Mitt Romney’s $10 million federal bailout

Here’s an oldie but goodie: in 1993, when he was the chairman and chief executive of Bain & Co. (which is a separate though related operation from Bain Capital), Mitt Romney engineered a federal bailout of Bain:

by convincing the Federal Deposit Insurance Corp. to forgive roughly $10 million of the company’s debts, according to sources close to the deal and federal records obtained by The Boston Globe.

The linked Globe article is behind a paywall, but here are some key highlights.

[T]he $10 million cost to the FDIC raises the question of whether Romney’s success, as well as the resurrection of Bain & Co., came partially at the expense of the federal agency that protects US bank deposits.

Romney has never revealed the financial details behind his work at privately held Bain & Co. Nevertheless, federal documents and information from six sources with knowledge of the deal demonstrate that Bain & Co.’s problems contributed to the FDIC’s losses from the 1991 failure of Bank of New England….

Bain & Co. loans from Bank of New England date to the mid-1980s, when the economy, the bank and the consulting firm were booming….

Originally, Bain & Co. revenues were to have been used to repay the bank loans. But by 1990, with the economy slipping, it became clear Bain & Co. had overestimated its ability to repay its debts, which at that point had reached about $220 million. There also was widespread belief in the financial community that the company’s founders had overestimated the value of their firm….

With little hope for a turnaround, Bank of New England was seized by federal regulators in January 1991. Six months later, Providence-based Fleet Financial Group Inc. took possession of all the loans from Bank of New England that it believed would be repaid in full.

That left about $6 billion in troubled loans — including the $38 million in loans to Bain & Co. — which became the responsibility and property of the FDIC….

[D]ocuments obtained by the Globe show that two Bain & Co. loans, originally made by the Bank of New England, remain on the FDIC’s books today with a combined balance of $12.8 million.

The roughly $10 million forgiveness by the FDIC occurred in 1993, when Romney was chairman and chief executive of Bain & Co.

The company offered the FDIC and its other bank creditors a deal to reduce the debt, all of which accepted. In the case of the FDIC, the agency agreed to take $5.7 million less in cash, out of the original $38 million. In addition, sources said the agency calculate that the loss of interest payments as a result of the restructuring would exceed $4 million.

Upshot?  The bailout saved Bain from having to declare bankruptcy – ironic, in light of Romney’s more recent insistence that the federal government should not have helped prevent the big car companies from going into bankruptcy.  And speaking of irony, how’s about Romney calling Barack Obama a “crony capitalist” (which, by the way, makes absolutely no sense in relation to NLRB appointments) on the same day that this story reenters the spotlight?

All this, on top of Romney’s hilariously awful town hall in New Hampshire yesterday, suggests to me that Romney could actually be in trouble.  Rick Santorum doesn’t have to win NH to hurt Romney.  All he has to do is get reasonably close – within 10 points, say.  Don’t know if he can do it … but if he can, well, we might just have to bust out the blimp again!

Recommended by karenc, tblade.


3 Comments . Leave a comment below.
  1. In the mindset of the 1%ers,

    they can rail against government bailouts, but when the time comes for a helping hand, they have no problem extending their hands out, palms up. After all, it’s there for everyone, why should they refuse it. That would be standing on a principle. Besides, didn’t Mitt’s Olympics benefit from the infusion of extra 10s of millions of dollars for security in the wake of the 9/11 terrorist attacks?

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Mon 24 Apr 11:21 AM