1. The Boom in Leveraged Corporate Finance and its Implication for the Public Interest Presentation of Damon Silvers Associate General Counsel AFL-CIO June 8, 2007

2. Private Equity and Hedge Funds– Polite terms for Unregulated Leveraged Buyouts Leveraged investment strategies. Unregulated, opaque investment management vehicles. Extraordinary Fee structures - 2 and 20 Result-- Extraordinary concentration of wealth and power– top 25 hedge fund managers made more money last year than all the school teachers in New York City.

3. Dramatic Growth in Private Investment Management Growth in Private Equity, new investment in leverage buyout funds grew from less than 50 billion in 2002 to close to 200 billion in 2006 with a total of 1.5 trillion in assets by the beginning of this year. Growth in hedge funds, many of which make investments in leveraged buyouts directly or indirectly, from 845 million in assets in 2003 to over 2.4 trillion today. In United Kingdom, 25% of private sector employees work for a firm owned by a private equity fund.

4. Reasons for Growth in Private, Leveraged Finance Regulatory Loopholes – securities law, ERISA Tax subsidies for both leverage and fees Cheap debt globally, driven by flows of dollars resulting from global trade imbalances held by China, Japan into global debt markets Depressed stock prices relative to debt Pension crisis driven by labor market pressures, forcing pension managers to seek higher yields.

5. Problems with Private, Highly Leveraged Finance Lack of regulation and transparency breeds systemic risk. Cheap debt leads to overleverage and firm and lender bankruptcy. Highly leveraged firms underinvest, attack worker living standards. Fee structures and tax subsidies lead to concentration of wealth and political power, erosion of the tax base.