Transcript: Gretchen Morgenson


The transcript from this week’s, MiB: Gretchen Morgenson on Private Equity, is below.

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ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, I have an extra special guest. Gretchen Morgenson is the Pulitzer Prize winning investigative journalist for “The Wall Street Journal” and “The New York Times”. She currently works at NBC News as an investigative reporter. She has worked at “Money Magazine”, “Forbes”, “Worth”, all over the place. Her last book was a bestseller, “Reckless Endangerment” is all about the mortgage crisis. The current book is called “These Are the Plunderers, How Private Equity Runs and Wrecks America” That’s a little bit of a sensationalistic headline. When we spoke, the focus and conversation really emphasizes the largest of the large private equity firms.

Yes, there’s a legitimate need and use for private equities, especially in mid-markets where, to be blunt, Wall Street has just abandoned that space and gone upmarket, creating a vacuum. But we talk about some really fascinating things, 30% of operating rooms are managed and run by doctors employed by private equity. That’s a shocking number. We looked at everything from retail to nursing homes to hospitals to insurance companies to manufacturers. Really, private equity used to be a small, outperforming sector of alternatives. It’s now become giant, dominated by four firms, and no longer generating outsized returns.

It’s really a kind of fascinating aspect of this as it’s become more and more mainstream. It appears some of the performance advantages may have gone away.

Anyway, Gretchen is a legend on Wall Street. She’s won Loeb Awards and just about every other journalistic award there is. So, when she dives into a space, really, she does not leave any stone unturned.

I found this to be a really interesting conversation, and I think you will also.

So, with no further ado, my conversation with NBC’s Gretchen Morgenson.

So, let’s talk a little bit about your kind of interesting career. You started as an assistant editor at Vogue Magazine in the late ’70s. How do you go from that to being a financial columnist?

GRETCHEN MORGENSON, SENIOR FINANCIAL REPORTER, NBC NEWS INVESTIGATIVE UNIT: Okay. Well, first of all, assistant editor is a little strong. I was a secretary.


MORGENSON: 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.


MORGENSON: It was the only job I could get. I wanted to be a journalist. This was back in the Watergate days, and 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, the silence was deafening.

RITHOLTZ: Deafening. Yes.

MORGENSON: So Vogue was it.

RITHOLTZ: So you didn’t stay a secretary at Vogue for very long, though.

MORGENSON: 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.

RITHOLTZ: At Vogue, though.


RITHOLTZ: They just wanted to have a little, “Hey, let’s speak to women in our magazine.”

MORGENSON: I guess so. I think they sold it against an ad page, to be honest with you.


MORGENSON: But anyway, so it was very basic instruction, and I really enjoyed doing that. So I interviewed people, met a lot of folks, and then I was making, Barry, $10,000 a year.

RITHOLTZ: That’s big money in the ’70s. Not really.

MORGENSON: No, not really.

RITHOLTZ: That wasn’t even big money in the ’50s. I mean, 10 grand a year is nothing. Is that what led you to your interest in Wall Street?

MORGENSON: 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.

RITHOLTZ: Well, thank goodness that got resolved.


RITHOLTZ: Now that we have gender parity in finance, thank you.

MORGENSON: Well, not quite, but it’s better than it was. Anyway…

RITHOLTZ: Well, it’s definitely better.

MORGENSON: So 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, Merrill Lynch, Prudential Bache at the time…


MORGENSON: And I got a job at Dean Witter. And the reason I got the job was because I killed it on the phone test.

RITHOLTZ: Really? Well, you had been doing some journalism beforehand, so you’re not afraid to ask people questions.



So, this is in the ’80s, in the beginning of the huge bull market, not that anyone knew in ’82 that strap yourself in, the next 18 years are going to be a rocket ship.

MORGENSON: Wait, wait, wait. When I sat down in my chair at Dean Witter Reynolds, the Dow Jones Industrial Average was at 781.

RITHOLTZ: Still under 1,000. That’s unbelievable.

MORGENSON: Yes, so by the way, it made it hard to sell stocks, because people were still in the looking-backward phase.


MORGENSON: They weren’t looking forward. But, August 1982 — you’re too young to remember that…

RITHOLTZ: Oh no, I had a vivid recollection of that.

MORGENSON: Was when the turn came. And it was sort of like, “Okay, stocks are way too cheap. This is where you want to be.”

RITHOLTZ: 7 PE back then, right?

MORGENSON: Right. 7 PE on the S&P. And it was, you know, that was the turning point. So, I was really well-positioned for that move.

RITHOLTZ: And you stayed at Dean Witter for what, three, four years? How long were you there for?

MORGENSON: 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.

RITHOLTZ: Were we even calling them tech stocks back then? What was the phrase?

MORGENSON: You know, I don’t know. I think it was tech stocks. Anyway…

RITHOLTZ: And I don’t recall that bear market at all.

MORGENSON: Yes, it was bad. It was vicious. It was over the summer of 1983. So, I learned the hard way what happens when the stocks that you recommended to people because your firm was saying they would be goodbyes go down, and those people lose money. And I felt bad.

RITHOLTZ: Well, they weren’t goodbyes, just not in the next six months. That’s the problem.

MORGENSON: You know, they were ahead of themselves. The euphoria, the momentum was getting too crazy.

RITHOLTZ: Was there euphoria in 1983?

MORGENSON: Yes, sure.

RITHOLTZ: No kidding.

MORGENSON: Oh yes, 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, and I sort of felt like if you have too much of a capacity for guilt, maybe not the right business.

RITHOLTZ: (LAUGHTER) So is that what sent you back into journalism?

MORGENSON: That’s what sent me back. However, I did have, or I was now armed with a lot of information about how the world works on Wall Street.

RITHOLTZ: So that’s exactly where I was going to go next, you have a knack for finding some of Wall Street’s shadier operations. You’ve done this your whole career. How important was working as a broker to giving you insight of, “Hey, here’s how this stuff really works?”

MORGENSON: Very important, Barry. 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 encourage brokers to sell them, put a lot of commission in them, to move them because some big seller was coming into the market.


MORGENSON: And 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 my customers were harmed by that as well.

RITHOLTZ: So let’s put a little sunshine, let’s put a little lipstick on this pig.

Here it is, it’s 40 years later. The fiduciary side of the street, which was tiny in the ’80s, is now not only large, but one of the fastest growing segments. While we’re not even remotely close to gender parity, it’s certainly better than it was.

MORGENSON: It’s better than it was, Barry. You don’t have strippers coming in for people’s birthday parties, like I saw when I was a broker, okay?

RITHOLTZ: Unbelievable.

MORGENSON: Yes. I saw it with my own eyes.

RITHOLTZ: I tell people who are the younger guys in the office, go watch “Boiler Room” go watch “Wolf of Wall Street.” It’s cinema verite. It just rings so, and that world is gone. It’s like the bad parts, it’s good that it’s gone, but there were some good aspects of that. Like there were training programs, they taught people what’s a stock, what’s a bond. They used to do that at the bigger firms. Those are like tiny classes now compared to what they used to.

MORGENSON: Oh really, they don’t do that anymore?

RITHOLTZ: They do it, but just not what it was. So around the same time you transition from Wall Street to journalism, the LBO boom starts to take off. It becomes all the rage. What were you thinking at the time? “Hey, I’m going to write a book in 40 years.” Or were you thinking, “This is interesting,” or “Here comes problems.” How did you see it back then?

MORGENSON: Back then, it really just looked like a very reasonable response to a decade or so of undervalued stocks. The 1970s, stocks were in the tank. The death of equities, you remember that cover.

RITHOLTZ: Sure. ’78, absolutely.

MORGENSON: 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 there, sitting there in the stock price that you could see, like you mentioned, the seven price earnings ratio.


MORGENSON: So it really was reasonable. It made sense. It was a natural kind of outcome of what had happened before.

RITHOLTZ: So we’re going to talk a lot more about the book, “These Are the Plunderers” But I have to mention the run of names that you really focus on in the book. These obviously aren’t all of private equity. There’s a whole lot, hundreds of other companies. But Apollo, Blackstone, Carlisle, and KKR really seem to be the key focus. Is it their size, their sector, the way they practice their business? What led you to those four?

MORGENSON: Well, it’s their size first, Barry. I mean these are the leaders of the pack. These are the folks and the firms that set the tone, lead the way. Other people mimic them. KKR was behind the big Kahuna deal of the late 1980s, RJR Nabisco.

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.

RITHOLTZ: And, you mentioned “Barbarians at the Gate” in the book, which focused on the KKR takeover of RJR Nabisco. That was sort of unfathomable at the time, that someone could buy a giant, publicly traded company strictly with low-cost debt. Did that change the game going forward?

Once RJR Nabisco was in play, does that mean anybody is in play?

MORGENSON: Absolutely.

RITHOLTZ: How did that affect what took place over the next few decades?

MORGENSON: Yes. 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. 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 Secretary of the Treasury at the time said the market will work out these things and they will not become a problem.

RITHOLTZ: The market always works these things out eventually, but that eventually can take longer than expected.


RITHOLTZ: You mentioned they had a big impact and they had a large effect. They also generated a lot of fees and a lot of monies. What were the dollars like for these mega deals like RJR Nabisco?

MORGENSON: 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 take care of. That’s not even a rounding error.

RITHOLTZ: Right, that’s pocket change today.

MORGENSON: That’s walking around money, right?


MORGENSON: So, it’s just gotten so, so, so much bigger, Barry. As the markets and the capital pools have gotten so much bigger.

RITHOLTZ: We’ll talk a little bit later about how, as these companies got bigger, Wall Street got bigger, and it’s kind of created a void underneath. But it’s really, really interesting see where all this began at a time when nobody really wanted a lot of these companies. They were, some of these firms were all but left for dead.

So you start the book with a line that kind of cracked me up. “Let the looting begin” So, let’s start there. Where did this all begin, and when did it move from, “Hey, we’re going to help finance these companies that can’t seem to get financed” to full-on piracy and looting?

MORGENSON: Well, there are a couple of things that happen early on that you see the beginnings of. 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. You also had this thing called monitoring fees, 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 they took over the company.

RITHOLTZ: They can do what they want, they’re the owners.

MORGENSON: Plus they’re presumably very good at managing and they know what they’re doing and they have a goal of selling it at a profit later.


MORGENSON: 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.

RITHOLTZ: Regardless of profitability or how they’re doing?

MORGENSON: Oh yes, no, it was absolutely de rigueur. They did it every year.

RITHOLTZ: Top line.

MORGENSON: 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 fees.

RITHOLTZ: Now, wouldn’t that just — whoever’s a purchaser knows this is happening, doesn’t that just lower the cost, the purchase price by that much?

MORGENSON: Maybe, but still.

RITHOLTZ: It’s a liability on the books.

MORGENSON: But still, it goes to these people. It is money for nothing.

RITHOLTZ: It’s good to be the king.

MORGENSON: They are not doing the monitoring, and yet they’re being paid to do the monitoring.

RITHOLTZ: Are there other fees like that that just sort of hack away at the stability of a company?

MORGENSON: 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. Its expenses increase 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 —

RITHOLTZ: In other words, when you say they load the company with debt, they’re borrowing a lot of capital, so now the company is sitting with this cash with an offsetting liability, meaning the company that’s been purchased, and the P/E owner/manager will take fees out of that.

MORGENSON: 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.

RITHOLTZ: And who’s lending this money to the company?

MORGENSON: Could be banks, could be Wall Street, could be private debt folks, but it’s —

RITHOLTZ: This is very often securitized and sold off into the market as well?

MORGENSON: 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.


MORGENSON: And by 2021, they were extracting 70 billion in dividend recapitalizations. Now that’s money that a company has to pay back …


MORGENSON: The debt that was raised to cover it.

RITHOLTZ: And it’s not going into what the company’s doing.

MORGENSON: And it’s not going into the company’s operations and it has an interest cost associated with it.


MORGENSON: So that’s another piece of the puzzle that I think is worth examining. So, we talked earlier about RJR Nabisco. When you look at the history of the ’80s and even ’90s era LBOs, they seem to be a lot of lesser-known, not necessarily consumer-facing companies, transport and logistics and manufacturing.

RJR is kind of one of the first names that average person would know.

How did that transition take place? What were most of the ’80s-era LBOs focused on? These were really way under the radar sort of things. It’s only later, or at least in the book you described it that way, it’s only later that it’s household brands and retailers and names we know. Explain that a little bit, if you would.

MORGENSON: 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.

Remember, we were coming out of a very bad recession.

And so probably what you had at that time are the industrial companies were the ones that were harmed very, very much by the recession.

And so their price-to-earnings ratios were probably below the S&P average of seven. And so that might have been why they were taking over and focusing more on them.

But again, as this practice and process morphed into something else, it became more about some of the big name companies that you know.

Now, a big pivotal moment was when the junk bond market crashed in the early 90s. This was after the SNL crisis. SNLs had been persuaded to buy a lot of junk bonds. The market turned. Milken and Drexel Burnham collapsed and failed.

So you had this 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.

RITHOLTZ: So how do you draw a distinction between LBO brands of private equity, the thing that some people call vulture capitalism, and credible mid-market banking and merchant banking that is really one of the few sources of capital for these mid-sized companies, given that Wall Street started chasing all the bigger firms?

MORGENSON: Well I think 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, okay, less debt, okay? The debt that is levied onto 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? 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. 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?

So, when private equity really was ramping up in the ’80s and ’90s, it was essentially an institutional allocation. This wasn’t a mom-and-pop investment. Today, that’s changed. It’s really attracting a lot of retail dollars. How is that working out?

MORGENSON: Well, you know, it’s interesting. For years, decades, as you say, this was an investing strategy that was limited to sophisticated investors, high net worth individuals, people who could 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.


MORGENSON: But now it is encroaching onto the mom and pop in 401(k)s. The Labor Department under Donald Trump did open the door for private equity to get into 401(k)s. 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.

But so yes, you have it starting to seep into what we might call the high net worth retail market. Some of these, the Blackstone BREIT is a perfect example of that. That’s a real estate investment trust that is a Blackstone entity.

And it has really done a lot to attract the high net worth retail customers into that. I think that 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.

RITHOLTZ: Clearly, 401(k) is not a much faster growing part of the allocation landscape than either direct benefits or pensions, if anything, that side of the street is shrinking dramatically.

Let’s talk about some of the new areas that private equity seems to be playing in. The book talks about emergency care and ER rooms that have been privatized. I always think of ER and those sorts of emergency services as a service, as a community good, not a for-profit model, am I naïve in not realizing we could monetize emergencies? Or should this be kept out of private asset allocators’ hands?

MORGENSON: 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 gross domestic product.

RITHOLTZ: Right, giant.

MORGENSON: 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.

RITHOLTZ: Imaging, MRI, CAT scans, all that.

MORGENSON: 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.

RITHOLTZ: So, let’s talk about hospitals. I don’t understand how all these not-for-profit hospitals get purchased and rolled up into a chain of not-for-profit hospitals that are managed for profitability. That seems to be counterintuitive.

Tell us a little bit about what’s going on there.

MORGENSON: Well, what we’re really talking about, Barry, is the staffing companies that staff the hospitals. So, private equity is not buying the emergency departments. What private equity is doing is operating the emergency departments.

RITHOLTZ: Similar to how hotels operate.

MORGENSON: For the hospital. And it’s like any staffing 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 Envision. Envision is owned by KKR, and Team Health is Blackstone.

And they control– and other smaller private equity firms– control 40% of the nation’s emergency departments.

Wow, that’s a lot. Now, you don’t know this when you go to the emergency department. The hospital hires them. Of course they say to the hospital, we’re going to improve your profitability. We’re going to help you make more money. 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.

RITHOLTZ: Well, they’re medical experts, aren’t they, private equity? Don’t they have a specialty in emergency care?

MORGENSON: No, I think they have a specialty in financing.

RITHOLTZ: They’re financers, I’m sorry.

MORGENSON: Yes, they have a specialty in financing.

RITHOLTZ: Excuse me for my…

MORGENSON: And making a return.

RITHOLTZ: This is horrifying, I have to tell you. I don’t have a problem with private equity pushing into real estate and other areas, but emergency rooms seem sort of …

MORGENSON: Right, I mean if you’re talking about the coffee and doughnut that private equity owns, okay. If you don’t like the coffee and the doughnut, you’ll go somewhere else. But if you’re in need of an emergency department, and this is the only one in your town, and you have to go there, and it’s run by an equity firm that is putting profits ahead of patients, that’s a problem.

RITHOLTZ: And this has become very big, not necessarily in big cities, but in the South, in rural areas, in places that have very limited healthcare options and a shortage of doctors, it’s not like there’s the option of saying, “Oh, I don’t like Southwestern General. I’m going to go to Northeastern General and that’s a better emergency room.”

This is usually one of the only games in town, is that right?

MORGENSON: Absolutely. Rural hospitals have really been hit by this practice.

The other thing, Barry, is that they don’t put the name on the door …


MORGENSON: Over the emergency department. They don’t say Team Health is here, or they don’t say Envision or KKR or Blackstone is running this. And so try to find out if your emergency department is run by one of these companies. It’s very difficult to do.

So again, it’s opaque. Again, the consumer does not know that this is happening. And so much of what private equity has taken over is kind of like this, a stealth takeover, because they don’t put their names on the door.

RITHOLTZ: So let’s talk about senior living. Since when are old folks’ homes a profit center? Tell us about that.

MORGENSON: This is perhaps the biggest crisis, I think. And it really became very evident in a 2021 study by academics, I think University of Chicago, UPenn, NYU, that studied long-term mortality at nursing homes that were owned by private equity and compared that with nursing homes.

RITHOLTZ: They’re so much more efficient, their mortality rates have to be much better, right?

MORGENSON: They’re so much more efficient because maybe they hire fewer people to take care of the residents that the mortality rate is higher.

The mortality rate is 10%.

RITHOLTZ: Really, that’s a big number.

MORGENSON: 10%, and so these academics found that there were 20,000 lives that they said were lost because at private equity-owned nursing homes, nursing facilities. And so you have the situation the academics said where the focus, the extreme focus on cost cutting meant lower staffs, meant lesser care, essentially translated to lesser care.

And this was just a striking, striking study of the difference between, and they were comparing it to other for-profit nursing homes. So this was not just for-profit versus non-profit. This was private equity, for-profit and non-profit.

RITHOLTZ: How did private equity healthcare, senior living, nursing homes, ERs, hospitals, do during the COVID pandemic?

MORGENSON: Well, they did very well because they got a lot of CARES Act money from the government.

RITHOLTZ: I mean, how did the care itself run? How did they perform during the pandemic?

MORGENSON: Well, as you know, healthcare was a disaster. And partly because we were so unprepared for the pandemic.

And I would argue, Barry, that one of the reasons we were so unprepared was because healthcare had been a focus of private equity since really the mid-2000s. Okay, so HCA, perfect example, that’s a company that went private in an LBO. And so what you had is these firms, again, focusing on cost cutting.

And so they were not likely to stockpile PPE, masks, to buy ventilators, to prepare for a pandemic. And in fact…

RITHOLTZ: Well, that stuff all costs money.

MORGENSON: That costs money. And it’s money that sits on a shelf. And these guys don’t like money sitting on a shelf. And so, you actually had a study in Congress that had what might happen if we were to experience a pandemic. And this was back in 2005 or 2006. And it said, “We need to stockpile more equipment.”

RITHOLTZ: And you had the Gates study in, what, 2015, saying the same thing? Just-in-time inventory doesn’t work because during a pandemic you can’t get things. It turned out to be very accurate.

MORGENSON: Right. But all those years leading up to 2020, when the whole world collapsed in March, all those years leading up to it, we had kind of a draining of healthcare, a bleeding of healthcare companies because of getting the fat out, cutting the costs down.

RITHOLTZ: So, I’m going to ask you a question now, but it applies to insurance also, which we’ll talk about in a minute. But there are regulatory agencies at the federal level. Every state has a medical board. How does this sort of for-care profit with a much worse mortality rate and much worse health outcomes, how do they get by the state regulators?

You would imagine that statewide regulatory medical boards wouldn’t really tolerate this.

MORGENSON: This is a $64 trillion question, Barry, and I would love for you to ask every State Attorney General, for instance, why haven’t you gone after for-profit medicine?

There are statutes in more than 30 states across the country that bar what’s called the corporate practice of medicine. And these laws came into effect 100 years ago when you had quack medicine show guys out there selling crazy cures for everything. And they decided, these states decided, that you can’t have profits potentially coming ahead of patient care.

And so doctors actually have to run these organizations. And that is supposedly going to keep from a problem of putting profits ahead of patients. But very, very, very few state AGs have enforced laws against the corporate practice of medicine. And when they do bring cases, they are so tiny and so minimalistic in the wrist slap that they deliver to these companies that it really is not even a cost of doing business. And so it’s just like, okay, fine, I’ll do it again, and even bigger next time.

RITHOLTZ: So let’s talk insurance. The insurance policy stuff seems just absolutely egregious. How did private equity step into the insurance area? Again, a very heavily regulated industry with separate, very robust statewide oversight panels and boards.

What’s going on in the world of insurance?

MORGENSON: Well, I’m very interested to hear you say it’s very robust on the state side.

RITHOLTZ: At least that’s how it’s presented. Talk to people who try and get licensed to do insurance things, or if there’s a failure to pay out a policy in the litigation that follows. There seems to be some options for policyholders, especially if you have a receptive governor or a state attorney general who can apply pressure through these insurance boards, although maybe I’m living in the past.

MORGENSON: Well, I think it’s spotty. Let’s just say that there are some states where the regulation is aggressive, but there are a lot where it is not.

And as you might guess, some of these companies flock to the ones, to the states, where the oversight is more of the minimalistic. Now, the problem with insurance companies being owned by private equity is that you can understand why they want to own them because this is a pool of assets, it’s a pool of money that they can really generate immense profits on. And it’s unlike banks, it’s not fast money or hot money, it isn’t likely to leave quickly, Barry, like we’ve seen in some of the recent bank problems. So insurance companies are really huge pools of very stable money for these companies, for these private equity companies. And it’s interesting because you’re supposed to, in insurance, be very conservative. And most, I think, most people who buy insurance policies really would prefer that their insurer be a conservative entity, that it’s not taking risks, we’re not swinging for the fences here.

You know, yes, if I can get a higher yield, that’s awesome, but I really want to know that I’m going to get a payout when it comes time for my claim.

So what these companies are doing is buying these insurance companies, they’re also buying up pension assets, Barry, so a corporation has a pension, let’s say it’s Lockheed, Bristol-Myers, or a couple. And the private equity firm will buy those pension obligations.

Lockheed or Bristol-Myers gets it off their books, they’re happy, they transfer the risk that those obligations had for them, and the private equity firm takes over that risk. But now you don’t have the pension benefit guarantee corporation backing you if the pension should fail.

RITHOLTZ: So, a company could just get out from under the PBG by selling it to a third party?

MORGENSON: Correct. It’s called a pension risk transfer, and they have been happening like crazy. And private equity firms are the ones doing a lot of the pension risk transfers.

RITHOLTZ: That’s really interesting.

MORGENSON: And so you have pensioners at Bristol-Myers or Lockheed or Coors is another who are really relying on private equity to do the right thing for their pensions going forward, for their retirement, for their payouts when they need them.

And that, I think, is something that we really don’t understand the entire nature of. And unfortunately, we will see, we may see some problems with rising interest rates if some of the investments that these private equity firms have made in their insurance companies start having problems.

RITHOLTZ: Are these arm’s-length investments meaning you’re managing this as a fiduciary on behalf of the pensioner. You can’t then turn around and festoon that pension filled with whatever junk paper you’re selling to the street? Or does that happen?

MORGENSON: That does happen. Now, they do have to disclose in their statutory filings with the insurance regulators how much of their investment portfolio in the insurance company is related transactions or related stocks or bonds or mortgages or whatever.

So they do have to disclose that, but I’m going to guess that very few people read those disclosures.

RITHOLTZ: Quite interesting. Let’s talk about the insurance deal of the century. What’s going on with Executive Life? What happened there, and how did that go off the rails?

MORGENSON: Executive Life is where we start the book, because it was such a massive failure, and Of course, it was coming at the time of the junk bond collapse.

RITHOLTZ: But this was a AAA highly regarded insurance company beforehand.

MORGENSON: This was a highly rated insurance company. It had the highest rating.


MORGENSON: But it was run by a guy who was kind of what we used to call in the old days a gunslinger.


MORGENSON: He was a guy who was more of a risk taker than your average insurance company executive. And he bought a ton of junk bonds from Drexel. He was one of their top clients when they were selling these bonds of slightly lower quality…

RITHOLTZ: Slightly lower quality.

MORGENSON: Lesser-known companies. He was there to buy.


MORGENSON: So his firm, his insurance company, had a ton of junk bonds.

And when that market turned, it was dire for him.

RITHOLTZ: So this was really separate from private equity. This was just bad stewardship by an insurance executive who should be conservative. And, again, the question, where are the regulators when a conservative insurance company is buying junk?

I mean, it’s right there in the name, they don’t even hide it, junk bonds. What happened with Executive Life? They blow up.

MORGENSON: They blow up. The Department of Insurance for the State of California was, at the time, run by John Garamendi, who is now a representative in the House of Representatives from California, in Washington. And he was just brand new in the job. It was a new elected position. Prior to that, it had been appointees of the governor.

RITHOLTZ: You have to run to oversee?

MORGENSON: Yes, you have to run to the insurance …

RITHOLTZ: I don’t see how that could go.

MORGENSON: Anyway, so he won the big job, and the minute he got in the door, junk bonds were cratering, and everybody was concerned about Executive Life, and would it be able to pay its policyholders. And so he seized the company. Now, keep in mind, Barry, that he seized it probably at or very near the bottom, okay? So junk bonds were starting to come back after he seized it. And so if it had been worked out another way, it’s possible.

RITHOLTZ: Like just a re-org or a…

MORGENSON: Like a reorganization, it’s possible that the policyholders might not have lost what they ended up losing.

RITHOLTZ: What was the haircut the policyholders get?

MORGENSON: You know, it’s still to this day, we don’t know, but it certainly is in the three or four billion dollar, maybe even higher.

RITHOLTZ: What percentage does that look like? A third, a half?

It was a big chunk though, right?

MORGENSON: It was a big chunk for many people. You know, I mean, I know of some cases where it was 40% haircut for some policyholders. It’s very hard to, you know, getting numbers on this stuff, they really don’t want to help.

RITHOLTZ: And then, tell us about the crazy rule that said, “Okay, now we’re going to shred all the documents related to this.” What the hell was that?

MORGENSON: Well, okay. Let’s just remember, this happened in 1991. The insurance department took it over in 1991. Then we had Apollo, Leon Black’s new firm, after he flees from Drexel, the wreckage is burning at Drexel.

RITHOLTZ: Drexel collapsed.

MORGENSON: Drexel collapsed.

RITHOLTZ: Which arguably he didn’t have anything to do with. That was mostly Milken’s issue.

MORGENSON: No, he was not in the junk bond area. He was a corporate finance person. He was raising money for these companies.

RITHOLTZ: So, did he flee, or did he just say, “Hey, let’s go launch our own company”?

MORGENSON: Yes, let’s go launch our own company.


MORGENSON: Right. But, I mean, it was obviously a dire circumstance. So, anyway, long story short, he ends up getting ahold of this huge junk bond portfolio, which was a lot of paper that he had put into Fred Carr’s — that’s the name of the guy who ran Executive Life — paper that Apollo really knew what it was. They knew the numbers.

RITHOLTZ: And Leon was a salesperson and a financier.

MORGENSON: He was the finance guy.


MORGENSON: And so, he knew the numbers. He knew the companies. And so, he knew that they were distressed and that they could be restructured and reorganized.


MORGENSON: And so, he buys this portfolio of junk bonds.

RITHOLTZ: So anyway, he’s New York-based, right?

MORGENSON: He’s New York-based.

RITHOLTZ: And executive life is in California.

MORGENSON: Yes, yes.

RITHOLTZ: But because of the relationship with Drexel, he approaches California and says, “We’d like to buy this junk paper,” or did they hold an auction? How did it go?

MORGENSON: Well, it was with a French bank, actually. They were representing the bank. They were acting as the investment manager for the bank, and so it was going to be taken over by this French bank. But anyway, so the Department of Insurance sold it, sold the company on the cheap, absolutely.

And so, the people that bought it, in this case, the French bank and Apollo, were able to ride the recovery of those junk bonds.

RITHOLTZ: So, when California sells this, on behalf of the policyholders, is there any mandate, “Hey, you have to pay $0.90 on the dollar, at least,” or are there any requirements? They’re selling it inexpensively. What riders is California attaching it to the new owners on behalf of the people the California insurance board is supposed to be operating on?

MORGENSON: Well, California, at the time, said, “We think this is a great deal. You’re going to get at least $0.90 on the dollar. Everybody’s going to get at least $0.90 on the dollar.” That is their story, and they’re sticking to that.


MORGENSON: And that’s what they say.

RITHOLTZ: But they didn’t require that as part of the purchase.

MORGENSON: Well, that’s what they said was going to happen as part of the purchase.

RITHOLTZ: I could say all sorts of things, but until I sign a contract that says, “I guarantee that I will pay 90 cents out to each shareholder at a minimum,” it’s just words.

MORGENSON: Yes, well, what happened was, a lot of people did not get 90 cents on the dollar. There were quite a few people who were up in arms who wanted this to be investigated. It is sort of a moment in time that you look at and you say, “This is what can happen if an insurance company takes risks with their policyholder’s money.”

RITHOLTZ: Right. This all goes back to the gunslinger as opposed to a conservative operator. There are a couple of other regulatory questions that come up that I’m always sort of fascinated about. The first is the performance reporting for private equity. There have been lots of criticism from within Wall Street that at best it’s aggressive, and at worst it’s just a fantasy.

If you’re committing capital to private equity, you don’t care when they do the purchase. The sort of internal rate of return to the endowments and pensions who put money into private equity. They don’t care about that, but that seems to be the way they report.

Tell us a little bit about how performance numbers are ginned up. I don’t even know how to describe it.

MORGENSON: Well, these are private companies, not the firms themselves. They’re publicly traded, as you know. But when they buy a company and put it into a fund, it’s a private company. And so, how they mark the value of that company is, there’s leeway there, Barry. They can value it a certain way that, let’s just say, the stock market wouldn’t value it at.

RITHOLTZ: But you’re valuing it specifically how you’re purchasing it, and then if it’s sold five years later, that’s a hard dollar. Why is there so much wiggle room in between?

MORGENSON: Because you haven’t had a buyer tell you exactly what it’s worth until the end of the line when you actually do buy the company.

RITHOLTZ: Really interesting. Let’s talk about tax loopholes.

How on earth is there still a carried interest tax loophole for private equity, hedge funds, and venture capital? You’re talking about a teeny, tiny fraction of all taxpayers. Why the special treatment?

MORGENSON: It started out, I think, as a special treatment for real estate, and it sort of morphed into this bigger thing as the private equity venture world expanded. And it essentially is that the managers, executives of these companies just end up paying a far, far lower rate on their very beneficent payouts than you or I do.

And it’s a loophole that people have tried to get rid of for decades. We’ve had congressional hearings about it. And yet it continues to stay on the books. And boy, they cry bloody murder when it comes time for people to say, look, maybe we should rethink this and not let these guys — I mean, it’s like a billionaire minting machine to have this kind of a lower tax rate on these folks?

RITHOLTZ: Who wants to pay 37% when you could pay essentially 23%? Of course they’re spending money on lobbyists. Cut my taxes in half, where do I sign up for that? Oh wait, I don’t have access to that.

MORGENSON: Start a private equity firm, Barry.

RITHOLTZ: So here’s what we’ll do. We’ll start a private equity firm, we’ll buy pensions, and just put it in the S&P 500 and cost us five BPs to manage it. There’s a lot of fat there if you approach it that way.

So, let’s talk about a little bit of pushback. I’ve seen some criticisms and some stuff. I want to get your take on it.

First, we touched on this earlier. Aren’t the big firms and the LBOs, the leveraged buyouts, very different than the middle market, smaller private equity firms that provide capital and equity to small companies. Aren’t you painting with too broad a brush, goes some of the criticism?

MORGENSON: Well, if you look at these firms, these folks, these really titans of industry. celebrated in the business pages, they are, you know, on TV all the time. I mean, these are the people leading the way on this industry.

Now, again, there are others who are doing it right and doing it in a better way, yes.

But what you want to focus on, these are the folks that set the tone. These are the folks that say, “Here’s how we’re going to operate” and these are the folks that do have the biggest impact, Barry, because of their size. And so that’s why we really want to focus on them.

So when you have two firms controlling 30% of emergency departments in this country.

RITHOLTZ: That’s a lot.

MORGENSON: That’s why you focus on the big firms. They have the big impact, and so that’s why we’re doing that.

RITHOLTZ: So let’s talk about wealth inequality. You guys put a lot of blame on private equity for making it worse. But I look at wealth inequality and wage inequality, and it’s a lot of things. It’s low wages and a minimum wage that hasn’t gone up in forever. It’s corporate tax avoidance. It’s the shifting of the tax burden away from the wealthy and away from corporations to the middle class.

Aren’t we putting too much blame on private equity for exacerbating wealth inequality in America?

MORGENSON: Well, the reason we think it’s important to include them in the mix is that we haven’t really had that discussion. I mean, private equity was not really mentioned as a force in the inequality in the gulf between rich and poor in America. You would hear about offshoring of jobs, you would hear about companies going to Ireland so that they wouldn’t have to pay the high taxes.

RITHOLTZ: The double Dutch whatever it’s called thing.

MORGENSON: And so there has been a lot of discussion and of course the defanging or the diminishment of unions so you don’t have a balance of power between the worker and the corporation. But you look at some of the forces behind those forces, right?

So pensions, great example. If you’re starting to see private equity firms taking over pensions, you know, and or stripping the pensions of the companies that they bankrupt, that is a definite wealth gulf, right? That is a definite impact on everyday people, Main Street America, that I just don’t think we’ve really examined.

So you just have to look behind some of the practices.

When you have retailing, that’s a big force, a big area that private equity has been very forceful in. Almost 600,000 jobs lost in retailing. Now, yes, some of that would have happened with the shift to online. But honestly, there have been consequences like that. So you look at that, and then you look at the problems with health care and what it’s doing to patients. And so I do think that it is a force to be reckoned with here.

RITHOLTZ: So I’m glad you brought up retail. Some of the pushback I’ve seen is the United States has been wildly over-retailed. I think in 2007, we had 24 square feet per capita versus Europe, which was like 14, and Japan, which was like 9. So we really had far more retailers than we knew what to do.

We built way too many malls and ultimately, this was going to go through a huge set of changes.

Anyway, private equity may be an accelerator a little bit, but we certainly can’t blame the shrinking retail footprint on PE, can we?

MORGENSON: We can maybe put some of it on them, right, yes. And obviously, the shift to online hurt some folks, Toys R Us is an example of that.

RITHOLTZ: Right. And more recently, Bed Bath & Beyond, that was a publicly traded company.

MORGENSON: That’s right.

RITHOLTZ: They hit the wall without private equity’s help.

So the biggest pushback I’ve seen is, go back to the ’80s and ’90s when LBOs were first ramping up, companies went from big to really big. And as these big publicly traded mega companies went upmarket, the banks, the brokers, all of Wall Street chased them, and they just created this air pocket, this void underneath where there used to be national banks and national lenders servicing that industry, and they have nobody left to service them. And that vacuum is into what good private equity has stepped.

If it wasn’t for the private equity below the four biggest companies, there’s very little sources of capital for these $100, $500, $700 million firms that Wall Street ignores.

MORGENSON: Well, I think you have to say, then, if you’re going to say, “Okay, these companies are not being banked properly,” then that’s great if you can get money from private equity. But let’s not bankrupt them in the process. You have a study that shows that bankruptcies occur far more with companies that are private equitized than it does with other companies.

So I think that, yes, if you want to have the resources, the capital is not being assigned to these companies, but that doesn’t mean that they should be abused or that some of these practices can’t be questioned.

RITHOLTZ: And one of my favorite parts of the book, you talk about equity ownership and wealth ownership in the United States. In 1913, the bottom 90% of incomes owned about 15% of the wealth in the United States. This is real estate, businesses, and publicly traded companies. By the ’80s, that had more than doubled to 35% of the wealth in the U.S. Was that the peak? What happened with that going forward?

MORGENSON: That was the peak. And one of the reasons for that very big considerable growth and that was the, you know, people were able to have a family without having two wage earners….


MORGENSON: You were able to buy a house, et cetera. That moment in time, also a huge contributor to that was pensions. So corporate pensions that gave a worker a reasonable shot at a prosperous retirement.

And those started disappearing in the mid to late ’80s. And so that’s a big factor in why the wealth held by the Main Street America, the middle class, the big broad brush America. That’s why that has declined.

RITHOLTZ: So here’s, I think, my favorite pushback to the conversation about wealth inequality, and I’m curious as to your thoughts. It’s not the top 10% versus the bottom 90% where that big disparity has opened up. It’s not even the top 1% versus the bottom 99%, although that’s certainly pretty meaty.

It’s the top 0.01% versus even within the top 1%, there’s this massive disparity. We didn’t used to have that many billionaires and uberwealthy today versus 50, 100 years ago. How has the distribution of wealth shifted in the United States and what might come out of that going forward?

MORGENSON: I just don’t think it’s a good thing to have this coterie of extreme, extreme wealth at the top of the pyramid. I mean, it’s just not healthy. An economy does better if the most people are prosperous, right? And so these multi, multi, multi-billionaires are really outliers, but it points to a problem with the entire society.

And perhaps it’s because we laud wealthy people, but part of it is this tax loophole that really is unfair. Part of it is some of the practices that really are aggressive and that end up harming companies and workers and pensioners. And let’s not forget the huge fees that pensions pay to buy into private equity funds. And for years, those private equity funds outperformed the S&P, but they no longer do.

RITHOLTZ: So let’s hit on that, because that’s really interesting. This was a small asset class that, whether it was the illiquidity premium or just the ability to go places where the public markets couldn’t, actually did better than the markets.

That risk premia seems to have evaporated.

MORGENSON: It stopped outperforming in like the mid-2000s or towards 2008. And so you really have to wonder what the purpose of the continued infatuation with private equity among pensions is if they can get the same return in a S&P 500 with five basis points as a cost.


MORGENSON: And total transparency, by the way, and a mark-to-market that you see at the end of every business day. And so, you know where you stand. So, it’s not one of these fuzzy math situations where you don’t really know what the value of the fund is because it’s got private companies in it that are being marked by individuals who have an ax to grind in the mark.

RITHOLTZ: Really quite interesting.

So, let me give you one of my curveball questions I like to surprise guests with. Your career history is “Money Magazine” in the early, mid-18th Davies, and then “Forbes” and then “Worth” magazine. But while you were at “Forbes” in 1995, you get tapped to be press secretary for then presidential election candidate Steve Forbes? What was that like? How different are political campaigns from covering finance?

MORGENSON: Well, when Steve asked me to be his press secretary, I thought, “Wow, this this is going to be interesting. I even maybe thought this is going to be fun.


MORGENSON: Now I’m a financial reporter, I am not a Washington reporter, I’m not a political reporter, and so I had a different idea of what it might be like, but anyway, it was a very, very tough six months period.

RITHOLTZ: I can imagine.

MORGENSON: And it was, so Steve was a candidate that had economic ideas, okay?

RITHOLTZ: Flat tax, that was his big–

MORGENSON: One of them was the flat tax, which by the way would have gotten rid of lobbyists. That was the big benefit.

RITHOLTZ: And all those loopholes, right?

MORGENSON: Flat tax, he was also for medical savings accounts and health savings accounts. Anyway, and so I would explain these concepts. And he was against the double taxation of dividends, which of course we have gotten rid of, I think.

Anyway, so those were sort of three of his initial ideas. And I would have to explain these to the Washington Press Corps, the Washington Press Corps not being financially oriented and probably not that interested. They were just interested in the horse race.

RITHOLTZ: Always, even to this day.

MORGENSON: Now, he did very well in New Hampshire, and so for a frenzied moment, it was like, maybe he has a chance or a shot. But anyway, it was a very trying time for me, but I really became a better journalist because of it.

RITHOLTZ: I was going to go there with that question. What was it like being on the other side of the clamoring, that scrum that you always see the photos of? How did that change how you do journalism and view journalists?

MORGENSON: Well, I really, after that, decided that I really wanted to give people a lot more time to respond to my questions because I would be asked to answer questions that were quite comprehensive and/or tricky, difficult to come up with the answer in minutes.


MORGENSON: And so it was very frustrating to not be able to do that. And so I came away from that experience saying, okay, from now on, I’m going to give everybody that I’m writing about more time to respond because I don’t want to put them in the situation that I was in.

RITHOLTZ: All right, we only have you for a few more minutes. Let me jump to my favorite questions that we ask all of our guests, starting with, tell us what you’re streaming. What are you watching, listening to? What’s keeping you entertained?

MORGENSON: What am I streaming? Well, gosh, I really like the BBC show “Happy Valley” I don’t know if you’ve seen that.


MORGENSON: It’s kind of a detective, a pretty tough female detective, I like that. I like “Ted Lasso.”

RITHOLTZ: What’s not to love?

MORGENSON: I know that’s very mundane, but. So those are the two right now.

RITHOLTZ: Tell us about mentors. Who helped shape your career?

MORGENSON: Jim Michaels, who was the editor of “Forbes” magazine. He was a very tough, old newspaper reporter. He was at UPI, and he was the guy who broke the story of Gandhi’s assassination. So really knew how to do that kind of reporting. But he took his expertise to business and really taught me how to look at businesses, analyze balance sheets, income statements, really do contrarian reporting. He was a guy who didn’t want the conventional wisdom. He wanted to question the conventional wisdom.

He was very difficult, very irascible, very demanding, but you really learned a lot.

RITHOLTZ: Interesting. Let’s talk about books. What are some of your favorites and what have you been reading recently?

MORGENSON: I like 19th century fiction. So Anthony Trollope, “The Way We Live Now” which is a really wonderful book about a tycoon who is sort of a scoundrel, who sells shares in a railroad company that doesn’t really exist.


RITHOLTZ: Well, if you want the railroad to exist, that’ll cost you more.

MORGENSON: Yes. Right now, I’m actually reading a biography of Genghis Khan.

RITHOLTZ: Oh, which one?

MORGENSON: Jack Weatherford.

RITHOLTZ: I’m not sure if that’s the one I read, but it’s amazing.

MORGENSON: Yes, and that’s a guy who was kind of slimed as being this terrible marauder and everything. It’s a different story altogether, so I’m really enjoying that.

RITHOLTZ: Our last two questions. What sort of advice would you give to a recent college grad who is interested in a career in either investigative journalism or finance?

MORGENSON: Well, I would, of course, say go with investigative reporting because I think we need more of it in this country. I think we don’t have as much as we need. We have seen newspapers hollowed out, of course.

RITHOLTZ: Closed down left and right.

MORGENSON: Closed down. We’ve also seen that the costs associated with investigative reporting, it’s not easy. It’s not something that happens overnight. So it really is costly and we’ve seen that fewer and fewer of those folks.

So I would say gung ho if you can get a job doing that, that it is going to be the most fun that you’re going to have and also doing a service.

RITHOLTZ: And what do you know about the world of investigative reporting and finance today you wish you knew back in the early 80s when you were first getting started?

MORGENSON: Well, let’s see. So what’s about the world of finance that I wish I knew 30 years ago is that it isn’t as hard as you think. That it isn’t, you know, a lot of people come out of college if they’re not a financial person, like I was a humanities major, you know, and you have this mental block about numbers, I can’t do numbers, or I, you know, it’s not that hard. It really isn’t that hard, it’s common sense.

Now there are people who are really extra special good at it but, you know, it’s something that you can tackle. Don’t feel like you have a mental block against finance and don’t think that finance isn’t important. Finance is not a backwater, it touches everyone. It touches everybody in this country. It is political. It is everywhere. And so just don’t discount the importance of finance. –

RITHOLTZ: Really interesting. Thank you, Gretchen, for being so generous with your time.

We have been speaking with Gretchen Morgenson. She is the author of “These Are the Plunderers, How Private Equity Runs and Wrecks America.”

If you enjoy this conversation, well, be sure and check out any of the previous 500 we’ve done over the past, I don’t know, eight years. You can find those on YouTube, iTunes, Spotify, or wherever you find your favorite podcasts.

Sign up for my daily reading list at Follow me on Twitter @Ritholtz. Follow all of the Bloomberg family of podcasts @podcast.

I would be remiss if I did not thank the crack team that helps put these conversations together each week. Sara Livezey is my audio engineer. Atika Valbrun is my project manager. Paris Wald is my producer. Sean Russo is my researcher. I’m Barry Ritholtz, you’ve been listening to Masters in Business on Bloomberg Radio.





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