by John Lawrence / San Diego Free Press
Mitt Romney’s Bain Capital was very good at making money for Mitt Romney.
At the same time, it loaded companies Bain bought with debt, borrowed even more money to pay dividends to Mitt Romney and destroyed or outsourced lots of jobs. It even raided pension funds. Then Romney turns around and holds himself up as a “successful businessman.”
Sure, he was successful in terms of making money for himself. But this was at the expense of workers who lost their jobs at previously successful companies when they went bankrupt—a debt loaded on them by bank-borrowed money that went directly into Romney’s pocket.
Here’s how a private equity fund such as Bain Capital works: It picks a successful company and then takes it over with a leveraged buyout (LBO). The money borrowed from a bank to pay off the owner or stockholders does not become the debt of Bain Capital. It becomes the debt of the company that was taken over.
You might ask, “Why would a bank even loan money to place a company in debt for the purposes of being taken over by Bain Capital which does not even assume the debt?” Well, it’s for the same reason that so many subprime loans were available. The bank does not continue to hold the debt. It offloads it to investors such as pension funds so the bank doesn’t really care. They have no skin in the game.
Why not loan Mitt Romney money to take over companies? There’s good money in those commissions.
Pension funds show up again and again as the fall guys in Wall Street machinations. They are the dumb clucks who keep trying to make up for the fact they are 50% underfunded by entering into sucker bets and losing even more money. And since Romney and Bain do not assume the debt themselves, they don’t care if the overleveraged company goes bankrupt since, if it does, they lose nothing. That company is just a money conduit for Romney since, as soon as they take it over, they have the company borrow even more money in order to pay Romney a dividend.
You might ask, “Why would the owners of a company or the shareholders sell out to Bain Capital?” Because Bain offers them a really good deal, that’s why. After all they don’t care if they overpay. They’re using OPM, other people’s money. It’s all based on a loan to the company they intend to take over, not a loan to Bain itself. Bain takes hardly any risk at all. So much for the risk takers that Romney eulogizes.
Romney pioneered the strategy of having a company Bain took over in a leveraged buyout borrow even more money to pay himself a dividend. So now the company is staggering under a huge load of debt and in many cases they can not keep up with the payments. In 1994, Bain bought medical equipment manufacturer Baxter International. After a merger with another company, it became known as Dade Behring. Bain then reduced R&D investment because Bain’s game plan was to only hold the company for five years or so. So why invest for the long haul? The money borrowed from banks for the LBO was usually for five to eight years with small monthly payments and a big balloon payment at the end. About five years after Bain had acquired Dade, it was looking to get out. But not before it drained even more money from Dade and placed the company and its workers in even more jeopardy. …
For the remainder of this article, please go to San Diego Free Press.
John Lawrence writes Will Blog For Food.
{ 6 comments… read them below or add one }
What Mitt and his company do should be illegal… at best, it is immoral. Romney is a Vampire in Mormon Clothing and under his leadership, Bain gutted companies, sucking them dry and leaving families in shambles without work or a means to provide for their children. Is this the type of leader we want? Read more about the role of Romney’s blood money in this election and the power of his sacred undergarments at http://dregstudiosart.blogspot.com/2012/05/mitt-romneys-magic-mormon-underwear.html
Hey, at least Romney wears magic underwear.
You’re lies can’t stop Mitt now! Mitt Romney for President 2012! Go Mitt!
*Splat!* That was X hitting the sidewalk from 20 stories.
Contrary to what we are being fed this election cycle, our rich history of elected officials to the highest public office does not indicate there is any advantage to selecting businessmen for achieving effectiveness in office. While Mitt may be the best the Reps can dig up this election cycle, he certainly does not enjoy any advantage of being a businessman.
I don’t hold any grudges against Mitt or his ilk: our representative form of government, by design, works to the advantage of monied interests. Who can fault someone for becoming successful to the point of controlling the wealth game?
My dissatisfaction with this election comes from listening to Reps say how bad our economy is, and that their guy can fix things. The hot air reminds me of my chosen candidate of 2008, who said he would make the world a better place. It’s a choice of lesser evils: the best I can do is to give the alternative guy another 4 years and hope he gets things accomplished for the environment, world relations, and for our people. Was it “Hope AND Change” or “Hope FOR Change”?
Rick
Everyone has to understand that running a company, Private business is not like running a government. they are 2 distinctly different operations. A business is suppose to make money, show a profit make the stock holders, owners and the employees a wage.
A government is not in the business of making money. They provide a service, roads, public infrastructure, defense etc etc. Service to the population, which are paid with taxes and it should be run efficiently.
A good business man will not necessarily make a good political leader. Good business sense does not necessarily make a good government leader.
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