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