One of Trump's Treasury contenders hails from the most cutthroat private equity firm on Wall Street

A Financial Powerhouse’s Rise to a Potential Treasury Role #

Marc Rowan, CEO of Apollo Global Management, is eyeing a significant role in the US government as a contender for Treasury secretary. Apollo, a major force in private equity, stands to benefit from his potential appointment. As Treasury secretary, Rowan would oversee the Financial Stability Oversight Council, which monitors the ’nonbank’ financial system, including private equity.

The Treasury also encompasses the IRS and the Office of the Comptroller of the Currency, pivotal regulatory bodies for financial institutions. In the event of his selection, Rowan could influence how these entities regulate private equity, a sector known for its minimal oversight.

Despite uncertainties about his impact as Treasury secretary, it’s common for industry leaders to transition to governmental roles overseeing their previous sectors. Rowan, a wealthy financier, could potentially mitigate regulatory pressures on firms like Apollo, KKR, Blackstone, and the Carlyle Group. Currently, private equity firms thrive in the ‘private capital’ sphere, a $24 trillion market, with the US stock market being twice its size.

Private equity firms invest in struggling, non-public companies, restructure them, and aim for profitable sales. These firms often use debt financing, which burdens acquired companies financially. Instances like Red Lobster highlight the challenges, where property sell-offs and increased rents contributed to higher operational costs.

Layoffs and aggressive cost-cutting often ensue as acquired companies struggle under debt burdens, sometimes leading to bankruptcy rates far higher than their non-targeted counterparts. Critics warn that a Treasury led by a private equity executive could uphold these industry practices.

Founded in 1990, Apollo manages over $700 billion, with ambitions to double by 2029. It gained renown for distressed-debt investments after the 2008 financial crisis, as traditional banks faced increased regulation. Last year, private equity amassed over $8 trillion globally, influencing numerous industries, from retail to healthcare.

Legislation aimed at holding these firms accountable and improving transparency has struggled for bipartisan support and faced legal challenges. Rowan’s potential appointment comes at a time when no clear Treasury pick has been announced, but he remains a prominent contender. The role would likely enhance private equity’s influence, continuing its trajectory of growth and power.