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Froma Harrop: The Missing 'Humanity Clause' At Bain (This will make your blood boil
The Sun Journal ^ | 1/14/2012 | Froma Harrop

Posted on 01/14/2012 2:24:16 AM PST by Laissez-faire capitalist

... Under Romney's leadership Bain bought majority control of World Wide Grinding Systems in 1993. It put up $8 million of the $75 million purchase price and borrowed $125 million by issuing bonds. Bain immediately sent investors $36 million in dividend checks...

A steel business is capital-intensive and sensitive to economic conditions. That's why it needs to conserve money for the lean years. When the economy did go south, so did GS Technologies. GS Technologies went bankrupt in 2001, the plant closed and 750 workers lost their jobs.

Bain skipped out on a previous agreement to provide severance pay and health benefits coverage if that happened. The workers saw their pensions slashed by up to $400/month. But Bain walked away from the smoking ruins $12 million richer, not including $4.5 million in consulting fees.

And it had tapped government as well. The company had extracted $3 million in tax savings from Kansas City... The Federal Pension Benefits Guarantee Corp bailed out the company's underfunded pension plan to the tune of $44 million [taxpayer-funded]

...

(Excerpt) Read more at sunjournal.com ...


TOPICS: Crime/Corruption; Front Page News; News/Current Events; Politics/Elections
KEYWORDS: bain; baincapital; elections; gingrich; perry; rickperry; romney
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To: Cringing Negativism Network
"This sort of “capitalism” has sent America’s once mighty industrial base to the PEOPLES REPUBLIC OF CHINA. How is that a good thing?"

Exactly. Low life rape and burn business practices are not traditional US business practice or at least it was not condoned until the leftists started their reign of progressive terror. But the left would love for everyone to paint a disgusting picture of the entire business community and the huge part of the Republican party that makes up business.

The Romneys are old Detroit leftists and they left Detroit in ruins, Mitt proceeded to Massachusetts and enacted Romneycare on the masses. Romney is a parasite on the taxpayers and treats average Americans as suckers, not customers or employees and loves nanny state mandates...that is what we call a limousine liberal around here..not a conservative.

Yes Virginia, there are rotten apples in the barrel....

51 posted on 01/14/2012 5:00:54 AM PST by Earthdweller (Harvard won the election again...so what's the problem.......? Embrace a ruler today.)
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To: Laissez-faire capitalist
Hey RUSH, how about this capitalism? You think this is what our country was built on? Hannity, Does this make you proud to be an American?

This is NOT capitalism folks, this is sleaze and just barely legal. The people who do this are reprehensable. They want to do that in private business, it's up to them, but I do NOT want one of them to be president of this country.

52 posted on 01/14/2012 5:01:00 AM PST by McGavin999 ("If you'll have my back when I go to Washington, I'll have yours" Rick Perry 2012)
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To: hans56

There is no thinking person in America that thinks Union Pension plans are reasonable and fairly negotiated. Union pension plans are bankrupting whole states as well as companies. Most of the pension plans are forced on companies because they must have unions under state / federal laws and if the companies do not agree to a business killing plan a strike will bankrupt their company immediately. They negotiate outlandish and unsustainable pensions with a gun held to their heads.


53 posted on 01/14/2012 5:03:13 AM PST by BushCountry (I hope the Mayans are wrong!)
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To: Longbow1969

Attacks on capitalism? YOU think this is capitalism?


54 posted on 01/14/2012 5:03:47 AM PST by McGavin999 ("If you'll have my back when I go to Washington, I'll have yours" Rick Perry 2012)
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To: BushCountry
They provided the capital . . .

Sounds like these are on the venture capital side of Bain -- about which there has been no criticism. You list only one that sounds clearly like a private equity turnaround.

Sort of unrelated question: it sounds in a number of accounts as if Bain took over, in whole or in part, a company and then hired or got itself as a consultant. I guess it's perfectly legal (whether it should be or not is another question), but it does seem to guarantee that, whether the company succeeds or fails, Bain will come out on top.

55 posted on 01/14/2012 5:06:46 AM PST by maryz
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To: BfloGuy

So you are telling me that this wasn’t just the practice under Romney? You are telling me this is the standard practice of Bain?


56 posted on 01/14/2012 5:08:05 AM PST by McGavin999 ("If you'll have my back when I go to Washington, I'll have yours" Rick Perry 2012)
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To: Longbow1969

I agree. Some folks here are so obsessed with attacking Romney they’d knock down their own momma to spit on Romney.

Clearly, many of them have no idea what venture capitalists do or why they are beneficial in a free enterprise system. Apparently, they favor some type of REGULATIONS to restrict buyouts or outside capital, the loss of jobs resulting from scrapping or relocating unprofitable parts of a business, or the complete scrapping or relocating of a business & its assets, BY ITS OWNERS.

Apparently, attacking Romney trumps even private property.


57 posted on 01/14/2012 5:12:12 AM PST by Mister Da (The mark of a wise man is not what he knows, but what he knows he doesn't know!)
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To: Mister Da

And you have no idea what venture capital is. Hahaha.


58 posted on 01/14/2012 5:15:40 AM PST by Utmost Certainty (Our Enemy, the State | Gingrich 2012)
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To: Laissez-faire capitalist

“Mitt Romney is a “job cremator””

“Mitt Romney has claimed that while at Bain Capital and Bain & Co. between 1984 and 1999 he helped create 100,000 net new jobs yet in his 1994 attempt to unseat Ted Kennedy he claimed 10,000 net new jobs. Since Romney retired from Bain in 1999, it’s plausible that the other 90,000 happened between 1994 and 1999, though it’s highly unlikely. It appears Romney is adding up all the jobs “now” at the few companies that later thrived.

National Review, a leading conservative publication, has claimed that Mitt Romney’s firm “never asked for a bailout” but there is abundant evidence that isn’t true. In October 1993, Bain Capital became majority shareholder of a steel company called Worldwide Grinding Systems, later renamed GS Technologies. Eight years later the mill was padlocked and 750 people lost their jobs. Workers were denied the severance pay and health insurance they were promised, and their pension benefits were cut by as much as $400 a month.
The federal Pension Benefits Guarantee Corp., which insures company retirement plans, had to pony up $44 million to bail out the company’s underfunded pension plan. Nevertheless, Bain profited on the deal, receiving $12 million on its $8 million initial investment and at least $4.5 million in consulting fees. In all, Bain Capital more than doubled its investment.
Bain made its profit after taking control of the company by piling on more and more debt. The amount totaled $378 million by 1995. The new company also issued $125 million in bonds. Bain put inexperienced managers in place and spurned a generous buyout offer from a competitor. All these moves guaranteed that the company would fail.
Four of the 10 companies that made Bain the most money under Romney went bankrupt. The Wall Street Journal looked at 77 businesses Bain invested in under Romney’s leadership and found that 22% went bankrupt or closed their doors within eight years. Romney generated fantastic returns for himself and investors, with $2.5 billion in profits. About 70% of that came from just 10 deals and four of those companies wound up going bankrupt. The buyout firm delivered an average annual return on investment of 88 percent between its founding in 1984 and when Romney left in 1999.”

Sounds like Romney can use debt and bankruptcy as well as O’Bummer!


59 posted on 01/14/2012 5:18:23 AM PST by tired&retired
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To: Laissez-faire capitalist

No “humanity clause” can suspend economic reality. In fact, the exact goal that Marx, Lenin, Stalin, Mao and Pol Pot were trying to achieve was to suspend all laws and principles in order that their societies produced the perfect Socialist Man. The resulting hell on earth was an attempt to effect the ultimate “humanity clause”, a kind of secular salvation of humanity.


60 posted on 01/14/2012 5:24:29 AM PST by theBuckwheat
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To: Laissez-faire capitalist
What say you?

Ivy-League-White-Trash alert.

61 posted on 01/14/2012 5:24:39 AM PST by the invisib1e hand (eat more possum.)
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To: Utmost Certainty
To my knowledge, Bain Capital has broken no laws, so they were participating in the free market as dictated by law.

You are siding with the leftist, nanny state, “let's pass some more regulations to stop this sort of stuff” crowd. The author of this article is a Leftist. All the Leftists are on you side on this one. Don't you feel just a little uncomfortable? They are ALWAYS wrong, you know!

There are plenty legitimate ways to attack Romney without attacking free, legal enterprise.

62 posted on 01/14/2012 5:27:42 AM PST by Mister Da (The mark of a wise man is not what he knows, but what he knows he doesn't know!)
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To: Laissez-faire capitalist
You can say that FR quoting Froma Harrop is an example of irony but here's an even better example of irony involving Froma Harrop which ironically comes via Jon Stewart's Daily Show.
63 posted on 01/14/2012 5:33:44 AM PST by Tribune7 (Vote Perry)
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To: maryz
Whether the company succeeds or fails, Bain will come out on top.

Exactly! That is their business model to come out on top. However, if they make a company more successful, the more they come out on top! Their business model is based on providing companies with an infusion of cash so they can survive and thrive.

They want the companies to succeed! The two recent examples that the left and certain unstable members of Freerepublic are screaming about failed because of a Union Strike theat caused the company to shutter its doors and a whole industry failing. Both events out of their hands.

If Bain had a choice they would have wanted these companies to succeed to collect more profits from their risky investment. They would be stupid to not take advantage of Government subsidies freely offered and not to demand a return on their extremely risky investment in failing companies. Does anyone sane person believe without demanding a return on their investment any venture capitalist would supply the needed capital needed to a dying company?

64 posted on 01/14/2012 5:37:44 AM PST by BushCountry (I hope the Mayans are wrong!)
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To: Mister Da

Don’t care if someone says they’re from the right or the left, if their arguments are factually sound.

I’m not saying there needs to be more laws—I think there ought to be fewer laws. There should be fewer laws that protect crony corporations from accountability—along with less loose government monetary policy which inflates easy credit that makes reckless LBOs like those of Bain Capital more possible. Get government interference out of the market.

You wannabe-capitalists ought to go shill for Solyndra and more TARP bailouts. You make me sick.


65 posted on 01/14/2012 5:39:30 AM PST by Utmost Certainty (Our Enemy, the State | Gingrich 2012)
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To: BushCountry

Arg... next time I might proofread.


66 posted on 01/14/2012 5:41:00 AM PST by BushCountry (I hope the Mayans are wrong!)
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To: BfloGuy

I say that the left will spin this cruel capitalist meme for all it’s worth.

I say it may have been a mistake for Perry and Newt to hit this, but I’d need to know more about the overall practices of the company to be sure.

We can be capitalists without accepting corruption and theft.

I don’t know about Newt but I know Perry has a proven record of being pro-business and pro-capitalism and cannot be logically attacked on this score.

We’ll just have to see how it plays out. (mad at Rush right now though)


67 posted on 01/14/2012 5:41:07 AM PST by altura (Perry 2012)
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To: Utmost Certainty

I wannabe a capitalist. Capitalism is great.

But not, by destroying American jobs.

Haven’t we all seen how that’s turning out, already?


68 posted on 01/14/2012 5:42:10 AM PST by Cringing Negativism Network (ROMNEY / ALINSKY 2012 (sarcasm))
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To: Tribune7
Yep...the lights are on, but nobody's home. But apparently she's now T.S. Eliot.

Beam me up, Scotty.

69 posted on 01/14/2012 5:55:44 AM PST by truthkeeper (Vote Against Barack Obama in 2012! (That's my story and I'm sticking to it.))
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To: Utmost Certainty

“You make me sick.”

Your good at sniping & name calling, & not much else.

Goodbye!


70 posted on 01/14/2012 5:57:25 AM PST by Mister Da (The mark of a wise man is not what he knows, but what he knows he doesn't know!)
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To: Laissez-faire capitalist
IMHO Willard is no different from Lloyd Blankfein who justified hoodwinking Goldman's own investors by selling them poor securites and then having their prop desk bet against them. BETTING AGAINST THEIR OWN INVESTORS!

Blankfein justified it by simply stating that it's "just business" to make money for the firm. No morals. No ethics. Just greed.

Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other. - John Adams

If we don't vote for righteous men, we get what we deserve.

71 posted on 01/14/2012 6:00:13 AM PST by Dr. Thorne (Fall on your knees before Christ, your only salvation!)
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To: BushCountry
They provided the capital for Staples, Sports Authority, Bright Horizons, Domino’s Pizza, Dade International, Steel Dynamics (Oh no! They saved the third largest steel manufacturer), Gartner Inc. (over 100,000 jobs total) All these companies are much stronger (survived) because of Bain.

Some doctors deliver babies and also perform abortions.

How many healthy babies delivered do you calculate to make up for each aborted baby?

in the same vein, how many successful ventures does it take to excuse the intention killing off of going concerns in order to plunder their assets?

72 posted on 01/14/2012 6:00:42 AM PST by John Valentine (Deep in the Heart of Texas)
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To: BushCountry
I believe that, properly speaking, venture capital is an investment in a promising -- but undercapitalized -- start-up. "Private equity" seems to be the preferred term for take-over of an underperforming company in hopes of turning it around or whatever. (I read that private equity used to be referred to as "private investment," but then you get the acronym of PIGs, so "private equity" became the preferred term.) Just because the news media don't know or care about the difference is no reason to emulate them.

I haven't seen any account of union strike company, so I have no comment on that. To what extent Bain may have failed in due diligence ahd so did not foresee union troubles or to what extent they merely overestimated their ability to deal with the union, I don't know.

So why was Bain making "extremely risky" (your term) investments only justified to them by the promise of gov't subsidies? The problem with government subsidies is that they tend to be ill-thought-out or precisely designed to reward the politically connected -- or both. Also, the gov't is playing (as usual) with other people's (i.e., taxpayers') money.

I don't think a tunnel-vision approach to making money at whatever cost to others (or to the economy or to the country for that matter) is a conservative value, else FR would be celebrating and praising George Soros, instead of condemning him.

73 posted on 01/14/2012 6:01:55 AM PST by maryz
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To: maryz

Technically your right... Bain provided Private Equity to most of these companies to turn them around. Most of the companies were failing or about to go bankrupt.

The union strike company was featured in the King of Bain video. Remember the strike happened after the company fired all of it’s employees and rehired them. However, once the company exceeded hiring 51% of the employees back they were forced by state laws to unionize. Immediately the union went on strike. The company closed their doors.

The second company mentioned was a steel company. The whole industry started to collapse years after Bain’s investment.

The companies that Bain invests Private Equity / Venture capital outperform the S & P four to one. Thousands of companies apply for Bain’s Private Equity money yearly. They are one of the best performing companies of this type in the nation. They meet or exceed the national average for Venture Capital / Private Equity Firms in successful outcomes.


74 posted on 01/14/2012 6:20:53 AM PST by BushCountry (I hope the Mayans are wrong!)
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To: Laissez-faire capitalist

An American steel plant went out of business because they couldn’t compete with cheaper foreign imports? Gee, that’s never happened before. During this same stretch, one half of all steel jobs in this country would be lost. Maybe if the union workers hadn’t gone on strike for 2½ months for even more money and bigger benefits, things might have gone better for them. Speaking of, isn’t it the United Steel Workers union that handles the pension fund? I would be asking them about what happened to the pension money. But $44 million is a drop in the bucket compared to the $1.9 billion that the Pension Benefit Guarantee Corp paid out to LTV Steel that same time.


75 posted on 01/14/2012 6:22:40 AM PST by Hoodat (Because they do not change, Therefore they do not fear God. -Psalm 55:19-)
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To: Laissez-faire capitalist
????
76 posted on 01/14/2012 6:31:38 AM PST by upchuck (Let's have the Revolution NOW before we get dumbed down to the point that we can't.)
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To: BushCountry
Remember the strike happened after the company fired all of it’s employees and rehired them.

Where was Bain in all this? Just asking who was in charge of the firing and rehiring. Sounds like a truly stupid thing to do without knowing the applicable state law.

Without knowing more, I suspect it might have been better than firing to let the company go into Chapter 11; I believe Bankruptcy Court judges have the authority to void or insist on renegotiating contracts. (For the same reason as I understand it, it would have been better for GM and Chrysler to go into bankruptcy. Also more legal.)

Much of the rest of your post sounds as if it were lifted verbatim from Bain promotional material! If not, maybe you could get a job writing it for them! :) (Just trying to be constructive!)

The attraction to gov't subsidies and taxpayer bailouts remains a problem though. I've asked what percentage of Bain turnaround targets involved such thing and either no on knows or just haven't bothered to answer.

77 posted on 01/14/2012 6:41:26 AM PST by maryz
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To: Longbow1969
Come on. Every single thing done under the umbrella of "capitalism" isn't worthy, honorable, and above reproach. I'm sure you'll agree that just because one can do it doesn't mean one should do it.
78 posted on 01/14/2012 6:42:35 AM PST by Clara Lou (nObama, noRomney (Obama-lite), noPaul, noBachmann, noSantorum)
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To: hans56
Union's don't underfund pensions. Company run defined pension plans are just that. They are run by the company. The union and the company negotiated the benefit (usually in place of wages) and it was the companies responsibility to properly fund it. If the company couldn't afford to fund it they shouldn't have said they would. It is that simple.

I'm glad you said it, now I don't have to. Unions don't generally "run" a pension plan, companies do. G.M. being a notable exception with the union playing a dual role as "owner" too.

And I see you already have a reply telling you about those awful union run pension plans. Some just never will "get it".

Some skilled trades unions may be exceptions too - company funded and union supervised but that's a situation where the members don't just work for a single company but go from company to company, depending on where the work is.

79 posted on 01/14/2012 6:49:20 AM PST by Graybeard58 (Eccl 10 v. 19 A feast is made for laughter, and wine maketh merry: but money answereth all things.)
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To: Mister Da

Nobody is attacking free enterprise, except a bunch of wilfully blind RINOs who can’t seem to see the difference between asking reasonable questions about a candidate’s record and “attacking capitalism.”

Romney has boasted about his “business,” trying to give the impression that he was a captain of industry, but avoiding the fact that his activity was actually in the highly speculative financial sphere. There is nothing wrong with this, but he should be honest about it. However, because the Dems have vilified “Wall Street,” he doesn’t want to be connected with it.

There are also questions about some of the deals the company did, particularly those done during the heyday of “vulture capitalism,” which didn’t mean buying and restructing failing businesses, but buying anything you could get, stripping the assets out of it and dumping it. These things may all have been perfectly legal, but that doesn’t make them right or beneficial to anybody’s economy except that of the speculator.

In addition, some of these things were done relying on the fact that the government would come in to make up the difference; it was possible to take the entire pension fund as “management fees” because the fund was government insured and the government would bail it out.

Romney has explained none of this. But he sure has been successful at duping a bunch of people who should know better, convincing them that somehow defending his lies is defending “capitalism.”


80 posted on 01/14/2012 7:25:50 AM PST by livius
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To: livius

Well, if Republicans don’t want to look at Romney’s record now, I’m sure they’ll get a chance in the summer and fall. Just counting the 80 or so companies the WSJ mentioned and the 20% or so that went bankrupt, that gives the MSM one bankrupt company a week to investigate between July through October. The guy who did the King of Bain video was apparently just a former Romney staffer who made it on his own and tried to sell it to Newt and Perry. The MSM will have about a zillion times more resources to put together their own reports.

The one common thread that seems to go through all the Bain bankruptcies is that Bain and their investors either lose nothing or very little on them. All the loss is piled onto the employees, the banks, the insurance companies, the government, etc. It’s very much like the mortgage-backed securities situation where one person uses clever financial wheeling-and-dealing to lead another person into taking all of the loss on a high risk prospect.

We’ve been focusing on the job losses, but that seems to be just one piece of a larger gaming of the financial system that shows not just ethical lapses but willful abuse of the system. It seems like the modus operandi for a lot of Bain’s acquisitions was to buy a company and cut a lot of short-term costs by selling assets, firing workers, etc. Then they would take the financial statements to creditors to show that the company is starting to show a profit and get huge loans for the acquired business. Then they would take most of that loaned money and transfer it back to Bain for their own profit in the form of fees and dividends. That money was then untouchable when the acquired business went bankrupt. The insurance companies, the government and the banks were then on the hook for the loss. The NY Times reported one case where Bain was threatened with a lawsuit and only then agreed to forego some of the fees they said they were owed from a bankrupted firm.

No one’s saying Bain didn’t have successes. But it seems like the way to “maximize their return” was to realize they could get away with scams and con jobs on 20% of their buyouts without ruining their reputation. That kept enough credit flowing and allowed them to abuse the system. I’ve seen where a couple managers from these businesses say they would’ve avoided bankruptcy if Bain didn’t drive them into debt, often just for the purpose of Bain paying itself in advance before they did anything to help the company.

I wonder if I could start a company today, get a million-dollar loan, pay myself a million-dollar consulting fee, and then let the business go bankrupt and claim it has no assets while I keep the money. Well, you have to realize this is exactly what Bain did. They just did it with a lot more cover, basically as a “side business” on top of their legitimate operations. Obviously they couldn’t do that scam 100% of the time, but they seem to have figured out they could get away with it 20% of the time without it ruining their reputation.

At any rate, most of us are amateurs trying to piece together a picture of Bain on a shoestring budget. I’m sure the MSM will do a much better job of defining Bain for us this summer and fall if Romney is the nominee.


81 posted on 01/14/2012 7:58:44 AM PST by JediJones (Newt-er Romney in 2012!)
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To: livius

Romney has explained none of this. But he sure has been successful at duping a bunch of people who should know better, convincing them that somehow defending his lies is defending “capitalism.”

**

Exactly. Has explained NOTHING. If he could come out, provide some walk through on any of it, providing some rationales ...ok, but he hasn’t, and he won’t. He will only attack his critics.

Just like Obama does.

A man who thinks it’s ok to have some “losers” in these deals is NOT a man I want for president.

What got me in one of the stories was hearing about the lowering of quality of the products (i.e., the washing machines, for example). It reminds me of what’s being done in healthcare now ...continue to push employees, do more with less — just to stay profitable. Eventually it runs it into the ground, runs people into the ground — the “craft” of what you do is destroyed. It’s a horrible way to operate and a horrible thing to do to tour fellow human beings.


82 posted on 01/14/2012 8:00:04 AM PST by LibsRJerks
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To: livius

Romney has explained none of this. But he sure has been successful at duping a bunch of people who should know better, convincing them that somehow defending his lies is defending “capitalism.”

**

Exactly. Has explained NOTHING. If he could come out, provide some walk through on any of it, providing some rationales ...ok, but he hasn’t, and he won’t. He will only attack his critics.

Just like Obama does.

A man who thinks it’s ok to have some “losers” in these deals is NOT a man I want for president.

What got me in one of the stories was hearing about the lowering of quality of the products (i.e., the washing machines, for example). It reminds me of what’s being done in healthcare now ...continue to push employees, do more with less — just to stay profitable. Eventually it runs it into the ground, runs people into the ground — the “craft” of what you do is destroyed. It’s a horrible way to operate and a horrible thing to do to your fellow human beings.


83 posted on 01/14/2012 8:00:16 AM PST by LibsRJerks
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To: RobertClark
If these companies were to go belly-up and send all of their employees to the curb, would private equity be blamed for the job losses for not stepping in and saving them? Some work out, some don't. Cerebus tried like hell to save Chrysler.

The problem is that private equity firms are able to "socialize their losses" by transferring assets from the troubled firm directly to the private equity firm. Then if or when the troubled firm goes bankrupt, Bain has no responsibility to pay the firm's debts and can keep all that money. Thus we all end up funding Bain's profits out of our pockets by covering their losses through banks, insurance, taxes, or losses in the workers' pension plans. This is the explanation that answers the suspicion as to why Bain never seemed to lose money on a deal, even when their acquisitions went bankrupt. This is the kind of "capitalism" that people, quite rightly, do not trust. It's one of those things that sounds indistinguishable to most people from what Bernie Madoff did, but just happens to be legal. You can argue it's caused by government policy or the private firm itself, whatever. Just like with the mortgage meltdown of 2008, there is plenty of blame to go around.

84 posted on 01/14/2012 8:19:38 AM PST by JediJones (Newt-er Romney in 2012!)
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To: Mister Da
BTW, unless the laws have changed recently, pension funds are segregated from the business & may not be raided by the business or its owners, old or new. Any pension bailout occurred because the poor management prior to the buyout failed to adequately fund & manage the pension.

Why do you say the poor management had to occur before the buyout? Since Bain controlled this firm for 8 years prior to the bankruptcy, aren't they responsible for funding the pension? The article says they promised to fund the pension, so are you saying it's ok for them to lie to their workers?

I suppose that if Romney was a surgeon specializing in amputations, we would be criticizing him & his employers for creating so many cripples.

That's not the correct analogy. Here is the correct analogy. You go into Dr. Bain to get your tonsils out. During the process he also removes your kidney and sells it to someone who needs a transplant. Your health insurance then pays for your kidney to be replaced and everyone else's insurance costs go up.

85 posted on 01/14/2012 8:27:48 AM PST by JediJones (Newt-er Romney in 2012!)
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To: BushCountry
If Bain had a choice they would have wanted these companies to succeed to collect more profits from their risky investment...Does anyone sane person believe without demanding a return on their investment any venture capitalist would supply the needed capital needed to a dying company?

Demanding a return is different than guaranteeing a return. People buy stocks all the time and they don't know whether they will lose or make money on the deal. It's called risk. It's called the free market. Rigging up your deals so that you will get bailed out by insurance, banks, the taxpayer or the workers' pension funds whether the company makes money or loses money or not isn't the free market, it's socialism and subsidization. If you want to make the argument that PE firms should be subsidized in this way because they are that important, then go ahead. But it doesn't show that Bain is an honorable business or one that succeeded on its own merits. It's essentially just another government-backed entity like Fannie or Freddie.

86 posted on 01/14/2012 8:35:54 AM PST by JediJones (Newt-er Romney in 2012!)
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To: livius
Pension funds are governed by strict laws. I seriously doubt any pension can be gutted by management fees. But if Bain did something illegal re. any pension funds, then they should be indicted or sued. I see no indictments, no lawsuits.

Ultimately, this whole argument comes down to “fairness”, a mythical concept of the Left used to encourage class warfare.

While it seems unfair that a business layoff employees or move elsewhere to a better business environment, it is just as unfair that investors lose their money supporting employees they cannot afford.

“...buying anything you could get”

This is exactly right! But, investors don't usually sell good investments, & Bain C cannot force any investor to sell their investments. You cannot buy that which is not for sale. There must be good monetary incentive (profit) to sell a good investment. Bad or poorly performing investments, OTOH, are easily acquired & are often selling at bargain prices.

Do you think those investors - owners - selling their business give one whit about the fate of the employees? Did they include protections for the employees in the sale & management turnover? Owners can do that, you know, but it costs them money. Or did they take their money & run?

Let's see? You've worked 20-30 years for a company, & one day the owners sell off & leave, often w/o so much as an “Adios”. New owners come in & gut the place, so it is entirely their fault you lose your job? Seems to me that if any obligation exists to the employee & I don't believe there is, it is the people who hired them that has the obligation, not the new owners or new management.

"These things may all have been perfectly legal, but that doesn’t make them right or beneficial to anybody’s economy except that of the speculator."

The exact same argument could be made against Boeing as it attempted to move manufacturing out of the Northwest to the Carolinas. Is it right or fair that all those people would lose their jobs so Boeing could make more money for their stockholders? That is the essence of the argument.

87 posted on 01/14/2012 9:20:11 AM PST by Mister Da (The mark of a wise man is not what he knows, but what he knows he doesn't know!)
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To: BfloGuy
You don't have to support Mitt Romney's candidacy to debunk the anti-capitalist rhetoric being flung at him.

And, it isn't an attack on capitalism to be critical of ruthless, immoral and unethical business dealings:

http://www.nypost.com/p/news/business/ad_mitt_mistakes_jRmd2LHaPIb0bbNn1ZkgaJ

Romney's private equity firm, Bain Capital, bought companies and often increased short-term earnings so those businesses could then borrow enormous amounts of money. That borrowed money was used to pay Bain dividends. Then those businesses needed to maintain that high level of earnings to pay their debts.

88 posted on 01/14/2012 9:33:49 AM PST by Kazan
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To: Longbow1969

Romney is NOT a Republican; he is a Democrat posing as a Republican.

Bain is one of the largest donators to the Democratic Party. What you’re trying to defend as being Capitalism is actually Democrats without ethics in business! For them, any means justifies the end if enriches themselves.


89 posted on 01/14/2012 2:01:07 PM PST by SatinDoll (NO FOREIGN NATIONALS AS OUR PRESIDENT!)
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To: Laissez-faire capitalist

We no longer teach capitalism - so no one understands how it works.

We only teach Marxism in our schools. And Marxism only points out the flaws in Capitalism.

Our Republic could very well be screwed. :(


90 posted on 01/14/2012 2:08:39 PM PST by Tzimisce (Never forget that the American Revolution began when the British tried to disarm the colonists.)
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To: Longbow1969
Wait, is this article by the same Froma Harrop that compared the Tea Party to terrorists and at the same time runs the “Civility Project”? The same Froma Harrop that the Daily Show just skewered (with video right here on FR) for being so biased that when made directly obvious to her she still couldn’t see it. Kinda amusing that an article by this woman would be used to attack a venture capitalist company - even one run by Romney the chameleon. Sorry, but my guess is there is more to this story than what Harrop is telling us. I don’t think these attacks on capitalism are the right way to go. There is plenty about RINO Mitt to attack from the right without sounding like a bunch of occutards.

Worth repeating. Because it's the most intelligent post on the thread.

May we have the shole story, please? And may we have it from somebody who knows more about business (and life outside the ivory tower) than Froma Harrop -- who knows nothing about anything?

91 posted on 01/14/2012 2:19:45 PM PST by okie01 (THE MAINSTREAM MEDIA: Ignorance On Parade)
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To: Laissez-faire capitalist

Funny how liberals (like Romney) are so big in amoral financial shenanigans. Making those megabucks via shoving pension funds onto the American taxpayer and extracting $$$ from a victim company until it bankrupts. This is what took place most of the time

Romney’s father ran an automobile company, a captain of industry. His lazy arse son gets together with fellow Mormon Robert C. Gay and founds Bain Capital with a few others


92 posted on 01/14/2012 2:39:37 PM PST by dennisw (A nation of sheep breeds a government of Democrat wolves!)
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To: Laissez-faire capitalist
 

They saw that you could buy a company through a leveraged buyout and radically reduce its tax rate. The company then could use those savings to pay off the increase in its debt loads. For every dollar that the company paid off in debt, your equity value rises by that same dollar, as long as the value of the company remains the same.

So the business model is based on a capital structure and tax arbitrage?

Yes. It’s a transfer of wealth as well. It’s taking the wealth of the company and transferring it to the private equity firm, as long as it can pay down its debt. It think it is real – the very early firms targeted industries in predictable industries with reliable cash flows in which they by and large could handle this debt. As more went into this industry, it became very hard to speak to the original model. Now firms are taken over in very volatile industries. And they are taking on debts where they have to pay 15 times their cash flow over seven years — they are way over-levered.

The most common argument for why Bain Capital and other private equity firms benefit the economy is that they are pursuing profits. They aren’t in the business of directly “creating jobs” or “benefitting society,” but those effects occur indirectly through the firms making as much money as they can.

But even here, “profits” — how they exist, where they come from, and how they are timed — have a crucial legal and regulatory function. A recent paper from the University of Chicago looking at private equity found that “a reasonable estimate of the value of lower taxes due to increased leverage for the 1980s might be 10 to 20 percent of firm value,” which is value that comes from taxpayers to private equity as a result of the tax code. Can you talk more about this?

That sounds about right. If you took away this deduction, you’d still have takeovers, but you’d have a lot less leverage and the buyer would be forced to really improve the company in order to make profits. I think that would be a great thing.

If you look at the dividends stuff that private equity firms do, and Bain is one of the worst offenders, if you increase the short-term earnings of a company you then use those new earnings to borrow more money. That money goes right back to the private equity firm in dividends, making it quite a quick profit. More importantly, most companies can’t handle that debt load twice. Just as they are in a position to reduce debt, they are getting hit with maximum leverage again. It’s very hard for companies to take that hit twice.

If you look at Ted Forstmann, an original private equity person who just passed away, he would rail against dividends in this manner — borrowing money to pay out dividends. He was more interested in taking companies public and selling shares and paying down debts and collecting proceeds that way. I can respect that a lot more. The initial private equity model was that you would make money by reselling your company or taking it public, not by levering it a second time.

Private equity and buyouts started as a way to take advantage of tax gimmicks, not as a way of saying “we’re going to turn around companies.” And now it’s out of control. I look at the 10 largest deals done in the 1990s, during ideal economic times, and in six cases it was clear that the company was worse off than if they never been acquired. Moody’s just put out a report in December that looked at the 40 largest buyouts of this era and showed that their revenue was growing at 4 percent since their buyout, while comparable companies were growing at 14 percent.

In January — so just in the past 12 days — Hostess, the largest bakery in the country, just went bankrupt. Coach, the largest bus company, just went bankrupt. And Quizno’s is about to go bankrupt. All of these were owned by private equity.

This battle is part of a larger discussion of, in Henry Manne’s phrase, “the market for corporate control.” The tax code is set to overlever firms, which require increases in earnings to go toward debt payments instead of research and development, expansion, and other things that build the firm. What could we change to generate different outcomes?

That’s exactly right. Right after this goes on for a few years, you’ve starved your firm of human and operating capital. Five years later, when the private equity leaves, the company will collapse — you can’t starve a company for that long. This is what the history of private equity shows.

What I’d like to see Mitt Romney do is to show an example of a buyout that went well. The only success stories he’s talking about on any level are venture capital investments — Staples and Sports Authority. Personally I like venture capital, I think it provides a lot of value, but that’s not what he did mostly, and that’s not what these takeovers are about.

The big fix I’d encourage is an end to interest-tax deducibility for leveraged buyouts. The tax system encourages companies to borrow as much as they can. For certain industries, like telecom, these deductions might make a lot of sense. But it was never intended for financing leveraged buyouts. If you put a cap on this you would find buyouts and private equity firms that were much more focused on building companies.

http://rortybomb.wordpress.com/2012/01/12/an-interview-with-josh-kosman-on-the-embeddedness-of-private-equity-in-the-tax-code/

 

93 posted on 01/14/2012 2:42:21 PM PST by dennisw (A nation of sheep breeds a government of Democrat wolves!)
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To: Cringing Negativism Network

Newt or Santorum. Bain has made the spaced out Mormon unelectable. Why did he thrust himself upon the Republican party? Mittens is a 100x worse than I thought. This egomaniac thinks he is a moral person? He is that crazy and will drag us down if he runs against Obama. Team Obama is salivating, planning for a run against Romney, their ideal Republican nominee.

Another Karl Rove scheme....


94 posted on 01/14/2012 2:51:40 PM PST by dennisw (A nation of sheep breeds a government of Democrat wolves!)
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To: BfloGuy
Thanks for that link. Very, VERY, informative on what reallyhappened .

All these attacks of late on capitalism in general from conservative FReepers, are to say the least, making me a tad confused as personally I LOVE Capitalism in all it's forms. And some of those forms are like making sausage: You don't want to see how it's done.

I also rather enjoyed having people fired when they were costing my projects, my company, and ME -- MONEY! One guy in particular who was a THIEF and wasn't arrested on this one construction project solely because nobody in that building actually saw him loading the four computers that went missing into his truck.

The staff walks out of room with computers there. This guy comes in to work, he finishes, then the staff comes back in -- POOF -- no more computers in the room.
Seeing his final paycheck being printed and the Field Superintendent delivering it to that mutt was one of my happier moments.

So yeah, Firing People IS Fun!

This is NOT a pro Mittens comment, IMO he's a snake and phony.
It's a Pro Capitalism comment.

95 posted on 01/14/2012 3:37:10 PM PST by Condor51 (Yo Hoffa, so you want to 'take out conservatives'. Well okay Jr - I'm your Huckleberry)
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To: Texas Fossil
But, but, but, the MSM says that Mitt is the most “electable” candidate for President. / sarcasm

The MSM is just drooling over the stories that they will publish about Mittens once he gets the nomination. That's why we haven't seen much in the way of attack news against Mitt -- there is SO much good stuff that they are praying he's the one to go up against Obama.

96 posted on 01/14/2012 3:49:11 PM PST by PapaBear3625 (During times of universal deceit, telling the truth becomes a revolutionary act.)
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To: okie01
Worth repeating. Because it's the most intelligent post on the thread.

No, it's one of the stupidest posts in the thread. Criticizing the messenger instead of the message is a classic logical fallacy, hence it fits the textbook definition of stupidity. If you can't find any faults in the accuracy of the message but simply insist it must be wrong because of who the messenger is, then you're being stupid. If one of the candidates murdered somebody, I would expect Democrats to report it. Would that make the message false?

97 posted on 01/14/2012 4:04:01 PM PST by JediJones (Newt-er Romney in 2012!)
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To: Condor51

Talk about a strawman argument. Who here would disagree it’s wrong to fire someone because they stole from the company?

If you like capitalism in all its forms, then you like crony capitalism, government bailouts, monopolies, lobbyists gaming the tax code so some firms can benefit over others, etc.

Romney and Bain could not do what they do without favored tax breaks, government insurance bailouts, unnaturally low interest rates, and laws that allow their acquired firms to go bankrupt without requiring Bain to pay back any of the borrowed money that they “transferred” to themselves. What they’re doing does not exist in some kind of mythical free market, which also does not exist in our country. They are gaming a system which is set up to favor some forms of market activity and punish others.


98 posted on 01/14/2012 4:11:58 PM PST by JediJones (Newt-er Romney in 2012!)
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To: dennisw

Thanks for that! That’s a missing piece from my analysis on how the tax code gives special government favor to these private equity firms. I really hope Newt and others DO NOT back off these attacks because what Bain did looks dirtier and dirtier the more you look into it. Here is a Wall Street Journal review of the book they’re discussing:

Private Equity, Debt Worries

A warning about the precarious state of companies owned by buyout firms.

http://online.wsj.com/article/SB10001424052748704013004574515450045378722.html

Mr. Kosman brings to the subject a relentlessly critical approach that is refreshing, simply because so many stories about the buyout firms are the sort of puff pieces that result from delicate negotiations for access. He documents dozens of companies acquired in buyouts—such as hospitals, mattress manufacturers and a car-parts maker—whose service or products went downhill, whose employees suffered pay cuts or layoffs, and whose fortunes plummeted, sometimes ending in bankruptcy.

Time and again, Mr. Kosman details how the rest of us suffer at the hands of the buyout barons, 17 of whom are members of the Forbes 400. The private-equity firms pay lowball prices, he says, shortchanging public investors, by teaming up with management to pre-empt competing bids. They cream fees from their acquisitions, generating profits no matter how the companies fare. The companies cut more jobs than publicly owned competitors and sidestep proposed reforms by currying favor with politicians. Mr. Kosman finds a University of Chicago study showing that, for the years 1980 to 2001, the private-equity firms’ investors got returns that fall short of the broad market average, after fees.

At Bain Capital, built by former presidential candidate Mitt Romney, dividends paid to investors siphon off much-needed capital, weakening company after company.


99 posted on 01/14/2012 4:38:34 PM PST by JediJones (Newt-er Romney in 2012!)
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To: JediJones

http://www.washingtonmonthly.com/political-animal/2011_12/romneys_carried_interest_probl034344.php

Romney is likely paying taxes at 15% rate due to the carried interest scam/loophole that hedge fund guys also pay. If true and this comes out while he is running against Obama....

Romney is kinda spacey. He is not grounded. David Axelrod loves him...an easy target


100 posted on 01/14/2012 4:59:53 PM PST by dennisw (A nation of sheep breeds a government of Democrat wolves!)
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