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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

Updated 3 hours ago - Politics & Policy

Senate action on stimulus bill continues as Dems reach deal on jobless aid

Photo: Alex Wong/Getty Images

Democratic leaders struck an agreement with Sen. Joe Manchin (D-W.V.) on emergency unemployment insurance late Friday, clearing the way for Senate action on President Biden's $1.9 trillion stimulus package to resume after an hours-long delay.

The state of play: The Senate will now work through votes on a series of amendments that are expected to last overnight into early Saturday morning.

Capitol review panel recommends more police, mobile fencing

Photo: Olivier Douliery/AFP via Getty Images

A panel appointed by Congress to review security measures at the Capitol is recommending several changes, including mobile fencing and a bigger Capitol police force, to safeguard the area after a riotous mob breached the building on Jan. 6.

Why it matters: Law enforcement officials have warned there could be new plots to attack the area and target lawmakers, including during a speech President Biden is expected to give to a joint session of Congress.

Financial fallout from the Texas deep freeze

Illustration: Annelise Capossela/Axios

Texas has thawed out after an Arctic freeze last month threw the state into a power crisis. But the financial turmoil from power grid shock is just starting to take shape.

Why it matters: In total, electricity companies are billions of dollars short on the post-storm payments they now owe to the state's grid operator. There's no clear path for how they will pay — something being watched closely across the country as extreme weather events become more common.

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