Is this a fair attack or not?To a large degree, yes it is.
Let's talk about what Bain, and other "private equity" firms really do. Their task -- how they make money -- is to find companies that are "inefficient" and turn them into more-efficient entities. Their reward for doing so is that they take some of the spoils for themselves -- frequently as much as a quarter of the value in the firm or more.
Efficiency is not a bad thing, and driving out inefficiency is, on balance, good. The problem is how that efficiency comes about.
We live in a world where our government has conspired with banks to make cross-border arbitrage profitable. Very profitable. The result has been the evisceration of our working-class population -- the vast majority of America. Our manufacturing has been made "more efficient" by moving it to China, where people labor under effective slave conditions -- conditions so good that recently a group of employees at Foxconn threatened to commit suicide en-masse.
But it doesn't end there. The abuse of leverage makes possible the taking of more and more debt by firms that then gets paid out to these private-equity raiders. The putative argument for this sort of structure is that the debt will help grow the company and thus everyone will benefit.
But it doesn't always work out that way.
KB Toys is one example outlined in that video that is truthful. KB was larded up with debt and ultimately collapsed under the load. Yet Bain made a monstrous profit on what was, objectively, a failed transaction.
This sort of "strip it and steal it" model is entirely legal. But the question is not whether something is legal -- it is whether it's a model we ought to encourage and base our economy upon, and whether someone who has practiced this destruction of American jobs and the offshoring of capital should be elected President.
The answer, quite simply, is no.
Friday, January 13, 2012
'Mitt Romney And Bain: Fair?'
Via The Market Ticker: