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Private Equity Seen as Blessing, Curse

Is private equity enriching an elite handful of investors, or is there a "trickle-down" benefit to others? On "Power Lunch," Stephen Lerner, director of the Private Equity Project at the Service Employees International Union (SEIU), and Michael Madden, co-founder and managing partner of BlackEagle Partners, squared off on the question.

In an exclusive interview on CNBC.com, Treasury Secretary Henry Paulson told Maria Bartiromo that he believes private equity to be an overall positive influence, responsible for creating many jobs.

But Lerner told CNBC's Sue Herera that instruments like hedge funds are partly responsible for "the greatest income inequality since 1928," and a "Wall Street bubble" that generates "enormous wealth for a small group of people" -- while "millions of people are getting squeezed out of the middle class."

Madden disagreed "significantly." The managing partner said that private equity serves several positive ends: Its "pervasive" presence in big institutions -- including California, Oregon and New York State pension funds -- lets retirees "benefit from the promise and prosperity of private equity."

He said private equity "lets companies stay alive" through acquisitions -- which "benefits the workers." And he said beneficiaries of private-equity generosity include "college endowments, hospitals and orphanages."

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  • Sue Herera is a founding member of CNBC, helping to launch the network in 1989. She is co-anchor of "Power Lunch."

  • "Power Lunch" & “Nightly Business Report” Co-Anchor

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Kenny Polcari