ok, but forgiving student loans doesn't do that. It signals to borrowers that they don't have to repay high loans if their career can't support it. It tells borrowers that they can make risky loans without a chance of default. It tells universities that they can keep charging exorbitant tuitions because kids can still get loans to pay them.

The solution is to allow judges the discretion to default them in bankruptcy after X number of years after graduation. Lenders need to accept the risk. With no risk, they can loan as much as they want and have guaranteed repayment. This drives tuition higher and higher.

So you believe universities have taken advantage of students by crafting, encouraging and financing education programs with an understanding that those programs would not result in jobs which would be sufficient to repay the debt needed to complete them, but you think the 18 year olds who were taken advantage of should be forced to suffer for their failure to make perfect decisions at 18.

Cool. Cool.

You take on the risk every time you pay the local school district's real estate taxes. Well to be fair that's even riskier. After all you have no idea if the kindergartner will go on to get a college degree and start paying taxes. It's actually riskier than student loan bail outs.

Great example of narrow rationality. Huge amount of Americas current problems can be traced back to a poorly educated population. Universal access to third level education, combined with a school system designed to educate - in direct opposition to current goal of producing labour units for corporate; would massively improve pretty much ever aspect of American life.

The market lens is myopic, the market cannot be expected to produce social goods in proportion to necessity - that's not any part of its function.

I agree that the student loan system is insane. Students need grants to cover cost of living while they focus on learning, education itself of course should be free.

I agree with you about student loan forgiveness, but disagree with your assessment of universities as a system. The humanities (which are highly profitable for the university) are suffering an existential crisis because their funding keeps getting cut, while STEM programs (which have low or even negative ROI after lab/equipment/resource costs) keep getting expanded. There's obviously more nuance to that, but at a high level, universities are prioritizing majors which have higher job placement at the expense of their own bottom line.

So what do you do when your payroll is more than $200k? The depositors were not treating SVB as investment, they were bank accounts for doing transactions.