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Gretchen Morgenson

lines on the record: 88
first: 2023-06-16
most recent: 2023-06-16
sittings or episodes: 1
sources: podcast

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“The hospital hires them, of course they say to the hospital we are going to improve your profitability, we're going to help you, you know, make more money. We're going to, you know, they'll say improve patient care. But the doctors that I have spoken to in emergency medicine say that's absolutely not the case, that when the private equity firms come in, they tell them how to do their business. They tell them how to code for patient billing.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“For the hospital. Okay, and it's like any staffing company, you know, you're a big whatever, you hire a staffing company to help you find people, okay? So there are two major players in emergency departments. One is Team Health and the other is Invision. Envision is owned by KKR and Team Health is Blackstone. And they control and other smaller private equity firms control forty percent of the nation's emergency departments. Wow, that's now you don't know this when you go to the emergency department.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, what we're really talking about, Barry, is the staffing companies. That staff the hospitals. Okay. So private equity is not buying the emergency departments. What private equity is doing is operating the emergency departments. Someone may hold...”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, anesthesiology is another big one. And yes, emergency departments is another. And the difficulty with healthcare is that you are not supposed to put profits ahead of patients.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“This is a really, really crucial question for the whole private equity industry. Now, they have seized on healthcare as a huge industry to really dive into, to invest in. And you know why that is? Because it's 17% of grove's domestic product. So it's a big, big pool of potential money. So you have private equity rolling up doctors' practices. You have private equity going into dermatology practices. Imaging.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“That is a black stone entity, and it has really done a lot to attract the kind of high net worth retail customers into that. So, you know, I think the private equity sees this as an opportunity because they're not really growing the institutional aspect of their business. Pension funds perhaps maybe aren't growing as much as they need them to. And so this is a ripe market for them.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you know, it's interesting for years, decades, as you say, this was a investing strategy that was limited to sophisticated investors, you know, high net worth individuals, people who could, you know, take it, stand the fact that it's opaque, that it has high fees, that it is not quite as investing in an S&P 500 stock fund and not that simple. But now it is encroaching onto the mom and pop in 401ks, the labor department under Donald Trump did open the door for private equity to get into 401ks. It had been prevented, had been barred from that before because of this fiduciary duty idea and also because of the opacity of these instruments. So yes, you have it starting to seep into What we might call the high net worth retail market, some of these, the Blackstone B-RET is a perfect example of that. That's a real estate investment trust.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“But I think right now we have to think about this as is it a sustainable business model that you fire a lot of workers, that you strip pensions and health benefits, that you levy the debt on these companies, and that you want to sell them in five years, which is short-termism, you know, that we often sort of deplore in the stock market, is that really a business model that can work for the long haul?”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“How about putting more of your own skin in the game, kind of a thing, and I think the massive layoffs that often occur are very detrimental. I think that the asset stripping that has also occurred, pensions, for instance, are sold off overfunded pensions get sold off and that goes into the private equity firm instead of into the company itself. So I think you can avoid some of these practices very easily. You don't maybe get the returns that you do when you have all those pieces of the puzzle in place.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think, you know, there is a right way and a wrong way to do this business. And certainly there are many firms doing the right thing. As far as what that might mean, less debt, okay, the debt that is levied on to these companies can be very damaging. And right now, Barry, we're going through a period of rising interest rates and companies are experiencing distress because much of this debt is floating. It's not fixed. And so what you need to remember is that the costs associated with borrowing money as a company when interest rates are zero is a different story than when interest rates are five. So that is a huge part of the puzzle. So how about putting a little more equity into these deals instead of so much debt?”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think what was going on again, we talked a little bit about this earlier, is that these were the companies that were most undervalued. So you had this, you know, huge market maker in junk bonds disappear. Junk bond market went really into the toilet, and that also then created a lot of distress in the market for companies that had borrowed from the junk bond market. And now you had those companies trading at very low prices. So again, it was a distress situation that these companies took advantage of.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“And it's not going into the company's operations, and it has an interest cost associated with it. So that's another piece of the puzzle that I think is worth examining.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“It can be collateralized loan obligations. Now it's big private debt. But so you had these dividend recaps in 2007. Firms extracted, the private equity firms extracted $20 billion from companies in the form of dividend recapitalizations. And by 2021, they were extracting 70 billion in dividend recapitalizations. Now that's money that a company has to pay back. Debt that was raised to cover it.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, they take the dividend recapitalization, meaning that they take a portion of what debt they've raised. In cash for themselves as a payout to themselves”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think I'm trying to think. Oh Well, okay. Well, first of all, the big fee that really ends up, and this is not a fee to the private equity firm, but the big problem with many of these deals is the debt interest costs, okay? So when the private equity firm takes over a company, they pile on a lot of debt on the company. Expenses increased dramatically to pay those debt expenses, and oftentimes the companies will extract the firms, I mean, will extract money in the form of what's called dividend recapitalizations. They will Load the company with debt, and then they'll take money out almost immediately. And that's just kind of a way of stripping the company of”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“So if the private equity firm sold the company, After five years. The company still had to pay, still had to cough up the remaining five year contractual obligation of paying those monitoring.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Plus, they're presumably very good at managing and they know what they're doing and they have a goal of selling it, you know, at a profit later. However, the monitoring fees had this really kind of abusive element to them. They were typically structured as 10-year contracts. So the company would agree to pay over 10 years a certain amount of monitoring fees every year to the private equity firm.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Where a company that was purchased by a private equity fund or firm would have to pay the firm fees for its monitoring, for its oversight, for its management expertise that it was providing to the company. Now that makes sense because, you know, they took over the company. There's presumably”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, there are a couple of things that happen early on that sort of you see the beginnings of that these takeovers are not only designed to find companies that are maybe undervalued or underperforming, we can whip them into shape and then sell them later, that while they're doing that, while they're monitoring them, while they are looking at them, streamlining them, improving their operations, there are a lot of fees to be extracted from these companies. So for starters, private equity firms will often put people on the company's board. And sometimes those board memberships will deliver earnings to those board members, okay? You also had this thing called monitoring fees.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“So, you know, it's just gotten so, so, much bigger, Barry. As, you know, the markets and the capital pools have gotten so much bigger.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, at the time, it sounded big, but if you look back on it now, I don't know, I think there's a number we have in the book, maybe $70 million or something in fees to KCAR. I mean, that's like not even around. Right, right. That's pocket changes. That's walking around money, right?”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, and it also concerned Congress, as you remember, they had hearings about it. I mean, it was such a gargantuan deal at the time that it really made a lot of people nervous. And, you know, there were studies done about what these deals would mean for workers, for pensions. And it really was sort of the beginning of questioning what the impact of these deals would be, but they just kept going, kept going. And there really was a sense during the late 80s, especially after the crash of 1987, that we really don't want to meddle with this. Let's just let the market take its course. In fact, I think”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it's their size, first Barry. I mean, these are the leaders of the pack. These are the folks that and the firms that set the tone, lead the way, other people mimic them. I mean, KKR was behind the big Kahuna deal of the late 1980s, RJR and Avisco. So this is a group of firms and people that really were there at the creation of what we now call private equity. And they do it in such size and in such scope that they have enormous impact. And that's why we're focusing on them. Yes, there are many, many private equity firms, but these really are the folks who set the tone.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Back then, you know, it really just looked like a very reasonable response to a decade or so of undervalued stocks, right? The 1970s, stocks were in the tank, you know, the death of equities, you remember that cover? Sure, 78. And so it looked like it was really a pretty reasonable reaction to what had been years of undervalue in the stock market. So the initial phase of LBOs were not as pernicious as they are now because they were actually taking over companies that had value their sitting there in the stock price that you could see. Like you mentioned, the seven price earnings ratio. So it really was a little, it was reasonable. It made sense. It was a natural kind of outcome of what had happened before.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“It's better than a Mosbury. You don't have strippers coming in for people's birthday parties. Like I saw when I was a broker, okay?”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Very important, very, I mean, you really saw the inner workings, how the sausage is made, as they say. And so I would see how the over-the-counter desk, over-the-counter stock desk would push stocks and, you know, encourage brokers to sell them, put a lot of commission in them, to move them because some big seller was coming into the market. And, you know, it just struck me there were a couple of things about it that I just kept seeing how it really was the customer was not being put first. And there were, of course, the conflicted analysts that I then wrote about years later. I saw that firsthand and was, you know, my customers were harmed by that as well.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“That's what sent me back. However, I did have our, I was now armed with a lot of information about how the world works on Wall Street.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, sure Oh, yeah, Eagle Computer. I mean, some of these things were high flyers. And so when you had customers calling you up and saying, oh my gosh, what happened to all my money? It was such a huge trauma for me. I really felt bad.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, it was bad. It was vicious. It was over the summer of 1983. And so I learned the hard way what happens when the stocks that you recommended to people because your firm was saying they would be good buys go down. And those people lose money. I felt bad.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“I stayed three years. I lived through the bear market that you don't remember of 1983 in tech stocks when there were this sort of initial phase of personal computers and computing was becoming big and they just got way ahead of themselves.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Right, seven a PE on the SP. And it was, you know, that was the turning point. So I was really well positioned for that move.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“So, by the way, it made it hard to sell stocks because people were still in the looking backward phase. They weren't looking forward. But August 1982, you're too young to remember that.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Wait, wait, wait. When I sat down in my chair at Dean Whitter Reynolds, the Dow Jones Industrial Average was at seven hundred eighty one.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, not quite, but it's better than it was. Anyway, So they had to hire. They had to start hiring women because they lost that case. And so I applied to the big brokerage firms as a salesman, Dean Witter, Marilyn Lynch, Prudential Bache at the time. And I got a job at Dean Whitter. And the reason I got the job was because I killed it on the phone test.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, so I said to myself, I don't have a rich dad. I don't have a rich husband. I'm going to have to make it on my own. And so what can I do? At about that time, Wall Street was battling a sex discrimination case With the EEOC, they had not hired enough women on the street. This is the early 80s we're talking about.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“I guess so. I think they sold it against an ad page, to be honest with you. But anyway, so it was very basic instruction. And I really enjoyed doing that. And so I interviewed people, met a lot of folks, and then I was making Barry $10,000 a year.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I sort of worked my way up, if you can call it that, to writing their personal finance column, which nobody read, by the way.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, well, first of all, assistant editor is a little strong. I was a secretary, and I got the job because I could type more than 35 words a minute. Okay. So I was just out of college, brand new to New York. I had graduated from a small liberal arts college in the Midwest, and my eyes were as big as saucers as I came into New York. It was the only job I could get. I wanted to be a journalist. This was back in the Watergate days. And, you know, it was kind of exciting to think about possibly being a reporter. So that's my idea. Of course, the silence from my job applications to the New York Times, to Daily News, you name it, was the silence was deafening. So vogue was it.”
2023-06-16 · Masters in Business · Gretchen Morgenson: From Wall Street to Journalism · IDENTIFIED FROM THE TRANSCRIPT · source