Post by Oscar Valdes Viera
Mass demonstrations across the country over the police killing of George Floyd have also highlighted the systemic racism in institutions across the nation. Racism is endemic in the prison industrial complex and mass incarceration, in financial practices like predatory lending and redlining, and in all too frequent recurrent episodes of police violence.
A less known, but insidious form of systemic racism is the business model practiced by Wall Street private equity (PE) firms. PE firms often profit from extracting wealth from communities of color and exacerbating racial inequalities. PE cash has been funneled into odious businesses like payday lenders and corporate landlords that particularly target Black and Latinx communities. But private equity’s complicity as a cash spigot financing and profiteering from tools of oppression deserves much more attention.
Private equity investors have quietly reaped tremendous profits — largely without raising the public’s ire — from investing in for-profit private prisons and detention centers, prison phone calls, and electronic monitoring of ex-offenders re-entering the community. These businesses make money from a racist criminal “justice” system and xenophobic immigration policy that are structural pillars of racial inequality in America. Organizations like Color of Change, Worth Rises, Action Center on Race and the Economy, the ACLU, the American Federation of Teachers, and others have called for ending the predatory involvement of PE in these industries. Members of Congress, including Sen. Elizabeth Warren, Rep. Alexandria Ocasio-Cortez, and Rep. Mark Pocan, have also criticized PE firms for profiteering from incarcerated people and their relatives. They have turned this critique into action by proposing legislation to curb PE abuses.
For example, HIG Capital owns companies that provide food and medical services to prisons. These PE-owned prison servicers have been caught cutting corners by providing low-quality and spoiled meals — even maggot-infested food — and by skimping on medical services and cutting back on prescribed medications. These PE firms increase their own profits by harming people in detention. In 2017, HIG Capital and Prospect Capital used the food provider Trinity Services Group to borrow $1.4 billion to pay dividends to themselves. The operator of the Homestead, Florida for-profit detention center for unaccompanied migrant children — including children violently separated from their families — paid a $1 million management fee to its private equity owner, DC Capital Partners.
And when millions of our friends, neighbors, and family take to the streets to challenge racist police murders, private equity is there to profit from the police crackdown on protesters. Major private equity firms back some of the manufacturers of the tactical weapons deployed against demonstrators in several states.
Two of the largest tear gas producers are owned by private equity firms. The Carlyle Group and Point Lookout Capital Partners own Combined Systems, the producer of the disorienting flash bangs and rubber bullet-spraying sting grenades reportedly used against peaceful protestors in Washington, DC. The PE owners expanded Combined Systems by buying a manufacturer of handcuffs and other restraints widely used by law enforcement and correctional facilities. Defense Technology, a subsidiary of PE firms Kanders & Company and Palm Beach Capital, also supplies law enforcement with crowd control weapons, including some its website describes as a “chemical agent” with the warning “Do NOT fire directly at personnel, as serious injury or death may result.” Despite the warning, canisters of the “chemical agent” were collected by protesters outside the White House. (Warren Kanders finally agreed to divest his tear gas holdings after this month’s protests, although activists had long criticized his tear gas investments that had been used on migrants at the U.S. border.)
Every time those tear gas canisters were deployed, every time people protesting police brutality against the Black community were hit with a rubber projectile, private equity firms made a buck. The Carlyle Group has close ties to the Trump Administration (including a former Carlyle partner who is now Vice Chair of the Federal Reserve) and spent over $1 million lobbying to get federal support during the Coronavirus crisis. In the first five days of protests, the Carlyle Group’s stock value surged and its market capitalization increased by $800 million.
While Carlyle gets richer, everyone else, especially people of color, is struggling to make ends meet. PE profits off of the pain and anxiety of people facing cash emergencies, too. Some of the largest predatory payday and similar high-cost installment lenders, like ACE Cash Express and Money Mart are PE-owned. Payday lenders are doubling down during the Coronavirus, targeting people in economic crisis and trapping borrowers in long-term cycles of debt with triple digit interest rate loans that can easily turn current bills into months or even years of unaffordable payments. These lenders have access to borrowers’ bank accounts and grab money out of them leaving little to pay for core household needs like food and shelter. Payday sharks deliberately expand their practices in communities of color, hindering the wealth-building capacity of those communities.
Today, the racial economic gap is as bad or worse as when Dr. Martin Luther King was assassinated in 1968. By 2016, typical white families had household wealth nearly ten times greater than Black families and eight times higher than Latinx families ($171,000 versus $17,600 and $20,700, respectively). Similar racial divides occur in household income, unemployment, homeownership, health care access, and so on, illustrating the unjust shortcomings of current socio-economic arrangements in the United States.
Eliminating systemic racist police violence and the prison industrial complex will require seismic antiracist social, economic, and policy changes to move towards a society centered around human needs and shared prosperity, one that truly eliminates racial discrimination in all its forms. Part of that will have to be eradicating Wall Street practices and profits that are rooted in systemic racial oppression.