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Warren, Ocasio-Cortez propose M&A ban during crisis

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Via Financial Times

Elizabeth Warren and Alexandria Ocasio-Cortez, two staunch Democratic critics of Wall Street, have proposed halting “risky” mergers and acquisitions to stop large companies from exploiting the coronavirus pandemic to gobble up smaller businesses. 

The two progressives said on Tuesday that their Pandemic Anti-Monopoly Act would impose a moratorium on deals by companies with more than $100m in revenues or financial institutions with a market capitalisation above $100m.

The bill also aims to block deals by companies backed by private equity and hedge funds, and seeks to protect groups that hold patents that could be crucial amid the pandemic, such as for personal protective equipment.

“As we fight to save livelihoods and lives during the coronavirus pandemic, giant corporations and private equity vultures are just waiting for a chance to gobble up struggling small businesses and increase their power through predatory mergers,” said Ms Warren, the senator from Massachusetts and former Democratic presidential candidate.

The bill is unlikely to gain traction in the Republican-controlled Senate or with the White House. However, it could pile pressure on presumptive Democratic presidential nominee Joe Biden, a centrist who is looking to shore up support from the younger, left-leaning Democrats who supported Bernie Sanders in the party’s primary process.

Mr Biden, who was vice-president under Barack Obama, has made increasingly explicit overtures to Mr Sanders’ supporters after the Vermont senator dropped out of the race earlier this month. In an interview with Politico at the weekend, Mr Biden lashed out at big businesses and banks in particular, saying: “This is the second time we’ve bailed their asses out.”

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Wall Street dealmakers are not particularly concerned about a law blocking them from doing deals, partly as M&A activity has come to a halt during coronavirus lockdowns.

However, they worry that the rhetoric used by progressive politicians angered at how large corporations are benefiting more than smaller ones from the federal rescue packages could result in more stringent regulation of business in the future.

Ms Ocasio-Cortez, a first-term congresswoman from New York, was the only House Democrat to vote last week against a $484bn interim stimulus package that expanded funding for the Paycheck Protection Program, a rescue fund for small businesses.

The congresswoman said the legislation favoured big businesses and did not do enough for people suffering from Covid-19. Ms Ocasio-Cortez’s congressional district, which includes parts of the Bronx and Queens, has been among the hardest-hit by the deadly virus. 

“It is a joke when Republicans say that they have urgency around this bill. The only folks that they have urgency around are folks like Ruth’s Chris Steak House and Shake Shack. Those are the people getting assistance in this bill,” Ms Ocasio-Cortez said on the House floor last week, in reference to large restaurant chains exploiting a loophole in the PPP to get millions of dollars in government funding intended for much smaller companies.

A similar plan to put mergers on hold during the pandemic was floated last week by David Cicilline, a Democratic congressman from Rhode Island and chair of the House antitrust subcommittee, who suggested that it could be included in a future round of stimulus legislation.

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The House and Senate are in an extended recess, with most lawmakers in their districts rather than Washington, amid concerns about the spread of Covid-19. Senators are expected to return to Capitol Hill next week as negotiations ramp up for another major stimulus package. 

The $2.2tn Cares Act, signed into law by President Donald Trump last month, was one of the largest economic relief bills in US history. The legislation created the PPP and awarded one-off, means-tested “economic impact payments” of up to $1,200 for most Americans, among other programmes designed to stem the losses sustained during the coronavirus pandemic.

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