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Private equity multiples breached Fed guidelines in Q1, according to new data published on Thursday by PitchBook. It shows debt-to-equity multiples hit a whopping 6.2x in Q1, compared to 5.4x for the entirety of last year and a 5.19x average between 2011 and 2016.

What the Fed says: Four years ago, America's central bank issues guidelines that debt-to-EBITDA ratios (for most industries) shouldn't exceed 6x.

What happened: For a while, most everyone played by these rules ― largely because banks were scared of crossing the Fed. Then a bunch of one-off transactions began breaching the threshold, particularly in tech. Then "baskets" of deals began to breach. All the while, the Fed did little more than send the occasional letter of reprimand. The takeaway for banks was: You can do it, just don't flout it.

Should the Fed care more? It's tough to argue that companies benefit from being over-leveraged but, from a public policy standpoint, private equity-backed deals don't pose a systemic risk. Namely because the failure of one PE portfolio company shouldn't impact the fortunes of another PE portfolio company, even if held in the same fund.

Caveat: It can be very difficult for data providers like PitchBook to accurately gauge market-wide leverage multiples, given that so many LBO values and debt breakdowns are kept private. Thus the average is prone to being weighted toward take-private transactions, which tend to be larger (and, historically, have higher leverage multiples). It's also worth noting that PitchBook also reported a mark in excess of 6x for Q1 2016, but the overall year settled much lower.

Go deeper

32 mins ago - Health

First known U.S. case of the Omicron variant identified in California

PhotoL Chip Somodevilla/Getty Images

The first known U.S. case of the Omicron variant was detected in California, the Centers for Disease Control and Prevention confirmed Wednesday.

Driving the news: The confirmed case was detected in a traveler returning from South Africa who was fully vaccinated and has mild symptoms, according to the CDC.

Supreme Court appears likely to roll back abortion rights

Abortion rights advocates and anti-abortion protesters demonstrate in front of the Supreme Court in Washington, D.C., on Dec. 1. Photo: Olivier Douliery/AFP via Getty Images

The Supreme Court on Wednesday seemed likely to weaken abortion rights and perhaps to let states ban the procedure altogether.

The intrigue: The court seemed likely to throw out the framework established in Roe v. Wade, but it wasn't clear whether a majority of the justices were inclined to overturn the court's precedents entirely.

Felix Salmon, author of Capital
Updated 2 hours ago - Economy & Business

How to meme a painting

Illustration: Megan Robinson/Axios

How can a physical artwork become an NFT? One new company has just spent $12.9 million on a Banksy in an attempt to try out a new way of converting the real into the virtual.

Why it matters: The art market globally sees volume of about $60 billion per year, almost all of which is trade in physical objects. Art-world insiders including former Christie's c0-chair Loïc Gouzer are on the lookout for ways to monetize physical paintings without necessarily giving up physical ownership of them.

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