ANALYSIS: Private Equity Firms Should Fear Warren’s Looting Act

When the next recession comes—and it will come—who will be blamed?

In 2008, the villains were the tandem of financial deregulation and banks. Financial deregulation allowed a huge real estate bubble to form, then burst. Banks exacerbated that lending problem because they took poor-quality residential mortgages and packaged them in mortgage-backed securities with unregulated credit default swap contracts, insuring enormous amounts of debt—debt that quickly became overwhelming as defaults mounted—without understanding the risks. The Dodd-Frank Wall Street Report Act of 2009 represented a concerted effort to address those deficiencies.

Increasingly mixed recent economic indicators have many worrying a recession may ...