The Bain of Capitalism..... By Robert Reich

[KoKo]

The Bain of Capitalism

By Robert Reich

It’s one thing to criticize Mitt Romney for being a businessman with the wrong values. It’s quite another to accuse him and his former company, Bain Capital, of doing bad things. If what Bain Capital did under Romney was bad for society, the burden shifts to Romney’s critics to propose laws that would prevent Bain and other companies from doing such bad things in the future.

Don’t hold your breath.

Newt Gingrich says Bain under Romney carried out “clever legal ways to loot a company.” Gingrich calls it the “Wall Street model” where “you can basically take out all the money, leaving behind the workers,” and charges that “if someone comes in, takes all the money out of your company and then leaves you bankrupt while they go off with millions, that’s not traditional capitalism.”

Where has Newt been for the last thirty years? Leveraged buyouts became part of traditional capitalism in the 1980s when enterprising financiers began borrowing piles of money, often at high interest rates, to buy up the stock of ongoing companies they believe undervalued. They’d back the loans with the company assets, then typically sell off divisions and slim payrolls, and resell the company to the public at a higher share price – pocketing the gains.

It’s a good deal for the financiers (the $25 billion buyout of RJR-Nabisco in 1988 netted the partners of Kohlberg, Kravis, and Roberts around $70 million each – and most of Mitt Romney’s estimated $200 million fortune comes from the same maneuvers), but not always for the company or its workers.

http://www.nationofchange.org/bain-capitalism-1326377914

[ooglymoogly]

1. Reich must get tired of hitting nails on the head. nt

[ooglymoogly]

2. Kr nt

[ooglymoogly]

3. kr nt

[DianaForRussFeingold]

4. K&R

[No Elephants]

5. The term "LBO" may have started in the 1980's, but that kind of transaction began well before then.

http://en.wikipedia.org/wiki/Leveraged_buyout and http://en.wikipedia.org/wiki/Early_history_of_private_equity

LBO's were very prevalent in the "go go market" of the Nineteen Sixties and Seventies. In fact, LBOs are probably what made it a "go go market."

Investors would buy a company essentially by using the assets of the company they were buying as collateral for the loans they were taking in order to buy the company. IOW, smoke and mirrors.

So, if the company did well, great. Everyone made money, the people who sold out, the purchasers and the employees.

If operating the company did not yield enough to pay off the debt and cover operating expenses, plus turn a profit, the company simply declared bankruptcy. The purchasers were not hurt. Neither were the original investors, who had been bought out in the purchase at a price that pleased them. (They often got lucrative consulting or employment contracts, too.) But, non investor employees were just out of work.

In many cases at that time, the assets of the company were worth more than the amount for which the shares of the company were selling. In that case, the company was purchased for the sole purpose of selling off its assets piecemeal, perhaps in bankruptcy, perhaps at an auction or perhaps a bit at a time. And employees were just out of work.

[roseBudd]

6. Go forth DUers & spread thi son facebook. The Revolution will be on social media...

You moderate low info facebook friends who don't obsess about politics are beginning to see the dots

Now they just need to see the connections

http://www.washingtonpost.com/local/study-americans-believe-conflict-between-rich-poor-is-growing/2012/01/11/gIQAZHibrP_story.html