Just passing along a noteworthy Bloomberg article. Noteworthy because the author, Anthony Luzzatto Gardner, is Managing Director for Structured Finance at Palamon Capital Partners (a private equity fund). He points out in Bloomberg the particular nature of the deals orchestrated by Bain during Romney’s time at the tiller in an opinion piece titled Romney’s Bain Yielded Private Gains, Socialized Losses.
What’s clear from a review of the public record during his management of the private-equity firm Bain Capital from 1985 to 1999 is that Romney was fabulously successful in generating high returns for its investors. He did so, in large part, through heavy use of tax-deductible debt, usually to finance outsized dividends for the firm’s partners and investors. When some of the investments went bad, workers and creditors felt most of the pain. Romney privatized the gains and socialized the losses.
What’s less clear is how his skills are relevant to the job of overseeing the U.S. economy, strengthening competitiveness and looking out for the welfare of the general public, especially the middle class.
Thanks to leverage, 10 of roughly 67 major deals by Bain Capital during Romney’s watch produced about 70 percent of the firm’s profits. Four of those 10 deals, as well as others, later wound up in bankruptcy. It’s worth examining some of them to understand Romney’s investment style at Bain Capital.
He goes on with some details and the particular character of the types of deals Bain was engaged in.
Some noteworthy quotes from the comments:
The U.S. government is not a business. Unless Mitt plans to borrow another several trillion, pocket a chunk of it, and fire the citizens, his experience is worth less than nothing.
What Bain has done with some pension plans is perfectly legal, although hardly ethical.
Pensions are protected by ERISA, and the tax-payer foots the bill when a Bain-funded entity is relieved of pension obligations through bankruptcy.
This is a perfect example of privatized gains and socialized losses.
I’ve always had a hard time seeing how Bain could be held up as a qualification of any kind for POTUS. Certainly brokering deals is part of the job description, but deals dependent on loophole exploitation seem few and far between for the job.
UPDATE: Should have done this before – hat tip to Ed Brayton.