When Steve Mnuchin went on CNBC on Wednesday to voice support for an antitrust probe that the Department of Justice is conducting into Amazon, the Treasury Secretary denounced the much-demonized tech giant. Amazon has "really hurt small businesses" and "destroyed the retail industry across the United States," Mnuchin said.
While he’s not wrong, it’s a bit ironic for the former finance executive to join the anti-Bezos crusade: Mnuchin has made millions off of the predatory tactics that have shut down businesses like Payless Shoes and Toys R Us, and personally had a hand in 30,000 workers losing their jobs when Sears filed for bankruptcy late last year. Amazon certainly has helped weaken some of these chain stores. But often, it's the rich people who buy these distressed companies who provide the finishing K.O.
Responding to Mnuchin, an Amazon spokesperson told the Washington Post that according to the US Census Bureau, 90 percent of retail still occurs offline. But brick-and-mortar stores have recently come under attack, not just from ecommerce sites but entities like private equity firms and hedge funds that buy companies in hopes of flipping them or stripping them of assets in hopes of quick profits, with little regard to the carnage they leave along the way.
Sears is a case study in how this works. The legendary retailer was already losing ground to big box stores and Amazon when it was bought by K-Mart in 2005 and fell under the control of a hedge fund executive named Eddie Lampert, who became its CEO in 2013. Sears borrowed billions from Lampert's investment companies and sold real estate to a company where Lampert was president of the board and then paid that company rent. From 2005 to 2012, it gave $5 billion in stock buybacks to investors, which of course included Lampert. (In 2017, Lampert and other board members settled a shareholder lawsuit over some of this alleged self-dealing for $40 million.)
After all that, and some widely criticized managerial moves by Lampert after he became CEO, Sears filed for Chapter 11 bankruptcy in October.
What does that have to do with Mnuchin? He and Lampert have been friends since they attended Yale together, and Mnuchin served on the Sears board until he became Treasury Secretary. Mnuchin and Lampert are co-defendants, along with the rest of the board, in a suit filed by Sears in April that claims they broke the law by stripping the company of assets.
Shenanigans like this have devastated entire industries—private equity has also helped drive hospitals out of business while making money for investors, and one recent study found that the private equity industry has led to 1.3 million layoffs in the past decade, including 600,000 retail workers. But you probably won't hear Mnuchin complain about that.
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