Romney’s Bain Yielded Private Gains, Socialized Losses

[wamland]

Romney


"Mitt Romney touts his business acumen and job-creation record as a key qualification for being the next U.S. president.
What’s clear from a review of the public record during his management of the private-equity firm Bain Capital from 1985 to 1999 is that Romney was fabulously successful in generating high returns for its investors. He did so, in large part, through heavy use of tax-deductible debt, usually to finance outsized dividends for the firm’s partners and investors. When some of the investments went bad, workers and creditors felt most of the pain. Romney privatized the gains and socialized the losses.
What’s less clear is how his skills are relevant to the job of overseeing the U.S. economy, strengthening competitiveness and looking out for the welfare of the general public, especially the middle class."

Please explain to me how this candidate has the vision to create jobs. It oly appears that he can game the system to make money for investors. Personally I don't see how the middle class is going to benefit from this experience.

[mister pc]

This is the most relevant thread to grace the PDB in a long time. Looking forward to a logical and fact based discussion on this subject.

[champ76]

Originally Posted by mister pc

This is the most relevant thread to grace the PDB in a long time. Looking forward to a logical and fact based discussion on this subject.

Me too. As well as an explanation for how a community organizer's experience makes one qualified for president.

[mister pc]

Originally Posted by champ76

Me too. As well as an explanation for how a community organizer's experience makes one qualified for president.

It was foolishly optimistic to expect a substantive examination of an issue which might actually matter. Let the regularly scheduled partisan slap fight continue.

[blackadder]

Originally Posted by champ76

Me too. As well as an explanation for how a community organizer's experience makes one qualified for president.

Is government an "organized community"?

[wamland]

Originally Posted by champ76

Me too. As well as an explanation for how a community organizer's experience makes one qualified for president.

Pretty sure that I asked for vision.

[mister pc]

Originally Posted by blackadder

Is government an "organized community"?

Something like that... although I don't imagine that a typical community organizer would have the qualifications to run for POTUS. A community organizer who also happens to be a US senator, who prior to that served 10 years in the state senate, and is constitutional law scholar... that's a different story. But saying it like that probably didn't sound as good in Champs head. Not that it had anything to do with the thread topic in any way. I wish we could delete all posts underneath the OP and start over, give this thread a chance to progress in a less embarrassing way.

[Mr. Sparkle]

So, wait, private gains and socialized losses are a BAD thing now?

Seems a little late for that, no?

Anyway, in answer to the question, I'd say it shows Romney may or may not be able to conjure up more jobs than the other guy (and I question the premise of any POTUS "creating jobs"), but it sure seems like he will ensure that the owners' interests (i.e. our tax dollars) are better protected when making those kinds of bets in the future.

If we're going to throw tax dollars at someone's startup, it would be nice to get paid back first when the business goes the way of Solyndra or pets.com.

Give me the cold-blooded private equity killer for that work.

"You've never been out of college. You don't know what its like out there. I've worked in the private sector. They expect results!"

[IntenseSaint]

If Bain capital is such a poor company when it comes to social standards, then how come the Obama campaign has no problems taking large donations from them in the form of a top executive bundler with Bain?

[texasjefe]

I doubt any voter or political junkie would care that Obama gets donations from Bain. It is very common for corporations to donate to both parties and guarantee some access regardless of which party wins the White House. Plus Bain 2012 is not the issue.

Bottom line, Mitt Romney brought all of this onto himself. And I think we've only begun to scratch the surface.

[El Caliente]

Originally Posted by blackadder

Is government an "organized community"?

Does success in business not require proper use of human capital?

[mister pc]

Originally Posted by Mr. Sparkle

So, wait, private gains and socialized losses are a BAD thing now?

Seems a little late for that, no?

Anyway, in answer to the question, I'd say it shows Romney may or may not be able to conjure up more jobs than the other guy (and I question the premise of any POTUS "creating jobs"), but it sure seems like he will ensure that the owners' interests (i.e. our tax dollars) are better protected when making those kinds of bets in the future.

If we're going to throw tax dollars at someone's startup, it would be nice to get paid back first when the business goes the way of Solyndra or pets.com.

Give me the cold-blooded private equity killer for that work.

I know it was an attempt at being facetious, but privatized gains and socialized losses are now and always have been considered a bad thing, and that's unanimous by people on both sides of the bailout issue.

As to your larger point, I still am not understanding how it translates. With Solyndra the objective of the investment was to create jobs and provide a boost to the domestic renewable energy sector. It's a totally different objective than when a private equity killer loads a company with bad debt, runs them into bankruptcy and walks away with a handsome profit. The reason it works out for the PE firm is because they are completely removed from the consequences. That strategy of investment would not translate to the US public sector and here is why...

There are many other examples of this debt-fueled strategy. In the two years following the acquisition in 1993 of GS Industries, a steel mill, for $8 million, Bain Capital increased the company’s debt to $378 million on operating income of less than a 10th of that amount. Some of this was used to pay Bain Capital a $36 million dividend in 1994. That degree of leverage was excessive in light of the cyclicality and capital-intensive nature of the steel industry.

By the time the company went bankrupt in 2001, it owed $554 million in debt against assets valued at $395 million. Many creditors lost money, and 750 workers lost their jobs. The U.S. Pension Benefit Guaranty Corp., which insures company retirement plans, determined in 2002 that GS had underfunded its pension by $44 million and had to step in to cover the shortfall.

Bain doesn't have to cover the unemployment benefits, health care, or retirement for laid off workers when the business goes bankrupt, Uncle Sam is left to pick up that tab. As a global management firm, Bain's profit margin is not correlated to American job loss or even the fiscal health of the companies it invests in. I understand how Bain can manage to walk away from a train wreck like that unscathed. What I don't understand is how this investment strategy would work on a federal level.

[wamland]

Originally Posted by mister pc

I understand how Bain can manage to walk away from a train wreck like that unscathed. What I don't understand is how this investment strategy would work on a federal level.

Exactly and when the candidate cannot explain how his vision that he brought to his prior works has formed what he plans to of with the presidency, that concerns me. He does the polar opposite and runs away from his "accomplishments" (Bain, Romneycare). How is he going to direct a vision for the country?

[wamland]

Originally Posted by El Caliente

Does success in business not require proper use of human capital?

I would argue in Bain's case it did not.

[V Chip]

Wait, is deflecting good or bad today? I get so confused if people are supposed to do it or avoid it and call out those that do it.