Romney Privatized The Gains and Socialized The Losses of Bain Capital

Republicans love socialism, as does big business, but they only love socialism that helps them, not the little people that work for them. There is a phrase called privatize the gains and socialize the losses. This was a favorite of Gov. Mitt Romney when he ran Bain Capital.

Bloomberg:

“What’s clear from a review of the public record during his (Romney’s) 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.”

The way Romney made his millions was through debt. He purchased a company, like American Pad and Paper (AMPAD) by borrowing 87% of the price of the company. Ampad then borrowed money to make acquisitions and repay existing debt, like using a credit card to pay off another credit card to pay Bain’s fees and its investors, $60 million in dividends.

From 1993 to 1999, Bain Capital charged Ampad about $18 million in different fees. By 1999, AMPAD’s debt was back up to almost a half of a billion dollars. When AMPAD was unable to pay the interest costs and drained of cash paid to Bain Capital in fees and dividends, Ampad filed for bankruptcy.

Again from Bloomberg, “senior secured lenders got less than 50 cents on the dollar, unsecured lenders received two- tenths of a cent on the dollar, and several hundred jobs were lost. Bain Capital had reaped capital gains of $107 million on its $5.1 million investment.”

Another instance of Romney never taking a hit on losses was Sage Stores. Romney’s Bain acquired the chain store by borrowing 96% of the price of the company, and according to Bloomberg, it was mostly with Junk Bonds.

Finally, Bloomberg looked into GS Industries, a company Romney’s Bain owned starting in 1993. Bain bought the steel mill for $8 million dollars. Bain increase the debt of the company to $378 million dollars, some that debt was used to pay Bain $36 million in dividends. By the time bankruptcy occurred, GS industries was over a half a billion in debt! Many creditors lost their shirts on this deal and almost a thousand people lost their jobs.

So, while many believe that wealth creation takes time and you need patience, Romney wanted to make a quick million. Romney wasn’t alone in these dealing but he was the king of it, according to Bloomberg. Bain was one of the most aggressive in these actions.

Bloomberg then questions whether or not Romney would run the country this same way.

They said,

“Enriching investors by taking leveraged bets isn’t a qualification for a job requiring long-term vision and concern for public welfare. It is appropriate to point that out to voters. “

Image: Toxichomind

10 Replies to “Romney Privatized The Gains and Socialized The Losses of Bain Capital”

  1. And not just here, in the USA, but the methods employed by Bain, transferred overseas through “offshoring” exploited the nations as well: A former Bain executive who appeared on Chris Hayes’ Sunday show, has a book documenting the wonder of giant profits that are generated by offshoring since the costs of manufacture ‘over there’ are only two: wages (low) and raw materials.

    No health care, no infrastructure spending, no safety laws, no ‘slip and fall’ lawsuits for workplace injury, no pensions to fund. Plus, this Bain guy said, “There’s less wear and tear on our national infrastructure.” And the bonus is we avoid the inevitable crimes committed if we had immigrants come here to do the jobs.

    So it is neo-colonialism, of course, but so openly and joyously engaged in it was appalling to see.

    He also expressed his annoyance that there remain salaries in the USA that are ‘insulated’ from the lowering that offshoring brings, since they are necessarily local: doctors, nurses, teachers, firefighters, police. (And we know what the offshorers are demanding of GOP governors right now…)

  2. Mittens, Mittens, Mittens. This isn’t how you run a company. Even if this were perfectly legit, you seem to have demonstrated an epic degree of failure when it comes to Business Ethics. I don’t even own a business, and I can tell you that. Borrowing tons of money in the name of someone else, keeping it, and then forcing that other person to pay it back, is nothing more or less than a large-scale, white-collar mugging.

  3. These were nothing more than ponzi schemes sold to the public as “how big business operates.” What makes him so different from Madoff?

  4. Damn..this guy doesn’t only take the cake..he owns the cakeshop…wheww…how does he sleep…??!?!

  5. Romney’s different from Madoff in that his tactics victimized the little guy. Madoff ripped off the rich–that’s why HE’S in jail!

  6. Love it. And you know this was not only intentional, but planned from the start!

    Why else name your company “Bane”- /bān/Noun: 1. A cause of great distress or annoyance. 2. Something, typically poison, that causes death.

    Synonyms: poison – venom – ruin

  7. Sure to the point about Bain Co.. W. M. Romney must
    have been associated very much–no matter about the 2 ‘extra’ years after he (?) quit. Yet again and again people try to slide over kind of business–raiding, downing corporations. If first one to White House from that life: worse than 2d Bush?

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