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Marc Rowan, a contender for what is arguably the most important economic job in the US government, is the CEO of Apollo Global Management, a behemoth in private equity, an industry notorious for its cutthroat, profit-at-all-costs standards.
The 62-year-old executive’s ascent to Donald Trump’s Cabinet could, if he were nominated and confirmed, represent a major win for one of the most powerful (and often despised) sectors of finance.
As Treasury secretary, Rowan would directly oversee the Financial Stability Oversight Council, which is nominally responsible for policing the “nonbank” financial system, including the private equity industry in which he is currently a major player. The Treasury also houses the IRS and the Office of the Comptroller of the Currency, or OCC, which regulates banks.
More to the point, Rowan, as Treasury secretary, would be able to ensure that those regulatory bodies continue to treat private equity the way they always have, under administrations of both Democrats and Republicans. That is to say, largely left alone.
“The regulation is really not there,” Bill Lazonick, president of the nonprofit Academic-Industry Research Network, told me. “You don’t even know what private equity owns —everything is shielded by various types of transactions and corporate structures.”
It’s impossible to know what kind of Treasury secretary Rowan would be, if he’s picked. It’s hardly uncommon for industry leaders to join the government bodies that regulate the companies they previously worked for, and their reputations are, let’s say, mixed.
Rowan is one of the wealthiest financiers on Wall Street — Bloomberg estimates his personal fortune to be $11 billion — and as the nation’s Treasurer he would be well positioned to defang any efforts by regulators to rein in Apollo and other major private equity players like KKR, Blackstone and the Carlyle Group.
Apollo declined to comment.
The dark arts of finance
Private equity firms, along with hedge funds and venture capitalists, make up the shadowy world of “private capital” — a more than $24 trillion market, according to EY research. That’s roughly half the size of the US stock market, which is public and policed primarily by the Securities and Exchange Commission.
The words “private equity” are almost poetic in their power to obfuscate in such a way that most people simply tune out when they hear them. That is by design.
“It is an industry that likes to operate quietly,” said Megan Greenwell, a journalist and author of a forthcoming book, “Bad Company,” about private equity. “People are not necessarily going to know the ways in which private equity affects their lives until there is some sort of crisis.”
Put simply: Private equity firms (also known by the decidedly less poetic label of “leveraged buyout” firms) invest in struggling companies that aren’t publicly traded, overhaul their operations and later sell them for a profit. Which sounds reasonable enough. But there’s a reason workers tend to have a negative association with private equity.
To buy a company, a PE firm typically relies on debt financing, aka borrowing the money from a bank. That debt then sits on the acquired company’s balance sheet, and only gets paid off using money generated by the business.
For example, when a buyout firm acquired Red Lobster a decade ago, it sold off the company’s real estate for a profit. Then, Red Lobster was forced to pay rent on those buildings that it had previously owned, significantly inflating its operating costs.
Target companies often resort to laying off staff and making other other aggressive cost-cutting measures to service the debts their private equity owners saddled them with to avoid going under. (Though very often, they eventually do go under. Research shows that the bankruptcy rate of target firms acquired by private equity is 10 times the rate of comparable non-targeted companies.)
“Putting a PE executive in charge of the Treasury Department would be a disaster for the American people,” Dennis Kelleher, president and CEO of the nonprofit organization Better Markets, which advocates for strong market regulations, said in an email. “The PE industry is grossly under-regulated, and its business model is based on extreme leverage and wealth extraction, often enriching itself at the expense of communities, patients and workers.”
No stopping it
Apollo, which Rowan co-founded in 1990, has more than $700 billion in assets under management, and it wants to double that figure by 2029. Per Bloomberg, Apollo “built its name as the scrappiest private equity and distressed-debt investor on Wall Street by buying businesses and loading them up with debt that offered creditors meager protections in the face of default.”
Historically, private equity deals were largely handled by big banks. But in the fallout of the 2008 financial crisis, as traditional banks became more regulated and risk-averse, specialized PE firms like Apollo stepped in to take on deals that traditional financiers no longer had the stomach for.
The industry has become a concentrated and powerful force in the global economy, with more than $8 trillion in assets under management last year.
Private equity firms now hold controlling stakes across an array of industries, including supermarkets, housing, health care, fashion, restaurants and vet clinics.
It’s hard to overstate just how complex and opaque private equity’s financing can be, and that’s partly why regulators and some lawmakers have targeted the industry as a threat to financial stability. (The Financial Times created the clearest possible flow chart of PE’s tangled financing web, and it’s honestly still pretty confusing.)
Democrats led by Sen. Elizabeth Warren of Massachusetts have introduced a bill that would make PE firms liable for the conduct of their target companies and better protect employees whose jobs are eliminated.
But that legislation has struggled to garner bipartisan support. And other efforts to force more transparency and accountability in private equity have similarly faced opposition. Over the summer, a federal appeals court struck down an SEC effort to impose new rules on the industry.
As of Thursday afternoon, the president-elect hadn’t announced his pick for Treasury, though Rowan was widely reported to be among the top choices, along with hedge fund manager Scott Bessent and Kevin Warsh, a former investment banker and former Federal Reserve governor.
“I think if you are concerned about the growing influence of private equity, there is nothing here that is going to slow it down,” Greenwell said. “Maybe Democrats weren’t going to slow it down, either, but certainly now it will just continue to grow in size, power and influence.”
