The debate is heating up about the impending regulations from the government applied to Private Equity (PE) and its sub-class Venture Capital (VC), fought by the National Venture Capital Association (NVCA) and reluctantly supported by the Private Equity Council (PEC). The latter stating that private equity does not represent a systemic risk. Perhaps not, if the council excludes VC from its membership, but VC as Private Equity poses a systemic risk as the gatekeeper to innovation.
Why the government is forced to step in
The government has decided to step in and we, as participants in the ecosystem should present our government with the facts (good and bad) so it can make informed decisions going forward. If we give the government self-serving information, rather than the facts, we will get punished by regulations that miss their intended target. So, now is the time to separate greed from honesty and shape the regulations that will be bestowed upon us.
The most rational explanation as to why the government is tightening our private equity belts came from Bob Grady, Managing Partner at The Carlyle Group (who worked for the government for a while) at the recent IBF conference. He suspects that the government simply wants to reduce the size of the financial services industry as a percentage of GDP (Gross Domestic Product).
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