Romney’s Bain Yielded Private Gains, Socialized Losses

[kpete]

Source: Bloomberg

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.



Read more: http://www.bloomberg.com/news/2012-07-15/romney-s-bain-yielded-private-gains-socialized-losses.html

[Pale Blue Dot]

1. Wow. Bloomberg.

Wow wow wow.

He's toast.

[Lucky Luciano]

15. Bloomberg is not as partisan as you might think.

An article like this does not surprise me at all. I have a Bloomberg terminal at work, so I see them as pretty reasonable. They do have some Nasty op-eds from the likes of Kevin hasset and amity shlaes, but many others are quite reasonable.

[Pale Blue Dot]

16. As a follower of the economy, I agree.

However, simply on the basis of their beat, they reach more of the 1% than the MSM.

[Skittles]

2. isn't that the republican way?

yet they have the GALL to say black people want "free stuff:

[Pale Blue Dot]

4. I just posted this article on Facebook with the caption

Romney: He's actually been on welfare this entire time.

[Skittles]

10. CORRECT

[creeksneakers2]

17. Great post!

I hope you don't mind, I used your comparison on my facebook page.

"But I hope people understand this, your friends who like Obamacare, you remind them of this, if they want more stuff from government tell them to go vote for the other guy — more free stuff."

Mitt Romney

[Skittles]

19. Mittens gave each of his five sons $20,000,000

that's a heck of a lot of "free stuff" for them

Mitt is a complete elitist ASSHOLE and I have no doubt he fails to see the hypocrisy

[ode2joi]

18. Matt Dowd would call it...wait for it....

KARMA !!!!!!!

[harun]

24. It is their obsession

I was having a nice walk at a state park with my wife on Sunday and here comes to old dudes walking by. They were talking about how the Democrats just want everyone to be dependant on the gov't. They have two or three basic false assumptions that they walk around all day grumbling about. Sucks to be them.

[Liberal_Stalwart71]

3. KICKED, RECOMMENDED and sent to friends, family and any Republican wingnut I know.

[Grassy Knoll]

5. With Bloomberg, APnews, Boston Globe, Huffingtonpost Etc.....

up your ass, it's difficult to remember that you're running
for the President of the United States.

Unknown Quote: "When your up to your ass in alligator's,
it's difficult to remember your main objective is to drain
the swamp".

[progressivebydesign]

6. Wow. Wth? Basically loads up on debt to pay himself and investors, then the company DIES.

Dude is like the Grim Reaper. That entire charade is why American jobs have been lost by the millions. The fuckers can't just leave the companies alone, they have to wrench every last drop of money out of them, and leave the employees in the dust when it goes bankrupt. Why aren't those people in prison???

This is more damaging than the Baingate stuff... what an asshole.

[Patiod]

28. Not just Bain - the private equity guys have been doing this for years

Americans need to understand what these people do, and how damaging it is to our country.

Why would we elect someone who thinks this is the way to build an economy? It's a way for a very few men to build personal wealth for themselves and their families, and for everyone else to slide out of the middle class.

[liberal N proud]

7. Losses are the only thing the GOP wants to socialize.

[Wolf Frankula]

21. We have Socialism in this country

Socialism for the rich, socialism for stock market gamblers and corporations. For the rest of us, it's getting to be Randroid Hell.

Wolf

[brewens]

8. If he were President and does what he know, he'll run up the debt while

siphoning off as much wealth as possible to his partners. Sound familiar? Exactly what "Chug" Dick Cheney did. The wars and everything else were all about looting and making it and the pack of criminals associated with it wealthier than they already were.

[Politicub]

9. Romney IS Bain, and Bain is Romney

The two are linked in everyone's mind now -- "retroactive retirement" or not.

[quaker bill]

13. The OP is about the time before his "retroactive" retirement

It is really just a description of the leveraged buyout business model. Romney apparently did it quite well. Buy the firm, load it with debt using the pension fund as collateral to pay yourself, bankrupt the company and use the pension fund to resolve whatever debts it will cover. The taxpayers then pickup the pension fund shortfall through the pension benefit guarantee corporation. It was all the rage in the 80s and early 90's.

[antigop]

14. The PBGC is NOT funded by general tax revenues.

http://www.pbgc.gov/about/how-pbgc-operates.html

PBGC receives no funds from general tax revenues. Operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income, assets from pension plans trusteed by PBGC, and recoveries from the companies formerly responsible for the plan

Taxpayers DO NOT pick up a pension fund shortfall.

[Quantess]

11. Found in the comments:

Barbara Seiders 2 hrs ago

Wow... seeing Mitt Romney and Bain showing up at your company is sort of like seeing Anderson Cooper at a natural disaster or Sanjay Gupta at a disease outbreak: you've got good reason to know it's not going to turn out well...

[indie_voter]

12. Wow.

How in the world is he going to recover from all this? I don't think he can release his tax forms because I'm betting whatever is in there could damage him even more, which is saying a lot considering what's been going on.

Wow.

Couldn't have happened to a nicer guy. Sweet Schadenfreude.

[Tx4obama]

20. Kick! n/t

[Kablooie]

22. His ability is to make money for share holders so it would be the same in government.

The 'shareholders' are not you and me, of course.
They are the fabulously wealthy, Romney's circle.

He would run the country specifically to make more money for the wealthy.

[muriel_volestrangler]

23. Sub-headings tell the story: 'Casino Capitalism' & 'Bankruptcy Filing'

"Thanks to leverage, 10 of roughly 67 major deals by Bain Capital during Romney’s watch produced about 70 percent of the firm’s profits. Four of those 10 deals, as well as others, later wound up in bankruptcy."

With 4 out of 10 of their major deals killing the victim company while making them billions, 'cannibal capitalism' might be appropriate too.

[valerief]

25. He's the best housekeeper and gardener job creator on the planet! nt

[Scurrilous]

26. K & R

[KansDem]

27. "...privatized the gains and socialized the losses."

That's American capitalism!

[blm]

32. That's INSURANCE FRAUD - the taxpayers were stuck with the $44million bill for the pensions after he

looted the GS Industries assets before he bankrupted it.

[Blue Owl]

29. There it is

Today's GOP in nutshell.

[Faryn Balyncd]

30. That is the reason that shining daylight on Bain is ESSENTIAL...Thanks!

[Faryn Balyncd]

31. "Casino Capitalism": an apt Bloomberg description of the economics of the party of Romney & Adelson!

Casino Capitalism

1986, in one of its earliest deals, Bain Capital acquired Accuride Corp., a manufacturer of aluminum truck wheels. The purchase was 97.5 percent financed by debt, a high level of leverage under any circumstances. It was especially burdensome for a company that was exposed to aluminum-price volatility and cyclical automotive production......Forty-to-one leverage is casino capitalism that hugely magnifies gains and losses. Bain Capital wisely chose to flip the company fast: After 18 months, it sold Accuride, converting its $2.6 million sliver of equity into a $61 million capital gain. That deal, which yielded a 1,123 percent annualized return, was critical to Bain Capital’s early success and led the firm to keep maximizing the use of leverage.


In 1992, Bain Capital bought American Pad & Paper by financing 87 percent of the purchase price. In the next three years, Ampad borrowed to make acquisitions, repay existing debt and pay Bain Capital and its investors $60 million in dividends.....As a result, the company’s debt swelled from $11 million in 1993 to $444 million by 1995. The $14 million in annual interest expense on this debt dwarfed the company’s $4.7 million operating cash flow. The proceeds of an initial public offering in July 1996 were used to pay Bain Capital $48 million for part of its stake and to reduce the company’s debt to $270 million.......From 1993 to 1999, Bain Capital charged Ampad about $18 million in various fees. By 1999, the company’s debt was back up to $400 million. Unable to pay the interest costs and drained of cash paid to Bain Capital in fees and dividends, Ampad filed for bankruptcy the following year. Senior secured lenders got less than 50 cents on the dollar, unsecured lenders received two- tenths of a cent on the dollar, and several hundred jobs were lost. Bain Capital had reaped capital gains of $107 million on its $5.1 million investment.


http://www.bloomberg.com/news/2012-07-15/romney-s-bain-yielded-private-gains-socialized-losses.html

The American people need to know the Romney/Bain formula for privatizing profits and socializing the losses:

1. Get a controlling interest
2. Sell enough bonds to issue yourself a dividend large enough to recoup your initial investment, as well as outlandish annual consulting fees
3. Underfund pension plans
4. Get out before the shit hits the fan
5. Have the taxpayers (through the Pension Benefit Guarantee Corporation http://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corporation , etc) clean up the mess

[elleng]

33. He says he should be elected

because he knows how ?economies? businesses work, so he should be asked: OK, What, exactly, would you do, and exactly how would it work? To promote/create jobs? IN the U.S?

[annabanana]

34. This is the WHOLE problem. Privatize profit, Socialize loss.

It's win-win for them and lose-lose for us.

[GreenMask]

36. chevy and Chrysler...

Wait, didn't we do this with Chevy and Chrysler?

[zellie]

35. No Sh^t

mitty is a felon.