Bain made billions by, as the Los Angeles Times writes, "firing workers, seeking government subsidies, and flipping companies quickly for large profits". In all, Bain bankrupted nearly one-quarter of the companies it invested in, often causing "substantial job losses", according to a new Wall Street Journal report ~ Scott Keyes, writing for ThinkProgres, in a 1/9/2012 article titled, "GOP Speaks Out On Romney’s Greed: He Likes Firing People, Bankrupting Them, And Taking All The Money".
Bane, definition: a person or thing that ruins or spoils; that which causes death or destroys life.
Bain Capital, definition: an investment firm founded by Mitt Romney that ruins or spoils people's lives; an investment firm that causes the death of jobs and destroys companies.
The following video is an excerpt from the 1/10/2012 edition of MSNBC's "Morning Joe". In the clip Newt Gingrich explains the issue he sees with Bain Capital. Below the video I've excerpted some of the dialogue from the interview that I'd like to address.
Gingrich (1:39 to 2:45): The question is, if you look at the Wall Street Journal report in the last day or two, if you have a company that cost 30 million dollars and they took out 180 million... and then it went bankrupt, they have some obligation, I think, to explain. Why did they take that much money out if it was bankrupting the company? I think that's just a fair question about process and judgment. I think people draw a very sharp distinction between investors who really want a company to succeed, and investors who basically take over the company for the purpose of draining out it's cash, and then walk out without any concern for the consequence.
I think Governor Romney is going to have to have a press conference at some point and explain what happened with these particular companies. Because they weren't just failures, they were just "oh, we went in, we invested, we lost money too". These were cases where they were making a LOT of money while the company was going bankrupt. I think you have to ask real questions about whether that's responsible management and the kind of management you want to see as president of the United States.
Gingrich (6:47 to 9:16): [responding to question: What are the specific concerns you have regarding his record at Bain Capital?] There was a company that they put 30 million dollars into that they, according to the Wall Street Journal, they got 180 million dollars. That's a 6 to 1 return. And the company went bankrupt. It doesn't seem to me like the owners were taking much of a risk. It doesn't seem to me like they were sharing in the problems of the workers. How could they, in good conscience, take 180 million dollars out of company that they invested 30 million in, and leave all the workers behind? What if they'd taken 60 million out, which would still have been a nice profit... would the company still be alive? Would the workers still have jobs? Would families still have paychecks?
I think there are at least three or four cases where it wasn't traditional capitalism. It's not, "I made an investment, the investment went bad, I feel sorry about it, but we all suffered". These are cases of, "I made an investment, I did really, really well. Sorry about the company going broke". I think people have the right to ask the question - is that the kind of management responsibility you want in a president. And is that the kind of attitude you want in a president. ... This is, "I invested in something, I got richer, they got broke". I think he's going to have to explain that model.
My Commentary: The "model" I think is, as Rick Perry first said, Vulture Capitalism. Granted, this may not quite be the modus operandi of Bain Capital. Many of the companies they took over went on to become successful. But I'd have a problem if they did this just once. In my mind it is basically thievery. A vulture picks from the carcass of an animal that is dead or dying. And this appears to be what Bain did.
If, in their judgment, the company could be turned around, they made the effort to do that. If, on the other hand, they determined that it could not, then they took advantage of the bankruptcy process to load the company up with debt, pay themselves with that borrowed money, and then laugh all the way to the bank with no concern at all as to whom they were shafting. I think this behavior is utterly deplorable and should be illegal. There should be provisions in the law that allow those who lost money to come after Bain to recoup it.
According to a 12/3/2011 LA Times article, "Bain expanded many of the companies it acquired. But like other leveraged-buyout firms, Romney and his team also maximized returns by firing workers, seeking government subsidies, and flipping companies quickly for large profits. Sometimes Bain investors gained even when companies slid into bankruptcy".
The Wall Street Journal, in the 1/9/2012 article referenced by Newt Gingrich, says one of their findings 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". However, "of the 10 businesses on which Bain investors scored their biggest gains, four later landed in bankruptcy court".
Was it because the company, so burdened by the debt Bain forced them to take on (in order to pay them for their "services"), eventually went under? I think the facts say "yes". My question is, would an ethical person seek a profit so out of proportion with their initial investment that it put the company in danger of failing later (the unbelievable 600% return cited by Gingrich)? I say "no". In my opinion (at least some of) what Romney did at Bain Capital was very unethical... it may have been legal, but it was quite unethical.
Further Reading: Romney's Bain Capital Made Billions While Bankrupting Nearly One-Quarter Of The Companies It Invested In by Pat Garofalo, ThinkProgress 1/9/2012.