The Nightcap newsletter from CNN Business recently featured a story about Marc Rowan, the CEO of Apollo Global Management and a potential candidate for the role of Treasury secretary in the US government. As the head of a major private equity firm, Rowan’s nomination and confirmation could have significant implications for the industry, which is known for its aggressive and profit-driven practices.
If appointed, Rowan would have direct oversight of the Financial Stability Oversight Council, which is responsible for regulating the “nonbank” financial system, including private equity. He would also have influence over the IRS and the Office of the Comptroller of the Currency, which regulates banks. This could potentially allow him to maintain the status quo and ensure that private equity firms continue to operate with minimal regulation.
According to Bill Lazonick, president of the nonprofit Academic-Industry Research Network, the lack of regulation in the private equity industry is concerning. He notes that the complex corporate structures and transactions used by these firms make it difficult to track their activities and holdings.
While it is not uncommon for industry leaders to join government bodies that regulate their former companies, their reputations are often mixed. Rowan, who is estimated to have a personal fortune of $11 billion, would have significant influence as Treasury secretary and could potentially prevent regulators from reining in firms like Apollo, KKR, Blackstone, and the Carlyle Group.
Private equity, along with hedge funds and venture capitalists, make up the world of “private capital,” which is estimated to be a $24 trillion market. This is roughly half the size of the US stock market, which is publicly traded and regulated by the Securities and Exchange Commission. The term “private equity” is often used in a way that is intentionally vague and confusing, making it difficult for the general public to understand the industry’s practices.
In conclusion, the private equity industry is a powerful and often misunderstood sector of finance. With the potential appointment of Marc Rowan as Treasury secretary, the industry could continue to operate with minimal regulation, potentially benefiting firms like Apollo at the expense of the general public.