Greed is good, and so is Mitt Romney’s record as a capitalist

BIZPACReview.com ^ | 1/17/2012 | Michael Dorstewitz

[SmileRight]

When I heard Michael Douglas, portraying Gordon Gekko in “Wall Street,” deliver the line, “Greed is good,” my date that evening was horrified. I, on the other hand, wanted to stand up and cheer. I totally understood what he was saying. Greed is good.

Last week, when Newt Gingrich, Rick Perry and Jonathan Huntsman ganged up on Mitt Romney for being a predatory capitalist during his tenure at Bain Capital, I assumed the posture of my date of 25 years ago; I was horrified.

When I use the term “greed,” I don’t mean the unfettered...

[SmileRight]

Regardless of what you think of the candidates or who your preference is, capitalism works, and they shouldn't be attacking it.

[RC one]

But it was OK to attack Newt for being a capitalist?

[Cringing Negativism Network]

Blah blah blah.

Romney is a waffling weenie.

[SmileRight]

Good point. I hadn’t thought of it that way, but you’re right, Newt was attacked for the same thing. Double standard in action again.

[CainConservative]

Then Willard the Lib should have no problem releasing his past five years of tax returns THIS WEEK.

[dfwgator]

I don’t care if Romney is a “good” capitalist, I don’t want him in the White House.

[swampfox101]

You are allowed to attack CAPTIALISM and CAPTIALIST, you just can’t criticize “crony captialist and crony captialism”. As long as you are a captialist and advocate bailouts at the taxpayers expense, then you are the proper kind of captialist. These are the kind of “so called” captialist that our conservative media, “so called” believes in protecting.

Just look have ALL of them have banded together to protect, defend, and promote the “crony captialist” Romney.

[impimp]

Right on!

[Utmost Certainty]

As somebody else explained to me recently:

Too many people are defending Romney as just being a good little capitalist, when this isn't really the case. He was playing shell games and essentially committing fraud with investors. I think most agree that the government should probably punish somebody selling watered gas… so why not punish dishonest debt instruments? I think most agree that if a minority shareholder uses company money to issue himself a big paycheck, this is embezzlement from the other shareholders. When Romney does this with his multi-million dollar consulting fees, this isn't different?

Now the crux of this problem is of course the government. Their limited liability laws unfairly rip up contracts between creditors and debtors. Making debt financing tax deductible, but not equity financing, has seriously skewed the corporate structure. And lastly, the Federal Reserve issuing so much debt (largely indirectly) and then bailing out said debt (→ moral hazards) is a significant problem in aiding and abetting private equity craziness of reckless LBOs, etc..

Specifically how the system works: A bank overflowing with money they created from low Fed Reserve interest rates meets with a private equity firm to talk about taking over firm. The bank provides ~80/20 the money and they together purchase the take over target. The PE firm immediately loads up the acquired firm with debt for the bank to get their money. The debt is structured as a huge balloon payment set to self-destruct in about 5 years. The bank realizes this is ticking time bomb, so unloads this debt ASAP to other banks, hedge funds, insurance companies and pension funds. The smarter investors realize this is a hot potato and keep passing it around. Recently they've been hiding this bad debt in CLOs (almost identical in concept to real estate CDOs). Hidden amongst other debt, people have no idea the mess they purchased. The PE firm on the other hand wastes no time in borrowing HEAVILY again to finance corporate mergers (they don't want to do it from the PE firm directly because they could be liable for the debt). They also borrow heavily to finance huge dividends that more than make up for what they paid for the firm. They justify the dividend legally by jacking up short term profits (price increases, job cuts, quality reductions) that threaten the long term health of the company, and by money saved from tax deductible interest as well. If possible, the PE firm tries to dump their acquired firm before the balloon payment comes up… but even if they're stuck with the firm they usually do very well given all the consulting fees they charge and the huge dividends they give themselves.

[dfwgator]

Abortionists are good capitalists, too; they are providing a legal service, that fills a demand.

[impimp]

Romney was not a crony capitalist. Those in charge of Solyndra were though.

[Hawthorn]

>> But it was OK to attack Newt for being a capitalist? <<

A “capitalist” who takes 1.6 million from Freddie Mac and additional millions in “consulting fees” from health insurance companies deserve to be attacked.

[swampfox101]

...u gonna get called to the carpet for cirticizing “them” good captialist.....

[alloysteel]

So, what is the brand on Mitt Romney?

Is it because he is Mormon, or is it because he was involved in a venture capital enterprise that bought up failing businesses, stripped out their negatives (which in some instances included a bloated payroll), and put these reconstituted companies back on the market, now much meaner and leaner, but with a good chance of survival.

That all these enterprises did not survive and thrive, is no more a strike against Bain Capital, than any other venture capitalist organization out there. Once relaunched, and Bain Capital has been reimbursed for their efforts, they had the same shot at grabbing the brass ring as any new venture, perhaps better, because they had some idea of how NOT to make rookie mistakes.

I doubt that Mitt would describe his business model in such manner, but we are trying to be a little bit objective here.

The “crony capitalism” label his opponents are trying to hang on Mitt is a red herring.

[swampfox101]

..ur right ofcourse,..... supporting bailouts, supporting tarp, support of hard working taxpeyer handouts to the super rich like Romney and Bain is true captialism.. I should have known better.

[sheikdetailfeather]

Mark Levin: Mark blasts the Republican Establishment and Explains Corporatism vs Capitalism

http://www.mrctv.org/audio/mark-levin-mark-blasts-republican-establishment-and-explains-corporatism-vs-capitalism

[RC one]

I disagree. Business is business. Newt’s consulting firm is in the business of obtaining consulting contracts, not declining them. Romney was in the LBO business, that is, the business of bankrupting companies, looting their assets, and then firing all of their employees. Piracy is so much better than consulting, isn’t it?

[moehoward]

"Gordon Gekko in “Wall Street,” deliver the line, “Greed is good,” my date that evening was horrified. I, on the other hand, wanted to stand up and cheer."

Might not be the best example considering Gecko ends up in jail.

[impimp]

Actually I sort of misspoke. Romney has advocated crony capitalism as a politician. Romney is the worst choice for the GOP. But his work at Bain is something to be applauded and commended. I have strong words for anybody who attacks his time at Bain. Those who bring up Bain are helping Romney.

[moehoward]

"A “capitalist” who takes 1.6 million from Freddie Mac and additional millions in “consulting fees” from health insurance companies deserve to be attacked."

Wow.