On Thursday's show: The job forecast for the region in 2022, lessons from the collapse of Enron, a conversation with the late Stephen Sondheim, and the best new restaurants from the past year. The industry also quietly helps itself to yet more money by having portfolio companies pay fees for consulting and financing services provided by, of course, their private-equity backers. 2023 Cond Nast. One is the so-called Paycheck Protection Program (PPP), set up to make $349 billion in government-guaranteed loans available to businesses with fewer than 500 employees. The socio-economic status of individuals needing . Even before the coronavirus crisis, the spigot was drying up. All rights reserved. By now, it should be abundantly clear that the current shale oil business model does not work even for the very best companies in the industry, the investment firm SailingStone Capital Partners explained in a recent note. About Bethany McLean is a contributing editor at Vanity Fair. This week, Kate and Daniel talk to Bethany McLean, author most recently of Saudi America: The Truth about Fracking and How Its Changing the World as well as the bestselling The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron, with Peter Elkind. McLean started her career as an investment banking analyst for Goldman Sachs[2] and joined Vanity Fair as a contributing editor in 2008. NEW YORK Business writers Bethany McLean and Joe Nocera are collaborating on a critical take of the U.S. response to the coronavirus pandemic. One of the key principles behind private equity is that increased leverageaka more debtcan make a business function more efficiently. Has its bubble finally burst? Mnuchin is a former Goldman Sachs executive and hedge fund guy; Blackstones Schwarzman has ties to Trump; Jared Kushners family business has gotten loans from Apollo, according to the Washington Post. All rights reserved. Its a rich history of a company, and a case study in how a corporate culture can turn toxic. In the Season One finale of Making A Killing, Bethany brings back her friend, colleague and co-author Joe Nocera (Bloomberg Opinion columnist and creator of The Shrink Next Door podcast) to bookend the season with a lively analysis of the former head of Nissan Motor Co. and Renault S.A., Carlos Ghosn. [7][8] The Washington Post selected it as one of the best nonfiction books of 2015. Investors were willing to do this only as long as oil prices, which are not under Americas control, were high and when they believed that one day, profits would materialize. Thanks to all the cheap money made available by the Fed, companies owned by private-equity firms could simply refinance their debts at lower rates, thereby getting a fresh lease on life. Bethany McLean was born on 12 December 1970 in Hibbing, Minnesota, USA. As a subscriber, you have 10 gift articles to give each month. Anyone can read what you share. But among those angling for a federal handout is one of the wealthiest sectors of the American economy: private equity. Its still unclear where most of this debt is held. Colombias Amazing Race to Build a $1,000 Ventilator Frontline Doctors Race to Learn the Mysteries of Coronavirus How Dr. Anthony Faucis Media Strategy Is Revolutionizing Coronavirus Messaging Can Americas Crowd-Driven Spectacles Return for the Fall Season? From the Archive: Following the Psychological Contagion That Fed the 2014 Ebola Outbreak. He and McLean previously worked together on All the Devils Are Here: The Hidden History of the Financial Crisis, about the 2008 market crash. Blame Congress for the meltdown, not Goldman Sachs. [12], McLean married Chris Wilford in 2000 and divorced in 2006. The 42 Best Romantic Comedies of All Time, The 25 Best Shows on Netflix to Watch Right Now. (Adila Mchich, CME Group), Fractivism: Corporate Bodies and Chemical Bonds (Sarah Ann Wylie), The Fracktivists (Colin Kinniburgh, Dissent), Kate: A Moderate Proposal: Nationalize The Fossil Fuel Industry (The New Republic), This week, Kate and Daniel talk to Bethany McLean, author most recently of, Saudi America: The Truth about Fracking and How Its Changing the World, The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron, If you like the episode and want to hear more, sign up as a monthly member at. According to the Institutional Limited Partners Association (ILPA), a lobbying group which represents CalPERs and other public investors, businesses backed by private equity employ more than 8.8 million Americans at over 35,000 companies, accounting for a staggering 5% of the United States GDP. In reality, the dream was always an illusion, and its collapse was already underway. Which explains why ILPA wrote to Treasury Secretary Steven Mnuchin and Fed Chairman Jerome Powell last week, arguing that companies backed by private equity should be allowed to access the relief funds provided in the CARES Act. By early 2019, America was the worlds largest producer of crude oil, surpassing both Saudi Arabia and Russia. Confirmed cases include those reported since the beginning of the current active outbreak and may include cases that . The SHIELD saliva-based testing is available for all ages. In early 2015, the hedge fund manager David Einhorn announced at an investment conference that he had looked at the financial statements of 16 publicly traded shale producers and found that from 2006 to 2014, they spent $80 billion more than they received from selling oil. The man who shot his girlfriend and five relatives at a birthday celebration had "control issues". Stopping that will require a creative effort to increase and sustain high levels of vaccination. The immunobiologist Akiko Iwasakiwrites that new vaccines, particular those delivered through the nose, may be part of the answer. COVID-19 in McLean County for the week ending 3-3-23 - New Cases (2-23-23 to 3-1-23):129; New Hospitalizations (2-22-23 to 2-28-23):10 ; McLean Countys COVID-19 Community Level is LOW: When Community Level is LOW: Stay up to date on vaccinations, Get tested if you have symptoms. The industrys lack of profits wasnt exactly a secret. More than 100,000 people already have died in this country from the virus. FILE - In this Friday, June 12, 2020 file photo, a nurse uses a swab to perform a coronavirus test in Salt Lake City. FILE - In this Friday, June 12, 2020 file photo, a nurse uses a swab to perform a coronavirus test in Salt Lake City. On April 20, oil prices did something theyve never done before. How Screwed Are Donald Trump and His Adult Children, and Other Questions You Might Have About the Staggering Fraud Lawsuit Against Them. Occidental is just one piece of the puzzle. Investors in the equity of these companies have already seen the value of their holdings decimated. Never mind that they often overpaid for the companies they acquired, and loaded them up with so much debt that even a mild economic downturn could make it nearly impossible for those companies to repay their loans, as Fortune put it. It once seemed utterly unattainable until the advent of fracking, which unleashed a torrent of oil. After Enron's rapid collapse later in 2001, McLean co-authored the book The Smartest Guys in the Room (2003) which detailed the corrupt business practices of Enron officials. Thats because some of the major investors in private-equity funds are public pension plans; at Blackstone, roughly one-third of the firms money comes from retirement plans set up to provide for over 30 million working-class Americans, according to someone with knowledge of its portfolio. The allies of private equity hope that similar exemptions will soon be forthcoming for their firms.We are in a wait-and-see mode, Chris Hayes, the ILPAs senior policy counsel, told me. If you need help with the Public File, call 540-512-1558. Copyright 2023 WSLS.com is managed by Graham Digital and published by Graham Media Group, a division of Graham Holdings. The taxpayer handouts will also help private equity continue its relentless march through the global economy, snapping up troubled companies at bargain prices or extending high-priced credit as other investors, including hedge funds, are forced to sell off their holdings in the post-corona landscape. The private-equity industry also wants the companies they have invested in to have access to the $454 billion being doled out through the Treasury, an amount that the Fed said could be leveraged into over $2 trillion. Dylan Hollingsworth for The New York Times. Bethany McLean, a contributing editor at Vanity Fair, is the author of "Saudi America: The Truth About Fracking and How It's Changing the World." The Times is committed to publishing a. Traders last year at the New York Stock Exchange near the post that trades Anadarko Petroleum and Occidental Petroleum. I dont think any of us can really believe what we saw today, one industry analyst told AP. Click here to take a moment and familiarize yourself with our Community Guidelines. Nocera is a columnist for Bloomberg Opinion and co-author of Indentured, about the NCAA. Restaurants and hotels owned by big chains have already received exemptions granting them access to the relief funds, regardless of how many people their parent companies employ. He and McLean previously worked together on All the Devils Are Here: The Hidden History of the Financial Crisis, about the 2008 market crash. Not only should taxpayer funds not be used to pay management or consulting firms, she says, but companies that take the money should also, for instance, be required to include workers on their corporate boards and gradually increase their minimum wage to at least $15 an hour. The title and release date have not yet been determined. As early as 2018, some investors had begun to tell companies that they wanted to see free cash flow, and that they were tired of compensation models that rewarded executives with rich paydays for increasing production, but failed to take profits into account. Wed like to hear what you think about this or any of our articles. [10][11] Bethany College will continue to adapt and collaborate as needed to encourage vaccines and boosters for staff and students. The industrys total assets under management have hit a record $4.1 trillion. The promised profits havent materialized. McLean was born in Hibbing, Minnesota on December 12, 1970. Manage all aspects of the daily operation for Ham Conversion, processing up to 1.5 million lbs/day . Best-selling author Bethany McLean reveals the true story of fracking's impact - on Wall Street, the economy, and geopolitics. The Wuhan Institute of Virology, the cutting-edge . Has its bubble finally burst? They have two children. Portfolio, a Penguin Random House imprint . Jack Ewings Faster, Higher, Farther is more than the story of a scandal. Thats because one big source of funding didnt dry up: private equity. Paying members will get access to perks like a. by Kate Aronoff, Alyssa Battistoni, Daniel Aldana Cohen, and Thea Riofrancos, and much more. Getting the government out of the housing market would mean saying goodbye to the 30-year mortgage. Whats more, the Milken Institute reported, even by mid-2018, private equity owned more companies than the number of businesses listed on all of the U.S. stock exchanges combined, and have accounted for a more significant source of financing than initial public offerings in many recent years. In 2018, according to analytics firm eVestment, pension funds in the U.S. and the U.K. pumped 27% of their fresh allocations of money into private-equity funds, up from 25% the year before. At least 1 in 303 residents have died from the coronavirus, a total of 2,512 deaths. So the era of low interest rates, which began with former Federal Reserve chairman Alan Greenspan and continues to this day, has been a huge boon to private-equity firms. The basic reason is that the amount of oil coming out of a fracked well declines steeply after the first year more than 50 percent in year two. The Times is committed to publishing a diversity of letters to the editor. "[3] The article noted some irregularities in Enron's financial documents that were available to the public, suggesting the company's then-record high stock price was unjustified but she did not at that point suspect fraud at Enron. Whiting Petroleum, whose stock once traded for $150 a share, filed for bankruptcy. Bethany McLean is a Vanity Fair contributing editor. If private equity is handed billions in taxpayer money, it could use some of it to pay themselves hefty fees today, then pocket even more of it down the road, when they sell their portfolio companies and collect their 20% of the taxpayer-enabled gains. Because rules for access to this money werent specified in the CARES Act, as ILPA notes, the executive branch will have a fair amount of discretion over who gets access to the moneyand private-equity firms want to take full advantage of that opening. McLean is a contributing editor at Vanity Fair and co-author of the Enron book The Smartest Guys in the Room. Nocera is a columnist for Bloomberg Opinion and co-author of Indentured, about the NCAA. As for Pelosi, she doesnt want to see companies backed by venture capital excluded from federal relief, given her Silicon Valley constituents. NEW YORK Business writers Bethany McLean and Joe Nocera are collaborating on a critical take of the U.S. response to the coronavirus pandemic. Tar Heel, North Carolina, United States. 1. (AP Photo/Rick Bowmer), Connect with the definitive source for global and local news. We could go even further. All information these cookies collect is aggregated and therefore anonymous . The key issue is the parent child problem. When wells are clustered tightly together, with so-called child wells drilled around the parent, the wells interfere with one another, resulting in less oil, not more. By Patrick Semansky/AP Photo (Mnuchin); By Mark Wilson (Pelosi), Jason Alden (Shwarzman), Patrick T. Fallon/Bloomberg (Black), by Johannes EISELE/AFP (stocks), by Christina Horsten (tents), by John Nacion (ambulance); All from Getty Images. A deal, and higher oil prices, might help the industry. All thats left to tally is the damage. Until the capital markets began to get suspicious, private equity investors could flip companies they had funded to larger, public companies, making a profitable exit regardless of whether or not the underlying business was making money. The industrys boosters argue that technological gains, such as drilling ever bigger wells, and clustering wells more tightly together to reduce the cost of moving equipment, eventually would lead to a gusher of profits. [citation needed] She began as a contributor to Slate's Moneybox column, in 2010 and "The Bulldog" column in Fortune. The book, which she wrote from the couple's home, puts a human face to the crisis. Even before the COVID crisis, there were questions about how well private-equity investments were actually performing. Almost everything thats happened since 2008 has tilted in their favor. Copyright 2020 The Associated Press. Saudi America: The Truth About Fracking and How Its Changing the World., stocks that make up the S.&P. And why not? Workers monitoring a hydraulic fracturing operation near Wink, Texas. Portfolio, a Penguin Random House imprint, announced Wednesday that the two had reached an agreement for a news-breaking, character-driven narrative revealing the forces that rendered critical American institutions ill-equipped to cope with the deadliest pandemic since the 1918 Spanish flu and the economic consequences of that failure.The title and release date have not yet been determined. Like so many other facets of the COVID-19 crisis, however, this unprecedented crash exposed long-running cracks in the facade. And North American oil and gas drillers have almost $100 billion of debt that is set to mature in the next four years. Ad Choices. And more! Even so, he told me, a large number of private-equity firms ignored that guidance and decided to put very high levels of leverage on their portfolio companies. Maybe those firms should now be required to contribute more equity from their cash stockpiles, he suggests. (And not all private-equity firms care equally about all of the programs.) In a January 4 opinion piece for the New York Times, Bethany McLean had this to say about the outcome of the Elizabeth Holmes trial: "A jury's verdict is black-and-white, but the real story is . Bethany Lee McLean (born December 12, 1970) is an American journalist and contributing editor for Vanity Fair magazine. She is the co-author of the 2003 book, "The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron," which was the basis for the Academy Award-nominated documentary of the same name. We need private equity, we need more of it, and we need it now, chief investment officer Ben Meng said in early 2019right before CalPERS hired a former private-equity guy, who began his career at Goldman Sachs, to head its private-equity efforts. Looking for more? Nocera is a columnist for Bloomberg Opinion and co-author of Indentured, about the NCAA. The reason is as simple as it is galling: while great private fortunes, such as that of Blackstones Stephen Schwarzman (net worth: $17.5 billion and Apollos Leon Black ($7.5 billion), have been made from private equitys march through the world, its losses, to a remarkable degree, will belong to all of us. [citation needed], She authored an article on Enron for the March 5, 2001, issue of Fortune entitled, "Is Enron Overpriced? Free COVID-19 testing is available at the McLean County Health Department from 9 a.m. to noon every Tuesday and Wednesday in Room 400E of the MCHD building at 200 W. Front St. in Bloomington. By Bethany McLean. The Next Financial Crisis Lurks Underground (Bethany McLean, New York Times), Coronavirus May Kill Our Fracking Fever Dream (Bethany McLean, New York Times), Are Crude Oil & Natural Gas Prices Linked? If private equity suffers, the blow will reverberate throughout the entire economy. All rights reserved). TDD: (800) 526-0844
The community level of Covid-19 in McLean County is low based on cases and hospitalizations, according to the most recent update from the C.D.C. What could endemic Covid look like? Some of it has been packaged into so-called collateralized loan obligations, pieces of which are held by hedge funds. 2 FOR DRIVE-THRU TESTING RESULTS: Lab samples are sent to an off-site laboratory and results may take 1 to 2 days or even longer in some instances or in times of peak demand. Previous assignments include editor-at-large, columnist for Fortune, and a contributor to Slate. Rasmussen points out that after the financial crisis in 2008, the Federal Reserve set a limit on the amount of debt it considered prudent. 1 FOR PHARMACISTS PRESCRIBING PAXLOVID: This service is available in all locations, with the exception of those in New Hampshire. The problem is, existing rules at the Small Business Administration, which is overseeing the program, have been widely interpretedas excludingloaning money to most mom-and-pop businesses that are controlled by large parent companiesincluding private-equity firms. The total number of . Its thanks to those who are able to contribute that were able to make the podcast free for anyone to listen to. Veuer's Tony Spitz has the details. Think of private-equity firms as the banks of the corona crisis: They are, for better or worse, too big to fail. From 2015 through 2019, private equity firms raised almost $80 billion in funds focused mostly on shale production, according to Barclays. Americas energy independence was built on an industry that is the very definition of dependent dependent on investors to keeping pouring billions upon billions in capital into money-losing companies to fund their drilling. A hydraulic fracturing site in Denton, Texas. Sign up for our daily Hive newsletter and never miss a story. https://www.cdc.gov/coronavirus/2019-ncov/your-health/covid-by-county.htm January 12, 2022 COVID Update Update on Bethany College COVID Response Hours
The typical fee structure in private equity is the so-called 2 and 20, which means that a fund collects a fee of 2% of the total assets it manages, as well as 20% of any gains on its investments after a certain return is achieved. Policymakers who wanted to tout energy independence disregarded all this, even as investors were starting to lose patience. [9], In September 2018, she published Saudi America: The Truth about Fracking and How It's Changing the World which examined the "fracking revolution" and U.S. energy independence. So why should they be permitted to raid the federal Treasury in a time of crisis? And President Trump reveled in the rhetoric: We hadnt merely achieved independence, his administration said, but rather energy dominance.. In 2019, Oxy, as its known, topped a competing bid from Chevron and paid $38 billion to take over Anadarko Petroleum, which is one of the major shale companies. Vanity Fair may earn a portion of sales from products that are purchased through our site as part of our Affiliate Partnerships with retailers. Bethany McLean is a Vanity Fair contributing editor. Actually, no. Use of this site constitutes acceptance of our User Agreement and Privacy Policy and Cookie Statement and Your California Privacy Rights. In May 2008, she married attorney Sean Berkowitz, the former Director of the United States Department of Justice Enron Task Force. Thats a difficult question to answer definitely, writes the Opinion columnist Zeynep Tufekci, because of the lack of adequate research and support for sufferers, as well as confusion about what the condition even is. In the five years ending in April, there were 215 bankruptcies for oil and gas companies, involving $130 billion in debt, according to the law firm Haynes and Boone. Thats because oil fracking has never been financially viable. Deaths, active cases . The technology of fracking in shale rock - particularly in the Permian Basin in Texas - has transformed America into the world's top producer of both oil and natural gas. Over the past 10 years, the entire energy industry has issued over $400 billion in high-yield debt. in English and mathematics from Williams College. Monday - Friday
If you need help with the Public File, call 540-512-1558. Otherwise, the ILPA warned in a previous letter, there would be significant harm not only to employees that see their hours reduced or jobs eliminated, but also significantly reduced returns to the institutions providing retirement security through pensions, insurance policies and other investments that serve hundreds of thousands of Americans. To make matters worse, ILPA added, provisions in many private-equity investments allow private-equity firms to make additional capital calls when times are tough.
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