Rick Perry brings it with Sean: What did Romney do wrong at Bain? What did he do there at all?
This morning, the New York Times struggles (and fails) to explain. But last night, on the Fox News Channel, Candidate Perry really brought it with Sean.
Hannity was puzzled by some of the things Perry had said. Sean challenged Rick about his remarks. In reply, Rick really brought it:
HANNITY (1/10/12): You said, talking about his days at Bain Capital, Bain Capital, compared [sic] companies like that, “They leave the carcasses behind. Bain is a vulture capital company. They walked into South Carolina, a company like Gaffney. They picked the bones clean of those people who lost their jobs in the same mill.” You say, “Rather than restructure jobs, they're trying to make money. Ethics get thrown out the door. They make as much money as they can in a hurry.”From Perry’s response, how well do you understand what happened at those two companies? In our view, this conduct needs to be explained more clearly. But Hannity was shocked, just shocked, by Perry’s remarks. So Perry brought it again:
You know, when I hear that, it almost sounds like Occupy Wall Street. It doesn't sound like somebody that is governing the state of Texas as a conservative.
PERRY: Sean, there's a real difference between venture capitalism and vulture capitalism. Venture capitalism we like. Vulture capitalism, no. And the fact of the matter is that he's going to have to face up to this at some time or another, and South Carolina is as good a place to draw that line in the sand as any because those people in Gaffney, South Carolina, understand what happened to that photo album company. The folks in Georgetown, South Carolina, understand the jobs that were lost and that Bain Capital took $20 million and $65 million respectively from each of those deals and walked away from it.
That's not what we're looking for in a president of the United States. We're looking for someone that knows how to build jobs, create jobs. And that's what I've done in the state of Texas. So there's no use trying to paper this over. That is a problem for Mitt, and he's going to have to face it.
HANNITY (continuing directly): Well, are you saying that he's—you said specifically that they're not ethical. You said specifically— You're saying that Mitt Romney, Governor Romney, is a vulture capitalist? That Governor Romney is unethical?The colloquy continued from there, with Perry saying that Bain “came in and picked their bones clean…and then walked away from them with huge amounts of profit.” To watch the whole segment, click this.
PERRY: What I'm saying is that the way that they operated at Bain Capital, with those two particular companies in those two South Carolina cities, I think was irresponsible. So you know, the truth is the truth, Sean, and there's no use in us trying to shy away from it. If we think for a minute that Barack Obama is not going to attack this and talk about it, we might as well get it out in the open and discuss it right now, and find out, is this the type of conservative that we want representing us at the top of the ticket.
For our money, Perry still didn’t quite explain what Bain did with respect to these companies. Just how did the “looting” work? How did Bain walk away with so much cash? How much of the looted money really should have gone to the workers? With these questions in mind, we’ll only say this:
We hope Perry and Gingrich can explain these matters! We aren’t sure that our side’s leaders will. Or that the Dowd-driven New York Times will ever be up to the task.
Vulture Capitalism in 60 seconds:
ReplyDelete1) identify a vulnerable or "under-valued" company
2) take out a huge bank loan and buy it
3) now that you own the place, put the loan on the company books (neat, huh?)
4) deal with the new and unproductive debt load by reducing the work force or moving it to Asia, and make those who remain work much harder for less. It's called income re-distribution -- from workers of the company to the new owners of the company. It's great!
5) bleed every last dime out the place before letting it collapse or, if it's still making money despite your best efforts to bleed it dry, sell the sucker for a profit and walk away!
6) If you miscalculated and can't wring enough out of the workers and company assets to service the loan and make a profit, go bankrupt. The money you borrowed is now the company's problem anyway, so who cares?
Dead right about our side. The previous accounts of Bain I've read in the NYT and LA Times have been somewhat smothered in the calculus of whether Bain over its years with Romney produced a net plus or minus in jobs.
ReplyDeleteThat's a decent question, but it oughtn't be the main point. The crux of the matter is Bain's utter indifference to anything other than making a boatload of money for its people regardless of how they went about it. If it meant pillaging, plundering and looting, they pillaged, plundered and looted. If it meant rebuilding, they rebuilt.
But they apparently did so while stacking the odds in Bain's favor and against the companies involved. The risk of insolvency was always on the takeover target's books, not on Bain's. (Inquiring minds might wonder why such arrangements are even legal and whether it's beyond human genius to formulate other ways to turn around still-profitable but imperiled enterprises.)
And by the way, the ring of Perry's words here is a good deal sweeter than anything I've heard out of Obama or the Democratic leadership in many years. I could say the same for Ron Paul on other subjects. This is exceedingly odd.
'...And by the way, the ring of Perry's words here is a good deal sweeter than anything I've heard out of Obama or the Democratic leadership in many years. I could say the same for Ron Paul on other subjects. This is exceedingly odd.'
DeleteWell said.
I think it's ironic that voters are so worried about debt, debt and more debt - the country's broke - but have so little knowledge of how "leveraged buy-outs" work.
ReplyDeleteAnonymous explained it neastly above. I'd just suggest that the term "asset-stripping" should be introduced and explained - it's pithy, powerful and it adequately describes what the vulture capitalists do.
Romney's Bain experience might be a plus. Bain worked with failing companies. Bain reduced staff, forced employees to work harder, and made the companies more efficient and more effective. A lot of voters might hope Romney could do the same for the federal government.
ReplyDelete"Forced the employees to work harder" Comedy Gold!
ReplyDeleteThis Wall Street Journal article gives their POV on what Bain Capital did. You may or may not agree with the WSJ's POV. However, the article at least allows the debate to proceed on a more informed basis.
ReplyDeleteA few highlights:
Bain Capital's business is a combination of private equity and venture capital. The latter means taking a flyer on start-ups that may or may not pan out...
One Bain investment during Mr. Romney's tenure was to back an entrepreneur named Tom Stemberg, who was convinced he could provide savings for small-business owners if they were willing to shop at a store instead of taking deliveries. Today, the Staples chain of business-supply stores employs 90,000 people.
Bain also backed a start-up called Bright Horizons that now manages child-care centers for more than 700 corporate clients around the world. Many other venture bets failed, but that's capitalism, which is supposed to be a profit and loss system....
...Bain looks to buy companies that are underperforming or undervalued and turn them around....Far from "looting," this is a vital contribution to capitalism and corporate governance. One of the persistent gripes of the left is that too many CEOs make too much money even as their companies flounder. Private-equity firms target such companies or subsidiaries, replace their management, and try to unlock the underlying value in the enterprise.
Private equity helps to promote dynamic capitalism that creates wealth, rather than dinosaur capitalism of the kind that prevails in Europe and futilely tries to prevent failure....
Bain's turnaround hits include Sports Authority and tech-research outfit Gartner Inc., which was once a small division of an advertising firm and is now a public company worth more than $3 billion. Another success was Steel Dynamics, which used Bain money to build a new steel factory and now employs 6,000 people....
The tougher questions for Mr. Romney involve the cases in which Bain took early payouts in dividends and management fees after purchasing existing businesses that ultimately went bankrupt....Certainly Bain Capital made sure that its investment partners were paid first...
companies bought by private-equity firms suffer more job losses soon after a buy-out than similar firms that didn't experience buy-outs....But this is hardly surprising since the companies were acquired in part because they were underperforming. The critics also don't mention that the Census study found that firms acquired in private-equity transactions created more new jobs in the ensuing decade...
I feel that Somerby should explain himself what happened in Bain. He kinda leaves his readers in the air. I am unsure of what Somerby thinks about the whole Bain affair. Is Somerby waiting for these candidate to explain the issue? Or does he have a formed opinion and wishes the Republicans spoke up?
ReplyDeleteFor a bit of background on these operations from an overseas viewpoint . . .
ReplyDeletehttp://www.smh.com.au/business/theyre-back-but-not-quite-with-a-vengeance-20120111-1pvdg.html
The WSJ's sweeping assertion that, "Private equity helps to promote dynamic capitalism that creates wealth, rather than dinosaur capitalism of the kind that prevails in Europe and futilely tries to prevent failure....", is utter bullshit.
David in Cal,
ReplyDeleteAs the man you love to quote, Paul Krugman, has noted, you can't judge collective job creation at Bain by looking at one company. How many mom and pop stores did Staples put out of business? What were the job losses? How many of the 90,000 jobs were actually new jobs? Or was Staples simply absorbing employees, at lower wages, that Bain put on the unemployment rolls? And what do the jobs pay? How many Staples employees are on food stamps or other forms of government support? Jobs that won't support families are, thanks to the likes of Mitt Romney, the new blue-collar norm.
And of course we need to look at the Bain bankruptcies, the job exported and the usual downsizings. It's not a pretty picture -- unless you're partner at Bain.
One might also ask why, if the partners at Bain were so confident of their abilities, they weren't willing to use their own money for these acquisitions.
Bain wasn't in the business of job creation. It was in the business of helping new companies start up and helping troubled companies get back on their feet, if possible.
ReplyDeleteWhen a more efficient company like Staples replaces less efficient mom and pop stores, they may be doing the same work with fewer employees. That's good, not bad. It means more people are freed up to do other useful work. Consumers benefit, because they can get better selection and lower prices.
When a company can be downsized so as to perform its necessary duties with fewer employees, that also frees up people to do other useful work and allows them to charge lower prices.
For a manufacturing company, another advantage of greater efficiency is that it will be better able to succeed against foreign competitors. A less efficient manufacturing company with lots of employees is apt to fail and thus wind up with no employees. E.g., Solyndra.
I don't know whether Bain partners ever put their own money into acquisitions. I thought they sometimes did. But, there's no doubt that Bain took care of itself first and foremost. Romney made an awful lot of money.
Still, no company was forced to engage Bain's services. Those companies that Bain didn't save went into their relationship voluntarily. And, the investors who put money into Bain acquisitions did so voluntarily. Bain must have been doing a good job. Otherwise, these companies and investors wouldn't have worked with them.
I'd rather have seen Bain try to save General Motors than the federal government. Bain probably would have done a better job. And, the taxpayers wouldn't be on the hook for the tens of billions the federal government invested in GM. (See http://www.politifact.com/truth-o-meter/statements/2010/apr/27/ed-whitacre/ceo-says-gm-has-repaid-government-loans-full/ )
You make good points sometimes.
DeleteBut when you mix in stuff like: 'Still, no company was forced to engage Bain's services. Those companies that Bain didn't save went into their relationship voluntarily....' and say it like it's true and like you know it, then it undermines everything else you say.
Because it's pure propaganda.
David in Cal, this time you outdid yourself for the sheer mendacity of your lies.
ReplyDelete"[Bain] was in the business of helping new companies start up and helping troubled companies get back on their feet, if possible. "
So leveraged buy-outs are heroic missionary work now, helping out "troubled companies" by firing their employees, raiding their assets and saddling them with debt? I had no idea. However, the source of your claim becomes clear a few paragraphs down:
"Still, no company was forced to engage Bain's services."
Bro, Bain acquires and takes over companies, often against their will. These targets don't "engage" Bain for anything. Which leads us to this hum-dinger:
"Those companies that Bain didn't save went into their relationship voluntarily."
So know we're supposed to believe that Bain does such wonderful work in the world that companies ungrateful enough not to let Bain's partners raid their assets and saddle them debt just go to their benighted fates?
"And, the investors who put money into Bain acquisitions did so voluntarily. Bain must have been doing a good job. Otherwise, these companies and investors wouldn't have worked with them."
About this you're absolutely right; but lots of reprehensible businesses are highly profitable, so I'm not sure what your claim is supposed to prove.
In any case, don't explain it any further.
"When a more efficient company like Staples replaces less efficient mom and pop stores, they may be doing the same work with fewer employees. That's good, not bad. It means more people are freed up to do other useful work. Consumers benefit, because they can get better selection and lower prices.
ReplyDeleteWhen a company can be downsized so as to perform its necessary duties with fewer employees, that also frees up people to do other useful work and allows them to charge lower prices."
I get it. It's not that you're losing your job, it's that you have been "freed up" to do other work. As others have pointed out, pure propaganda.
And of course you bring up Solyndra. Solyndra failed because it bet that its technology (thin film solar) would be less expensive than standard silicon. They counted on silicon's price rising, but they didn't foresee China subsidizing its industry to bring the materials cost down so they could undercut Solyndra. Solyndra failed because its materials costs were higher than its competitors, not because it was less efficient. But hey, don't let reality interfere with your ideological predisposition.
On second thought, David in Cal is to be commended for bringing to our attention an essential understanding which liberals tend to forget or miss: DinC's posts cease to be preposterous (notwithstanding their lies and equivocations) if you accept the underlying notion that the operation of markets leads to the highest human happiest or, in any event, that the operation of markets is far more important than human happiness.
ReplyDeleteIt's a remarkable view, in light of how thoroughly markets have been corrupted to serve the already wealthy, in the hundreds of billions devoted annually to corporate welfare at the demand of those markets, in the ground lost by the lower 90% of the American population over the last 30 years, and on the huge sums Americans spend on legal drugs of oblivion (alcohol, nicotine and anti-depressants). But it's the view held by the folks who determine how we live in this country.
Even more remarkable is the number of seemingly ordinary people -- those who haven't enjoyed extraordinary rewards at the hands of the "market" -- subscribing to this view, or at least claiming to. How deep that commitment actually runs is another question (they love their Medicare), but even so, it's hard to comprehend the attractions, ideological or aesthetic, of such a joyless, cramped and punishing worldview. Then again, lots of us go to religion for the joy of the prospect of punishing the wicked, so there's no accounting for taste.
Anonymous, you are taking for granted all that the free market has done for you. Take electronics, for example.
ReplyDeleteHenry Singleton quit his job as chief research scientist at Litton Industries to found a new company, Teledyne, because Litton didn't want to go into the field of transistors. In those days, vacuum tubes were used. Singleton died a billionaire and we all got the benefit of superior technology. The vacuum tube workers who lost their jobs may have seen the downside, but in the long run we all benefited.
In 1982, I bought an early portable computer, a Kaypro, for IIRC $3000. It weighed 30 lbs. and had limited computing power by today's standards. Later entrepreneurs obviously created much better, much cheaper machines, that we all benefit from. Should we fault Apple for putting the Kaypro employees out of work? I don't think so.