Mitt Romney continues to portray himself as a gifted businessman; but is he? Slick Mitt appears to have enjoyed Bain and Company’s bailout by the FDIC when the company was on its way to bankruptcy! Yes, bankruptcy.
The owner of the company Bill Bain and his top executives drained the company of most of its capital assets, stealing them for their own greedy desires sending the business into a tailspin. That is when Bain decided to have Slick Mitt come to the rescue with a plan. And that plan was to scam the FDIC into a bailout, ultimately hitting on the taxpayers through bank fees for the cash and a Bain bonus bonanza.
In Rolling Stone’s September 13, 2012 edition, Matt Taibbi (MT), one of the nation’s best investigative print reporters, and Tim Dickinson (TD) wrote terrific pieces on the Romney bailout of Bain and Company. This post will summarize and extract pieces from those great articles. I will use my copy of the magazine to reference the story of just how Mitt Romney never built that, which he believes is IT.
To take a phrase from Bill Clinton: “ It depends on what the meaning of the word ‘that’ is.
Mitt Romney never built anything in his life. What he created were the very financial smoke and mirrors transactions that brought this nation’s economy to its knees leading up to the Great Recession of 2007-8. Had the FDIC not stepped in offering a bailout of the business, it would have gone into bankruptcy leaving investors holding worth-less paper sending Slick Mitt, and Paulnocchio to look from the outside into the Tampa RNC convention hall wishing they could be there, too.
Instead of building cars, as his father did, and airplanes, tractors, machines, and products as other Americans have done, Slick Mitt built swaps, collateralized debt obligations, and other toxic financial products to sell to rich customers. Instead of building new companies, in order to make a product made by American workers, for American consumers, he took out massive bank loans and used them to acquire existing firms, liquidating every asset in sight and leaving the target companies holding the debt. (MT)
As we all recall, it were similar shysters dressed in Romney outfits bringing $2-3 million dollar bonuses for selling crap to managers managing retiree retirement funds, and mortgages that sent the economy into a nosedive. And, Romney was a symbol of it, as well as an actor on the stage of immorality. Romney was a takeover artist who now wants to takeover the White House in order to takeover the process which would likely spin the nation into another Great Recession.
What Matt Taibbi found out was that in spite of the hocus-pocus financially destructive takeovers that Bain Capital engaged in, they, nevertheless, made lots of money for their investors between 1984 to 1998. Had those same investors invested in the stock market, they would have come out earning the same returns—somewhere around 30% per year.
The only ones who profited in a big way from all the job-killing debt that Romney leveraged were Mitt and his buddies at Bain, along with Wall Street firms like Goldman and Citigroup. Barry Ritzholtz, author of Bailout Nation, says the criticisms of Bain about layoffs and meanness misses a more important point, which is that the firm’s profit producing record is mediocre, especially when set against all the trouble and pain its business model caused. (MT)
Here is a sample of Romney’s business model:
“A private equity firm like Bain typically seeks out floundering businesses with good cash flows. It then puts down a relatively small amount of its own money and runs to a big bank like Goldman Sachs or Citigroup for the rest of the financing. (Most leveraged buyouts are financed with 60 to 90 percent borrowed cash.) The takeover firm then uses that borrowed money to buy a controlling stake in the target company, either with or without its consent. When an LBO is done without the consent of target, it’s called a hostile takeover.
Romney and Bain avoided the hostile approach, preferring to secure the cooperation of their takeover targets by buying off a company’s management with lucrative bonuses. Once management is on board, the rest is just math. So if the target company is worth $500 million, Bain might put down $20 million of its own cash, then borrow $350 million from an investment bank to take over a controlling stake.
But here is the catch. When Bain borrows all of that money from the bank, it’s the target company that ends up on the hook for all of the debt.
Now, your troubled firm—let’s say you make tricycles in Alabama—has been taken over by a bunch of slick Wall Street dudes who kicked in as little as five percent as a down payment. So in addition to whatever problems you had before, Tricycle Inc. now owes Goldman or Citigroup $350 million. With all that new debt service to pay, the company’s bottom line is suddenly untenable. You almost have to start firing people immediately just to get your costs down to a manageable level.” (MT)
And, the interest payments just drain the profits right out of the company.
“Fortunately, the geniuses at Bain who now run the place are there to help tell you whom to fire. And for the service it performs cutting your company’s costs to help you pay off the massive debt that it, Bain, saddled your company with in the first place, Bain naturally charges a management fee, typically millions of dollars a year. So Tricycle Inc. now has two gigantic new burdens it never had before Bain Capital stepped into the picture: tens of millions in annual debt service, and millions more in “management fees.” Since the initial acquisition of Tricycle Inc. was probably greased by promising the company’s upper management lucrative bonuses, all that pain inevitably comes out of just one place: the benefits and payroll of the hourly workforce.
Once all that debt is added, one of the two things can happen. The company can fire workers and slash benefits to pay off all its new obligations to Goldman Sachs and Bain, leaving it ripe to be resold by Bain at a huge profit. Or it can go bankrupt—this happens [with] seven percent of all private equity buyouts – leaving behind one or more shuttered factory towns. Either way, Bain wins. By power-sucking cash value from even the most rapidly dying firms, private equity raiders like Bain almost always get their cash out before a target goes belly up.” (MT)
This is what Slick Mitt meant when he said in his presidential nomination acceptance speech that, “I will help your family.”
What Mitt Romney has done is to ‘saddle companies with nightmarish debt and assign the crushing interest payments not to Bain but to the children of the company’s workers and their children who would be left holding the financial note long after Slick Mitt said his good-byes.’ (MT)
“Which brings us to another aspect of Romney’s business career that has largely been hidden from voters: His personal fortune would not have been possible without the direct assistance of the U.S. government. The taxpayer-funded subsidies that Romney has received go well beyond the humdrum, backdoor, welfare-sucking that all supposedly self-made free marketers inevitably indulge in.” Romney siphoned off an incredible $1.5 billion in aid from the U.S. Treasury as head of the 2002 Winter Olympics in Salt Lake—a sum greater than all federal spending for the previous seven U.S. Olympic games combined. Romney, the supposedly fiscal conservative, blew through an average of $625,000 in taxpayer money per athlete—an astounding increase of 5,582 percent over the $11,000 average at the 1984 games in Los Angeles. In 1993, right as he was preparing to run for the Senate, Romney also engineered a government deal worth at least $10 million for Bain’s consulting firm, when it was teetering on the edge of bankruptcy.”
And, don’t forget that without a provision in the federal [tax] code, companies like Bain would not be allowed to deduct the interest on the debt they use to acquire and loot their targets. (MT) So, Mitt, did you actually build that? Or, did the government give you some help along the way?
Speaking of help along the way, let us now explore how the FDIC bailed out Bain. Government documents on the bailout obtained by Rolling Stone magazine showed that the legend crafted by Romney that he was a success in business is basically a lie. Bain and Company was actually a disaster around November 1993, leaving the firm so financially strapped that it had “no value as a going concern,” as was reported in the documents. Even worse, the federal bailout ultimately engineered by Romney screwed the FDIC out of at least $10 million. And, in an added insult Romney rewarded top executives at Bain with hefty bonuses at the very moment that he was demanding his handout from the Feds. (TD)
Romney’s firm owed the government $30 million in bailout money, but he manipulated the FDIC and others so badly that he only paid back a small portion. Here is how it all came down:
“The FDIC agreed to accept nearly $5 million in cash to retire $15 million in Bain’s debt—an immediate government bailout of $10 million. All told, the FDIC estimated it would recoup just $14 million of the $30 million that Romney’s firm owed the government. In other words, the bailout negotiated by Romney ultimately wound up being paid by the American people through higher fees charged by banks because the FDIC had to recoup bailout losses through charging banks higher insurance premiums.
How ironic that “a banner at MittRomney.com declared WE HAVE A MORAL RESPONSIBILITY NOT TO SPEND MORE THAN WE TAKE IN. (TD)
When it comes to presidents who improved the economy of the nation, we can look at those who dedicated their lives not to business in the private sector, but to those who dedicated their lives to working in the public sector: FDR, JFK, Bill Clinton, and Dwight D. Eisenhower. When we look to presidents who were in the business of business, and ended up damaging or destroying the economy, we can look directly to Herbert Hoover, George Herbert Walker Bush, and LilboyBush, all of who were involved either in finance, or big oil. Now we have Slick Mitt, who touts his expertise in business, which is beginning to prove that Emperor Wannabee has no clothes. He had to beg for a bailout of Bain and Company; and, he out spent other Olympic committee chairmen, while portraying himself as a fiscal conservative.
Now, we are reading that Bain is being investigated by the Attorney General of New York for possible tax fraud. Hum—is Slick Mitt really qualified to be president? Slick Mitt accuses President Obama for not being qualified to be president because he had no business experience, yet it appears that Mitt’s qualifications don’t give him any bragging rights whatsoever. Actually, it seems he was a slight-of-hand financial artist. Hey Mitt, show us your tax returns? Let the American people see for themselves what kind of business person you actually were.
What this bit of hypocrisy indicates is that Mitt Romney is a full-blown sociopath. He makes the rules fit for him at the expense of other, including the entire nation. Mitt Romney has no moral code. He has no ethical code. He portrays himself as a religious person, but he fails to follow the guiding principles of morality and ethical integrity that such a true believer would follow.
Mitt Romney is basically a scorched Earth, one-dimensional fake.
A reason for all of this could be found by listening to this podcast on “limits”.
In the final discussion of the show, they were discussing if the mind has limits to retain data, and if the mind can capture insight into that data.
It is my opinion that Mitt Romney lacks total insight in the struggles of middle and lower income families. He has absolutely no insight into the problems of real people. He only sees the world in turns of winning and losing. It is an either/or phenomenon. A black and white viewpoint. The GOP aligns with the Romney perspective---no insight in the real struggles and plight of the 99%.
This is what makes Obama different from Romney and his followers. We are in trouble!!
Here is more:
Mitt Romney Tax Returns May Have Employed Legally Dubious Maneuvers, Tax Experts Say