Illustration: Lazaro Gamio/Axios

Private equity's loudest political antagonists were back at it over the weekend, wrongly arguing that Taylor Swift's contract dispute is illustrative of the industry's rapaciousness.

What happened: While Sen. Elizabeth Warren and Rep. Alexandia Ocasio-Cortez each tweeted that private equity must be "reined in," they'll need to publicly wrestle at some point with how private equity is fueled by public pension systems that they otherwise support.

How it works: U.S. public pensions are the single largest investor in U.S. private equity funds, according to the most recently-available data, having hundreds of billions of dollars of exposure.

  • They've also increased their participation in direct private equity deals, often via co-investments with portfolio managers, with PitchBook reporting that 2018 saw a record number of domestic PE deals with public pension participation.

Why it matters: Any new regulation on U.S. private equity could have downstream impact on U.S. public pensions, many of which already have long-term challenges in meeting their member obligations.

  • Some changes, such as around the tax treatment of carried interest, would have a relatively small impact, if any.
  • Some changes, like Warren's plan to make PE funds liable for leveraged financing, would significantly impact public pension returns and allocation plans.

Yes, but: A popular progressive argument is that public pensions shouldn't invest in fee-heavy private equity at all, instead putting that money into public equity index funds.

  • There is some data to back this up, but it tends to ignore the value of diversification for public pensions with ongoing obligations, and imply that the past decade's bull run for public equities is normal.

The bottom line: Private equity and public pensions are tightly interconnected. To see the change they want, Warren and AOC may ultimately need to focus less on Taylor and Twitter, and more on the public pension leaders who represent part of their base.

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Downtown Chicago hit by widespread looting

Police officers inspect a damaged Best Buy in Chicago that was looted and vandalized. Photo: Scott Olson/Getty Images

Chicago police responded to hundreds of people looting stores and causing widespread property damage in the city's downtown overnight, resulting in at least one exchange of gunfire, the Chicago Tribune reports.

The state of play: Police superintendent David Brown said the event was a coordinated response after an officer shot a suspect on Sunday evening, per CBS Chicago.

McDonald's sues former CEO, alleging he lied about relationships with employees

Former McDonald's CEO Steve Easterbrook. Photo: Drew Angerer/Getty Images

McDonald's on Monday sued its former CEO Steve Easterbrook, seeking to recoup tens of millions in severance benefits while alleging he took part in and concealed undisclosed relationships with company employees, per the New York Times.

Why it matters: Corporations have traditionally chosen to ignore executive misbehavior to avoid bad press, but they have become more proactive — especially with the rise of the #MeToo and Black Lives Matter movements — in addressing issues head-on.

The transformation of the Fed

Illustration: Eniola Odetunde/Axios

The Federal Reserve is undergoing an overhaul. Conceived to keep inflation in check and oversee the country's money supply, the central bank is now essentially directing the economy and moving away from worries about rising prices.

What we're hearing: The move to act less quickly and forcefully to tamp down on inflation has been in the works for years, but some economists fear that the Fed is moving too far from its original mandate.