Private equity faces challenge from Warren's revived Stop Wall Street Looting Act

Private equity firms would be held responsible for the debts, court judgments and pension obligations of the companies they control under legislation reintroduced by Democratic lawmakers in the Senate on Thursday.

The bill revives a proposal that has failed to become law since Sen. Elizabeth Warren first unveiled it in 2019.

The Stop Wall Street Looting Act – a proposal led by Warren, the ranking Democrat on the Senate Banking Committee, alongside other concerned legislators on the Left – returns as private markets push further into retirement accounts.

Joining Warren on the Sept. 24 filing are Senators Tammy Baldwin of Wisconsin, Richard Blumenthal of Connecticut, Ed Markey of Massachusetts, Jeff Merkley of Oregon, Tina Smith of Minnesota and Bernie Sanders, the Vermont independent.

Reps. Pramila Jayapal of Washington, Mark Pocan of Wisconsin and Greg Landsman of Ohio are leading a companion bill in the House.

Sponsors tied the timing to the 21st Century ROAD to Housing Act, a bipartisan that law took effect this summer and which barred private equity and other corporate landlords from buying up single-family homes.

"This year, Congress proved with our bipartisan housing law that we can stop private equity from rolling through industry after industry, jacking up prices and leaving businesses and workers in the dust," Warren said in a statement touting the latest push against PE.

Read more: Trump promises ban of single-family homes by ‘large institutional investors’

How the bill would reshape the private equity model

Under the bill, buyout firms, their general partners and other insiders would be held accountable for debts their portfolio companies owe. Limited partners – the pensions, endowments and individual investors who commit capital to a fund without having a hand or substantial voice in running it – would be exempt from that obligation.

The bill would also change how private equity is taxed, ending what sponsors described as a tax subsidy for excessive leverage as it closes the carried interest loophole. Carried interest is the share of fund profits, often 20%, that managers keep, which is currently taxed at lower capital gains rates.

Fund managers would also have to disclose fees, returns and the terms of the corporate loans they make, a requirement that would reach into the fast-growing private credit space. For PE firms receiving federal or state money, another item on the proposed legislation would require them to report how it is spent, and bar them from making acquisitions or paying investor distributions for two years after receiving it.

The provision with arguably the widest reach for many client portfolios involves real estate investment trusts. The bill would repeal the 20% pass-through deduction for all REIT investors, not only those in health care, that was introduced under 2017 tax law during President Donald Trump's first term. It would also cut off federal health program payments to providers that sell property to a REIT or pledge property as collateral for a REIT loan.

A PE advocacy that would not die

Warren first introduced the bill in July 2019, while she was seeking the Democratic presidential nomination. Her co-sponsors then included Baldwin, then-Sen. Sherrod Brown of Ohio, Pocan and Jayapal. At the time, Warren wrote in a Medium post that "far too often, the private equity firms are like vampires -- bleeding the company dry and walking away enriched even as the company succumbs."

The 2019 version would have barred dividends to investors for two years after an acquisition. It would also have reinstated Dodd-Frank rules requiring arrangers of corporate debt securitizations to keep some of the risk. Sponsors reintroduced the bill in October 2021, alongside a Banking subcommittee hearing on private equity. They reintroduced it again in October 2024.

Over that time, the PE industry has grown astronomically. According to the sponsors of the latest iteration of the bill, PE fund assets rose from $4.5 trillion in 2020 to more than $9 trillion in 2025. The sector is poised to expand further into the American retirement system, as an executive order from the Trump administration last year has pushed for the inclusion of more alternative asset classes, including private equity, into 401(k)s.

"Workers should not be forced to risk their jobs, their communities, and now their retirement savings to subsidize Wall Street’s destructive business model," said Oscar Valdés Viera, a senior policy analyst with Americans for Financial Reform, a progressive nonprofit organization.

Read more: Democratic lawmakers demand probe into DOL 401(k) rule comments

What critics say about Warren's stance

Industry groups have opposed the bill since it was first introduced. In 2019, Drew Maloney, then president of the American Investment Council, said private equity "is an engine for American growth and innovation – especially in Senator Warren's home state of Massachusetts."

"Extreme political plans only hurt workers, investment, and our economy," Maloney said.

The council said private equity-backed companies based in Massachusetts employed nearly 400,000 people. Industry executives have also argued that buyouts often rescue companies that would otherwise fail.

Thomas Schatz of Citizens Against Government Waste, a fiscal watchdog group, wrote in 2021 that the bill's name uses an overly broad brush, implying everyone in financial services is out to rob investors.

He argued that private equity returns support public retirement systems in California and New York, as well as the Massachusetts Pension Reserves Investment Management Board. In his view, that means retired teachers and public workers would be among those hurt.

"Everyone who depends on private equity and Sen. Warren's supposed 'looters' on Wall Street should root for this legislation to never see the light of day," Schatz wrote.