Romney and Bain Capital

[Professor S]

Recently, there has been a lot said about Bain Capital and Mitt Romney, and after reading this article pretty much all of it (positive and negative) is either untrue or an exaggeration:

http://online.wsj.com/article/SB1000...713493694.html

Here is what I took away:

The Journal's findings could provide fodder for both critics and supporters of Mr. Romney's presidential ambitions and of his role at Bain...

...The numbers, however, also reflect Bain's investing style, which, particularly during the firm's early years, was focused on smaller and sometimes troubled companies that Bain hoped to fix or build. Bain was investing in "riskier deals," said Steven N. Kaplan, a finance professor at the University of Chicago's Booth School of Business. "For every one that went bankrupt, they had one that was a screaming success. The overall effect was terrific performance" for the firm's investors.

...Seventeen of the 77 private-equity targets filed bankruptcy petitions, usually Chapter 11 reorganization, or closed their doors by the end of the eighth year after Bain's investment...

In essence Bain Capital purchased failing companies in an effort to turn them around, and if they couldn't, then would either sell or dismantle them. In my mind, these companies were on the road to failure before Bain purchased them, so I can't exactly blame them for lost jobs if the companies were likely going to fail as it was. I think Bain can be credited with saving many jobs, though, and perhaps creating a few.

On a side note, I'm shocked to see how other Republicans have basically disqualified themselves by going after Mitt's record at Bain and his comments for wanting to "fire" insurance companies if you don't like them or their services. If there is any litmus test for Republicans it is a principled belief in capitalism. Gingrich, Huntsman, and Perry have all doomed their own campaigns by going for an ignorant, populist, anti-wealth, class-warfare message to attack Romney. Leave that garbage for the Democrats.

[Bond]

I agree it's mostly spin in regard to Romney's record at Bain; however, I do think there is a valid larger discussion concerning financial professionals and financial instruments that simply shift money around and do not create value and/or wealth for the country, and instead make those financial professionals rich. It's all very complicated though, and I'm certainly in no position to legitimately have that discussion.

[Professor S]

Originally Posted by Bond

I agree it's mostly spin in regard to Romney's record at Bain; however, I do think there is a valid larger discussion concerning financial professionals and financial instruments that simply shift money around and do not create value and/or wealth for the country, and instead make those financial professionals rich. It's all very complicated though, and I'm certainly in no position to legitimately have that discussion.

I agree to a point (although those "conversations" usually end up with more laws that make things worse), but is Bain a part of that discussion? From what I've seen Bain was more involved in ventures than simply pushing around money.

[Typhoid]

From what I've seen Bain was more involved in ventures than simply pushing around money.

Ah yes, but were those ventures to take over companies, liquidate the assets/sell off the stock; thusly pushing around money?







Joke. Save your fingers.

[Professor S]

Originally Posted by Typhoid

Ah yes, but were those ventures to take over companies, liquidate the assets/sell off the stock; thusly pushing around money?

I advise reading the article.

Joke. Save your fingers.

That's not my style.

[Typhoid]

Yeah, I just did.

This made me think though, in a "hmm, what if" way, not a "Ha Ha, I knew it!" way.

77 businesses Bain invested in while Mr. Romney led the firm from its 1984 start until early 1999...

Another finding was that Bain produced stellar returns for its investors—yet the bulk of these came from just a small number of its investments. Ten deals produced more than 70% of the dollar gains.

Some of those companies, too, later ran into trouble. Of the 10 businesses on which Bain investors scored their biggest gains, four later landed in bankruptcy court.

22% either filed for bankruptcy reorganization or closed their doors by the end of the eighth year after Bain first invested, sometimes with substantial job losses. An additional 8% ran into so much trouble that all of the money Bain invested was lost.

Seventeen of the 77 private-equity targets filed bankruptcy petitions, usually Chapter 11 reorganization, or closed their doors by the end of the eighth year after Bain's

Mr. Romney describes job losses and bankruptcies as an inevitable byproduct of the capitalist system, and has said that in some cases, eliminating some jobs may save the rest of the company.

I wonder if they were getting involved with different companies in the same field of work (I don't mean all of them, but some of each, rather than all of one, or one of everything), and then somehow running their own smaller businesses/investments out of business, in order for their larger ones to get even larger, because you've just made the market smaller.

[Professor S]

Originally Posted by Typhoid

Yeah, I just did.

I wonder if they were getting involved with different companies in the same field of work (I don't mean all of them, but some of each, rather than all of one, or one of everything), and then somehow running their own smaller businesses/investments out of business, in order for their larger ones to get even larger, because you've just made the market smaller.

Well, that might be the case, but beside the fact that a minority of the businesses went bankrupt there is nothing to lead you to believe this is the case. One thing to keep in mind is that in all appearances Bain's business model was to make failing businesses profitable (a risky model to be sure). If a business fails, all of those jobs are lost, not just some created by layoffs to reduce costs, so there is more evidence to suggest that Bain actually SAVED jobs rather than killing them because the alternative was assured failure.

Now if there is any evidence that Bain was predatory as Gingrich suggested, I'm all ears, but Bain's track record doesn't reflect it the way I read the evidence. Reading that article I think it's very difficult to make a case that Bain's model was that of a corporate cannibal.

[Typhoid]

but beside the fact that a minority of the businesses went bankrupt there is nothing to lead you to believe this is the case.

I never said I believed it.


I was just basing that "I wonder/what if" on his personality of "I love to fire people", and "I'm glad he had to take a mortgage on his house to beat me" with a little bit of "sometimes job losses are necessary for the bottom line of the company."

Everything he says - mixed with those quotes, just makes the guy seem 100% all about the income of himself and his cronies.

If a business fails, all of those jobs are lost, not just some created by layoffs to reduce costs, so there is more evidence to suggest that Bain actually SAVED jobs rather than killing them because the alternative was assured failure.

I'm not doubting that, and they did save some jobs, yeah.
Is there some type of document that says which businesses they invested in went out of business compared to everything they invested in, and which ones showed profit after the other ones went under.

It'd be a pretty evil scheme to invest in a company under the guise of helping it succeed, yet doing minimal effort to ensure that it actually does go under, so your other companies then eat their share of the market - and you (whomever invested) can sit back and say "Look, we tried to help, this shit just doesn't always work out."

Which I find to be a flimsy excuse for a professional company - at least not a really good one. It's like those interior decorator shows where they ask for (let's say) X dollars, yet are never under budget. It's like "Fuck, you redecorate houses, and give estimates for a living, how do you always go over-budget."

Reading that article I think it's very difficult to make a case that Bain's model was that of a corporate cannibal.

But because Romney is involved it makes it so much more interesting.