(Adds industry group response)
By Ginger Gibson
WASHINGTON, July 18 (Reuters) - U.S. Democratic presidential hopeful Elizabeth Warren on Thursday called for an overhaul of the private-equity industry as part of a new proposal targeting Wall Street.
“We need to shut down the Wall Street giveaways and rein in the financial industry so it stops sucking money out of the rest of the economy,” Warren said in a post on Medium.com announcing her proposal.
Warren and a group of Democrats also filed legislation on Thursday to implement the policy that the Massachusetts senator proposed through her campaign.
Warren, a relentless critic of the financial industry for much of her career, is one of more than two dozen candidates vying for the Democratic nomination to challenge Republican President Donald Trump in the November 2020 election. She has distinguished herself in the crowded field by releasing reams of policy proposals.
The legislation, titled the Stop Wall Street Looting Act was filed in both the U.S. House of Representatives and Senate. Senator Kirsten Gillibrand, who also is running for president, is a co-sponsor with Warren but no Republicans joined in sponsoring the bill.
The proposal was greeted with opposition from industry and business groups, who would undoubtedly fight efforts to enact the legislation.
“Private equity is an engine for American growth and innovation - especially in Senator Warren’s home state of Massachusetts,” Drew Maloney, head of the American Investment Council, an organization that lobbies for private equity firms, said in a statement. “Extreme political plans only hurt workers, investment and our economy.”
Warren repeated her previous calls for reinstating Glass-Steagall, a Depression-era law that separated commercial and investment banks. She also would impose limits on compensation for bank executives.
She also repeated her call for creating a government-backed banking system to work through the U.S. Postal Service.
Building on her prior policy positions, Warren outlined a proposal to transform the private-equity industry.
Private-equity firms invest private capital to purchase companies that are struggling. Critics like Warren argue the firms bleed the companies dry for their own profits and then let them collapse, costing the economy jobs. Defenders of private equity say the industry brings efficiency and modernization to struggling companies.
Warren has an eight-prong proposal to address private equity. She wants to make private-capital firms responsible for the debts of the companies they purchase. Warren also wants to make the firms responsible for the pension obligations of the companies they purchase.
Warren also proposed several tax-code changes that would alter the way the government treats the debt those companies create and how their profits are counted.
She would also change bankruptcy laws to make it easier for workers to obtain severance or pension payments if a company goes out of business. (Reporting by Ginger Gibson; Editing by Peter Cooney and Bill Trott)