Here is the article Hiram noted in the last post. It will be interesting if FactCheck checks this one out.
Rolling Stone Saving of Bain
Maybe Romney can negotiate away some of our $15 Trillion in debt. That would be nice and it sounds like he is skilled at it.
Please remember as you read this that it is actually a failed bank that started this chain of events. If FDIC had not been pulled in, Bain would have been working exclusively with Bankers. Then the Liberals wouldn't have cared because they don't like Bain or Banks.
Thoughts?
Maybe you didn't read all the way to the end- about how banks pass on their losses to their customers through higher fees ..."in other words, the bailout negotiated by Romney ultimately wound up being paid by the American people."
ReplyDeleteBesides the bailout I was struck also about how well Bain executives did with these financial dealings. Seems to go with the story line that Romney supports policies that are of great benefit to the wealthiest few.
I read the whole thing, since when have you cared that business costs are passed on to the consumer?
ReplyDeleteTypically that doesn't seem the case... (ie healthcare mandates, higher taxes, tort reform, environmental mandates, other regulations, mortgage debt forgiveness, higher pay for public employees, etc, etc, etc)
All these costs are born by citizens / consumers.
I guess my objection is to greed. I would pay a bit extra for clean, renewable wind generated electricity rather than coal, for example. How do you feel about increased bank fees to bailout Bain, when the execs have used funds for big bonuses?
ReplyDeleteAbout the same as I feel about paying more so:
ReplyDelete- people can be paid more than market wage and have their jobs assured no matter their performance.
- I can listen repeatedly to 411PAIN, ASK GARY, class action, etc commercials.
- normal people can claim bankruptcy after they took on too much debt.
- unmotivated or foolish people can have stuff, food, housing, insurance, etc
- gov't provides green companies much larger loans without adequate collateral and they default
As for cleaner air, sounds good but how clean is clean enough and a what cost? EPA Diesel Tiers Consumers have been paying 100,000's of engineers for 15+ years to develop engine and machine systems that exhaust less contaminants than they take in. And yes this has increased the cost of every piece of equipment that is sold. Thus increasing everyone's costs. (ie transportation, construction, etc)
And more importantly it has prevented companies from using these Engineers in other ways. Oh well... Job security has been good since every company in the industries have had to spend the money.
Remember, a great deal of the debt you suggest that Mitt would negotiate away, is owed to you. But no, when Mitt was in the private sector, and his company ran into big trouble, he was able to look to the government on the taxpayer, to bail him and his company out. As president, as the guy on the other side of the table there is no one he can shift the burden to. Mitt in his business life was always able to profit from his business deals while shifting the burden onto someone else. He will never have that option as president.
ReplyDelete--Hiram
Tabbibi's assessment of the private equity business, at least the kind of business Mitt engaged in, is basically correct. Bain would buy companies, take out their money up front through dividends and "management fees", funded by loans for which Bain wasn't liable, and sell the rump companies, which would then be allowed to fend for themselves. It's very much the business Gordon Gekko engaged in, in the movie "Wall Street". It's a business model that can succeed in a bubble market, because there in such a market there is usually a greater fool, to buy what's left, and because the private equity firm already has it's money, but when the bubble collapses, it fails, leaving the rest of us with the debt.
ReplyDelete==Hiram
That is probably the biggest difference between your views and mine, I don't think the Government owes me anything except to run efficiently and support America's defense, economy and freedoms.
ReplyDeleteRemember that if Payroll taxes are taxes and not forced savings/insurance accounts, then the things they fund are just government programs. That means they are open to negotiation or discontinuation.
If they are forced savings and insurance accounts, then the low income folks pay pretty much no taxes. Which is it?
I stand corrected... I do have a couple of old old bonds that they should honor. However I will give them up if it helps my kids start citizenship with a clean balance sheet.
Here's a link to a different perspective regarding Bain. As I have said, "these folks aren't angels, but they sure aren't devils". The Week 4 Good Things They have helped a lot of people while helping themselves.
I don't think the Government owes me anything except to run efficiently and support America's defense, economy and freedoms.
ReplyDeleteBut you are owed a lot with respect to entitlements you have paid for. And where Mitt is concerned, he and his partners owed the government a great deal. Mitt through tough negotiating was able to negotiate those debts down, but what that means is that the loss was sustained by the rest of us.
--Hiram
Actually, this is the Tabbibi article I was referring to.
ReplyDeletehttp://www.rollingstone.com/politics/news/greed-and-debt-the-true-story-of-mitt-romney-and-bain-capital-20120829
--Hiram
"Please remember as you read this that it is actually a failed bank that started this chain of events."
ReplyDeleteIt was Bain that started this chain of events when they borrowed money from a bank to cash out partners, and then couldn't repay the debt. The FDIC assumed the debt when the bank failed. This is classic capitalism, by the way, of a kind I learned about in my favorite movie. "The Wheeler Dealers" with Lee Remick and James Garner often shown on Turner Classic Movie. The key to any deal is to make sure that someone else takes the loss when the deal goes sour. In this case, it was the FDIC and ultimately the taxpayers.
--Hiram
I am not sure liberals dislike Bain as much as they should. For one thing, what Bain did isn't widely understood. Tabbibi lays it out pretty well. Basically, they were equity strippers, buying companies which they would then strip them of their assets, by taking out loans on the purchased company, which the company, not Bain, would be responsible for, andusing the money for dividends and management fees. As Matt points out, huge amounts of debt would be created. Mitt Romney borrowed a lot of money to make himself rich. This is a form of bubble behavior, depending as it does on banks willing to loan the money without adequate security, and on other folks willing to take the targeted companies as they flipped back into the market. As is typical with bubbles, it's lucrative early on but at some point, when banks lose their willingness or ability to loan money, the whole thing comes crashing down. That's what happened to Bain in the late 1980's and early 1990's. And this goes to the illusion of companies like Bain. They can be successful for a long time before they blow up. It's like the guy who jumps of a 50 story building. As he passes the 25th floor, someone asks him how he is doing. "Fine, so far", he says.
ReplyDelete==Hiram
The thing people don't understand about Mitt is that he is a man of the bubble, a man of the past. He is vastly wealthy because he was good at creating illusions, in persuading banks to loan money they shouldn't have lent, in persuading greater fools to buy companies with excessive levels of debt he had to sell. He could do this, in part, because the markets generally were rising, and the people who dealt with him could be fooled into thinking that they were not taking on the level of risk, that they in fact were. All of this, of course, came crashing down, first in the 1980's, and then in the early 2000's with total losses which were undoubtedly far in excess of any value these companies created.
ReplyDeleteWe are dealing now with the fallout of the way Mitt Romney made his fortune, the excessive levels of debt that he took on, that we, not he are responsible for. And we are dealing with the hangover of the false euphoria of that era, when we somehow persuaded ourselves, with the help of the Mitt Romneys of the world, that we could become wealthy, not by working and building something, but through financial manipulation.
--Hiram
Rolling Stone Greed and Debt
ReplyDeleteThat second Rolling Stone article is the most interesting piece I have read in a long time. I am curious to see if / how John will defend how Romney made his vast wealth as described by Taibbi. I think if average voters had even minimal understanding of how the Romney fortune was made he would have no chance of winning.
ReplyDeleteI have sometimes wondered if Bain investors, such as pension funds, did anywhere near as well as Bain executives in making $ by looting companies and learned that they did about the same as average investors in the 80's and 90's, where companies weren't destroyed by new, large debt. My revised opinion of Romney has sunk to an even lower level as an extraordinarily greedy person.
I am travelling back from Grandmother's house. I read the whole thing. More later.
ReplyDeleteI guess this person's thoughts are aligned with mine. Long Version RS Smear Machine
ReplyDeleteTaibbi simply seems inconsistent and incorrect to me in too many areas. And definitely highly biased. For example, if Bain and Folks were only earning stock market yields then Romney would not be worth the reported $250 million. So which is it $250 million or stock market yield?
Overall the invest, borrow and trade concept seems correct, however one sided. These folks are out to make money, as most successful Americans are. They apparently operated within the law and negotiated very well with many groups of people.
Romney himself has said that their company's success rate was ~80% and this was backed by factchecker. That means that 20% failed... And it seems that Taibbai is just trying to sensationalize those in order to sell a magazine and support his political agenda.
Imagine if someone was trying to paint a picture of you as a person by only discussing your decisions that did not work out so well. I am happy that I am not being subjected to that activity. Overall I do pretty good, but it would be a very disturbing article.
So I guess I am wondering, Bain and similar companies require large returns in order to attract investors to their very high risk deals. If 80% of the deals succeed and help companies to avoid bankruptcy or allow them to get started, is it acceptable that 20% fail? Or would it be better if no one took the risk to assist the 80%?
As I have said multiple times, they are not Angels or Devils. Just as Obama and his Socialist friends are not Angels or Devils. More on this in the next post.
As for Kaybee toys, I was the parent of young children when this was all happening. The reality was that the Kaybee stores were rarely busy and I am sure the malls weren't cheap. Toys R Us, Walmart & Target were kicking their butt with the big box stores. They were living on borrowed time, did Bain pull the plug? I don't know, not from this individual's highly biased and backward looking assessment.
One more question that occurred to me as I was out picking apples. (a yearly tradition since our apple tree is HUGE)
ReplyDeleteIf a car salesman gets rich buying cars cheap and selling them for a significant profit, is this a bad thing?
I'm sure some of his customers likely could have bought a car for less elsewhere... Or sold their car for more elsewhere... Yet this individual has a gift for successfully negotiating the deal to his favor.
I am assuming the Conservative answer will be that the Salesman is to be revered since he was excellent at what he did. And the Liberal answer is that he is to be reviled since he should have given the poor and foolish a better deal.
It is an interesting parallel. Thoughts?
One more question, who do you want leading your car dealership if your job is tied to the company's success?
ReplyDelete"For example, if Bain and Folks were only earning stock market yields then Romney would not be worth the reported $250 million."
ReplyDeleteI think the claim was that Bain was earning roughly market yield for investors in their funds. Mitt and his partners didn't make their vast fortunes by investing in their own funds,
"Overall the invest, borrow and trade concept seems correct, however one sided."
It certainly made them money but it left us with the debt.
"If a car salesman gets rich buying cars cheap and selling them for a significant profit, is this a bad thing?"
One question is how he is financing his business. Is the salesman financing his business by taking out loans on which he is responsible? Has he structured his business such that he makes his money when the loan is made, not when the car is sold?
Mitt made his money laying off the risk on others. Are political leaders able to do that? Mitt got rich by making sure the buck never stopped in his office, by making sure that someone else would absorb the losses he generated. But the Oval Office, as Harry Truman famously observed is where the buck stops.
--Hiram
I think your car dealer analogy is too simplistic.
ReplyDeleteHere is my counter analogy: Someone borrows a bunch of money to buy your home mortgage. As your new landlord he sells some of your home assets (let's say copper pipes, granite counter tops, fancy light fixtures.) Then he kicks your adult children out of the house. Finally, your wife rebuys the house and you now have a bigger mortgage on a house worth less than when you started. If you can't keep up with the new higher payments your house will be foreclosed.
I know this analogy makes little sense. I don't fully understand LBO and they don't seem to fit a simple analogy.
It is the LBO that I find objectionable. He seems to have created little to nothing of value while amassing his fortune, while others have lost jobs, pensions etc and the gov't lost tax $ due to his dedcucting the interest on the money borrowed for his deals.
My son is an accounting and finance major at UofM and I would rather he made a good salary the regular way, adding value to a company, then the Romney way of looting/destroying companies to get rich.
Hiram,
ReplyDeleteThat is one reason that I don't trust the writer. Here is how he interprets the data.
"So for all the destruction Romney wreaked on Middle America in the name of "trying to make money," investors could have just plunked their money into traditional stocks and gotten pretty much the same returns."
Here are the actual S&P returns for that period. They avg ~18%. 55 Stock History I don't know about you, but 10% additional return is not chump change. (ie 50% higher)
Taibbi isn't a Journalist, he is just an opinionated blogger who is trying to get hits and push his beliefs. He should probably go into politics. He is excellent with half truths and misleading quotes.
Laurie,
I can work with your analogy. Except he does not kick the owner out, the Owner willing moves out for a fee. (ie the Mgmt/Owners willing sold the companies) Maybe some tenants got forcefully evicted. (ie employees) And the wife willing buys the property back, knowing full well the debt load. Now who is at fault?
Similar idea I just thought of. A jeweler buys oysters for $1 a piece. He then takes out the pearls and puts them in his vault. And he finds a buyer who is willing to pay $1 per oyster. Is the jeweler doing anything wrong? Is the 2nd buyer just foolish and not doing due diligence.
Both,
As I have said many times, Bain is not a bunch of Angels. They are business people who are out to make money for themselves and their investors.
Taibbi is looking for all the bad things and zooming in on them. He could have earned credibility if he would have shown some of the positives of the private equity firms. Imagine if someone wanted to show you as evil and zoomed in on every negative thing you have ever done without explaining the background or positive things. What would that look like?
Hiram,
ReplyDeleteOne more thought.
If the buck stops at the President, why will you vote for Obama?
Record national debt, Record deficits, Taxes poised to jump excessively on everyone, etc.
Then again, maybe your vote does make sense given your views.
An equivalent and oppsite regarding Obama. Forbes GM Bankruptcy 2
ReplyDeletePlease note that the losses and debts are in the multiple BILLIONs, not Millions.
Here are the actual S&P returns for that period. They avg ~18%. 55 Stock History I don't know about you, but 10% additional return is not chump change. (ie 50% higher)
ReplyDeleteThe problem is that the economy has been stagnant for a generation as it works of the debt the Mitt Romney's of the world accumulated for us. The stock market is basically where it was 12 years ago. The income of Americans hasn't risen since 1997. We seem to have remarkably little to show for the remarkably favorable tax treatment we have extended to Mitt Romney's of the world in combination with the various assorted bailouts we have given him.
Biased though he may be, Tabbibi didn't invent the leveraged buyout business. And his description of it is not inaccurate. You can read in similar tales in books like "Barbarians at the Gate" written by Wall Street Journal staffers, or "The Predators' Ball" by Connie Bruck, and many others, and you can see the results of their handiwork all around us.
As for tax increases, taxes were lowered during President Obama's term. And Mitt would have to raise taxes on those earning less than two hundred thousand dollars to pay for his tax cuts on the wealthy.
--Hiram
--Hiram
why will you vote for Obama?
ReplyDeleteBecause he ended American involvement in Iraq, and is ending it in Afghanistan. Because he took the first, somewhat hesitant, and not entirely satisfactory attempts toward national health care (even if he had to use a Republican plan to do it}. Because he brought us back from the brink of economic catastrophe and despite Republican attempts to sabotage the economy for partisan political gain, put us back on the road to recovery.
--Hiram
Except for the last couple of years, household income seems pretty stable. With all the pressure from overseas labor markets, I am think counteracting inflation is about the best we can hope for.
ReplyDeleteDM Incomes
Wiki Income
Good points about Obama working to get us out the foreign conflicts. Can't support the healthcare plan though, too socialistic for my tastes.