Obama’s Bain Attack & Romney’s Potential Response

By Justin Gardner | Related entries in Barack, Obama, Romney, Video

Politico has the 2 minute video that pulls no punches, but does it fairly, in my opinion.

And here’s the longer version…



This definitely hits close to home since I live in Kansas City. And let’s face facts…but when all this was going on the idea of downsizing to improve profits was very attractive. The internet didn’t exist and nobody thought this stuff was going to get out. Why? Because that’s just business. Bankruptcy happens. Nobody really scratched the surface to see what was going on. But now it has, and Romney has to answer for it.

Romney’s potential response? Or the one that conservative columnist Byron York is providing…

The auto bailout:

How will Romney respond? The Romney campaign has given some broad hints lately. First, the campaign has carefully scrutinized Romney’s entire record at Bain and believes it is a strongly positive one overall. But that is the big picture — there are individual instances in which Bain investments failed. Given that, look for the Romney campaign and its surrogates to counterattack by focusing on an instance in which Barack Obama, in essence, took over a company and laid people off in an effort to save the larger enterprise.

That was, of course, the auto bailouts, and while Obama often cites his success in “saving” the car industry, few remember today how many (non-union) workers lost their jobs in the Obama administration’s handling of the matter. During the economic crisis, General Motors and Chrysler shut down more than 700 dealerships, resulting in the loss of tens of thousands of jobs. And the companies did it under pressure from Obama.

“President Obama’s auto task force pressed General Motors and Chrysler to close scores of dealerships without adequately considering the jobs that would be lost or having a firm idea of the cost savings that would be achieved, an audit of the process has concluded,” the New York Times reported in July 2010. “The report…estimated that tens of thousands of jobs were lost as a result.”

Right, but the big difference? GST Steel closed after 5 years. The bailouts of GM and Chrysler were 3 years again and not only have they not folded, but they’ve started expanding and keeping plants open longer due to increased demand. And both companies have paid back their initial loans in a mix of cash and stock. In fact, 2011 was GM’s biggest year on record for earnings.

So yeah…there’s a bit of a difference between the two situations.

Stil, more from the right, this time from National Review:

I talked this afternoon with the reader who had worked at GST Steel in 1997 and e-mailed about the conditions there. This person, who wishes to remain anonymous, elaborated a little more on the working conditions at the plant, saying thanks to the union structure, there was little incentive to be productive. For instance, while some workers were required to file a report daily regarding certain productivity issues, they waited until the end of the day (when it was too late to fix things) to file the report instead of earlier, because they saw no reason to bother doing it at the most effective time. And he said for some of the employees – including those racking up $100,000 to $130,000 salaries – large chunks of the day were just spent waiting for something to fix or do, with up to an 80 percent of day just spent not working.

And that’s the hours they weren’t sleeping and getting over time. During those overtime hours, when they brought sleeping bags, there was once a problem which required a couple of them to be woken up. Our reader thought the gig was up, once their sleeping had become known, but as it ended up, a supervisor was written up and that was it: the sleeping on the job continued as before.

Yep, lazy union workers made Bain come in, suck all the money out of GST and then close up shop. Sure.

Key lines to remember from the GST video:

  1. “Private equity is not, per se, bad, but what Bain Capital did was not capitalism, it was bad management.”
  2. “The business model of loading a company up with debt in order to extract immediate profits out of it and then ensuring the failure of the company later on seemed like exactly the wrong thing we needed in America today.”
  3. “Bain issued 125 million dollars in bonds. And out of that 125 million dollar debt, they paid themselves almost 40 million dollars.”

Okay…let’s take that in for a moment. Bain put the company into debt to the tune of $125M and paid themselves $40M.

Of course Byron York and National Review don’t mention details like THAT, but there it is.

More as it develops…


This entry was posted on Monday, May 14th, 2012 and is filed under Barack, Obama, Romney, Video. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

26 Responses to “Obama’s Bain Attack & Romney’s Potential Response”

  1. A Conservative Teacher Says:

    I think Romney’s response to this ad will to be point out that the above ad has been thoroughly debunked. It’s a load of garbage. The CEO of that company stated for the public record that Mitt Romney in no way whatsoever is responsible for what happened.

    The company went under after Romney was no longer involved in any major way with Bain (one can only imagine- if he would not have been busy saving the Salt Lake City Olympics when this company was going under, perhaps he may have saved all these people’s jobs too).

    It’s sad that Obama is running with this ad, hoping that ignorance about the situation above and a lack of information regarding it will fool people into overlooking the disaster that his administration has made for poor people, union workers, the young, people of color, and the middle class.

  2. Exasperated Says:

    Uhm, didn’t we already see this ad by the Gingrich PAC? I too remember Armco Steel. I am sure this ad will work for those who see what they need to see, and those who believe what they need to believe. I know that hind sight is 20/20 given that the steel industry was for the most part doomed, so I think the better question is why did Bain even try to turn around Armco rather than why did it fail. Across the US, 100K steel jobs had already been lost. If you ever have the chance to hear Clayton Christiansen’s description of the contraction of the steel industry and the demise of the integrated steel mill, it becomes all too clear.
    “While mistakes were made by management and Bain, there was clearly an effort to build GST Steel into a world-class operation,” said Steve Ornduff of Overland Park. “After the ‘corporate buyout,’ over $100 million was spent in new capital in the plant …. Unfortunately, it required a lot of debt to make the acquisition and complete these capital improvements.”
    That debt, Ornduff said, along with a decline in the global steel market, spelled doom for the massive plant near the Blue River. “Over 40 steel businesses in the U.S. filed bankruptcy during this period, so to come to the conclusion that Bain’s ‘corporate buyout’ was solely responsible for the failure of GST Steel is inaccurate,” Ornduff said.”
    I also am put off by the lack of clarity as to just how actively Romney was involved with GST and the failure to mention that Romney was out of Bain before the bankruptcy of GST.
    Read more here: http://www.kansascity.com/2012/01/09/3361987/issue-for-romney-touches-on-steel.
    What does irritate me is the Pension Fund bailout, though I am unclear who is responsible.

  3. Tillyosu Says:

    Actually, if you want to see Romney’s response, you can do so here. You don’t even have to ask Byron York.

    I didn’t see anything about lazy union workers there. But I did find this:

    “I Think The Ad Is Unfair… I Don’t Think There’s Anything Bain Capital Did That They Need To Be Embarrassed About.”

    -Steve Rattner (former Obama Car Czar and mastermind behind the auto bailouts)

    FAIL.

  4. cranky critter Says:

    I watched the longer version the other day. At no point does it describe the financial health of the company at the time it was acquired. Nor does it place this tale in the context of the broader picture of our domestic steel industry and what happened to it.

    The company went under after Romney was no longer involved in any major way with Bain

    And how long did Bain hold the company? What about his role during the time Bain held the company? That he wasn’t very involved when it finally collapsed seems like carefully chosen evasive framing.

  5. Tully Says:

    And both companies have paid back their initial loans in a mix of cash and stock. In fact, 2011 was GM’s biggest year on record for earnings.

    ROFLMAO. And exactly how well are we, the taxpayers, doing on a CASH BASIS on that stock, Justin? Well, I’ll tell you. Taking GM alone, the taxpayers took an $11 billion hit on the first sale at $34/share. That’s a locked-in loss. And if we sold the remaining block today, at today’s price of $22/share we’d be locking in an additional $20 billion or so in losses. Let’s leave aside the $14 billion in extraordinary tax breaks the new GM received.

    The investors and creditors of GST got some of their money back. The cost to the taxpayers was zero.

    The investors in GM got zip, and their creditors got darn near zip due to government interference in the bankruptcy courts. The taxpayers are out roughly $30 billion at this point. Leaving aside that $14 billion dollar tax break, of course.

    So yeah…there is INDEED a bit of a difference between the two situations. But hey, the unions did great!

  6. Tully Says:

    Cranky, Bain held GST for eight years. When they bought it it was failing from high costs, half-ass management, and import pressure in the steel market. Romney left Bain two years before GST finally went under. Also two years before GST went under, Bain offered the employees buyouts to reduce costs and headcount. The union refused buyouts. The import pressure in the steel market continued, and with no headcount concessions from the unions GST kept sinking in the face of an unsustainable cost structure. Bain liquidated two years after Romney left and two years after the union refused buyouts.

    Details, details …

  7. cranky critter Says:

    Yeah, as I said elsewhere, my best guess was that the main reason for the collapse of GST was the same reason that the rest of the domestic steel industry collapsed.

    My point about Romney above was to wonder how involved he was with GST, which “he was gone when they folded” does not address.

    As I suspected and you confirm, the company was already starting to flop due to an inability to adjust to nimbler competition.

    There is of course still the claim of taking new loans to harvest capital. I doubt anyone at Bain had any qualms about making a big pile of money. But the long-term viability of a commodity-ish enterprise like steel is that you have to compete on cost.

    I’ve noticed a lot of hand-wringing about the pensions. What most folks don’t realize is that few if any defined benefit pension plans are ever funded in such a way as to function as promised if a company fails. It’s up to a union to understand that, and to act on that understanding. Either they have to insist on that much higher level of funding at the expense of immediate compensation, or that have to explain to workers that if the company fails, everyone fails.

  8. Justin Gardner Says:

    And exactly how well are we, the taxpayers, doing on a CASH BASIS on that stock, Justin?

    Tully, it doesn’t work that way and you know it. Nice straw man. And the unions had to renegotiate contracts, pensions, etc. They took a hit too. But it was better than losing nearly our entire auto industry and millions of jobs in one fell swoop.

    To everybody else…

    Romney founded Bain. He was the CEO when GST was bought. It doesn’t matter if he left Bain before GST imploded. The initial deal was done under his watch.

    Bain loaded them up with $125M in debt and took $40M of it as payment to themselves. You’re telling me the pension couldn’t have been saved with that money? How is that responsible capitalism? Please. Enlighten me.

    And nobody’s arguing that the steel industry wasn’t in trouble. But certain deals can exacerbate problems, and loading a struggling company up with that much debt and then dipping into the cookie jar to grab nearly a 3rd of it for yourself is crazy. That’s not standard operating procedure. Don’t let the church of capitalism lull you into thinking that’s okay. It isn’t.

  9. mdgeorge Says:

    All of this seems besides the point to me, which is one of the reasons I don’t like the ad (nor Romney’s central argument that he’d be a good president because he has created jobs). The whole discussion is ad hominem. The basic argument being made is “Romney’s policies will be good/bad for the economy because Romney created/destroyed jobs”.

  10. Tully Says:

    Tully, it doesn’t work that way and you know it.

    It works EXACTLY that way, Justin, and that isn’t any straw man. We have LOCKED IN an $11 billion loss on a partial stake sold. Our remaining stake is over $20 billion IN THE RED at today’s prices, and has NEVER been in the black or even remotely close, nor will be in the foreseeable future. That sums up to $30 billion plus IN THE HOLE on the stock portion of the deal, not counting that $14 billion miracle tax break.

    So it’s you who are being ACTIVELY misleading and straw-manning when you say “paid back their initial loans in a mix of cash and stock.” If we only get back 40 cents on the dollar on the deal, we LOST MONEY. 60% of our “stock investment,” in fact. Over $30 billion at this point in time, in fact. Even if the government (meaning, we the involuntary investors taxpayers) hold the remaining stock until it reaches break-even price for the entire deal, we will have lost that many years worth of interest that money could have earned in better investments.

    Getting paid in stock is no different than getting paid in toilet paper — the payback is what you can get for what you receive.

    As for the UAW, I am quite familiar with the deal they got, and they made out most handsomely, including 17.5% ownership of the company and billions in 9% preferred-dividend stock. It wasn’t a GM bailout so much as a UAW bailout. The “concessions” applied almost entirely to new hires, not existing union members with seniority. Many thousands of jobs nationwide were destroyed by the admin’s cramdown deal, especially in the forced closure of dealerships that were in themselves profitable. But they weren’t union jobs, so they don’t seem to appear in the Obama campaign’s calculus.

    You might want to go compare the current financials of GM and Chrysler against Ford, which took no bailout funds. Guess which company is the most profitable, both overall and on a per-car basis?

  11. Exasperated Says:

    I don’t care one way or another about Romney, I’m just not buying the ad. I certainly get that it gins up the base.
    “Bain loaded them up with $125M in debt and took $40M of it as payment to themselves.”
    Are you saying the $40M was pure profit because I thought $25+ million was to payback loans made to finance the purchase?
    “In 1993 Bain Capital was APPROACHED by management of Armco Worldwide, looking to execute a management-led buyout of the 100-year old company. Bain invested approximately $24.5 million in the company, which was renamed GS Technologies. The following year, GST issued $125 million in new general obligation bonds, which repaid Bain’s investment with a profit of $10.9 million, while $90 million from the bond sale was invested in the company ( to modernize its obsolete facility).
    According to Gingrich, Bain enriched itself and its investors by drawing dividends and fees out of the company, directly causing its collapse. But this isn’t exactly right. According to Reuters, Bain earned $12 million in dividends and $4.5 million in consulting fees from its investment in GS: a tidy sum, but one that amounts to only 4 percent of GS’s 1995 debt load. Furthermore, the Reuters report doesn’t appear to account for Bain’s loss of its sizeable (but unknown) equity investment in GS.
    Did Bain make mistakes in the way it tried to run GS? Sure — Bain overestimated the attractiveness of the U.S. steel industry, and overestimated its abilities to persuade GS’s workers to reduce their wages and benefits to competitive levels. But it’s factually wrong, and indeed dishonest, to claim that Bain “looted” GS,…… Bain stood to make far more money, and generate far greater returns for its investors, if GS had regained its past prosperity.” Avik Roy National Review

  12. Exasperated Says:

    I don’t care one way or another about Romney, I’m just not buying the ad. I certainly get that it gins up the base.
    “Bain loaded them up with $125M in debt and took $40M of it as payment to themselves.”
    Are you saying the $40M was pure profit because I thought $25+ million was to payback loans made to finance the purchase?
    “In 1993 Bain Capital was APPROACHED by management of Armco Worldwide, looking to execute a management-led buyout of the 100-year old company. Bain invested approximately $24.5 million in the company, which was renamed GS Technologies. The following year, GST issued $125 million in new general obligation bonds, which repaid Bain’s investment with a profit of $10.9 million, while $90 million from the bond sale was invested in the company ( to modernize its obsolete facility).
    According to Gingrich, Bain enriched itself and its investors by drawing dividends and fees out of the company, directly causing its collapse. But this isn’t exactly right. According to Reuters, Bain earned $12 million in dividends and $4.5 million in consulting fees from its investment in GS: a tidy sum, but one that amounts to only 4 percent of GS’s 1995 debt load. Furthermore, the Reuters report doesn’t appear to account for Bain’s loss of its sizeable (but unknown) equity investment in GS.
    Did Bain make mistakes in the way it tried to run GS? Sure — Bain overestimated the attractiveness of the U.S. steel industry, and overestimated its abilities to persuade GS’s workers to reduce their wages and benefits to competitive levels. It’s overkill to claim they looted a thriving company……. Bain stood to make far more money, and generate far greater returns for its investors, if GS had regained its past prosperity.” Avik Roy National Review

  13. Justin Gardner Says:

    I wouldn’t say it’s ad hominem. These are all valid points about Romney’s record. No attempts are being made to belittle or attack Romney as a person here…just his policies and actions as a leader/businessman.

    At the end of the day it’s a pretty simple calculus. The vast majority of all voters believe in the basic tenets of capitalism. What we disagree about often is how to best stimulate and regulate it. Should the emphasis ALWAYS be on profits over people? Should Bain legally be allowed to take out a $125M loan and give their firm a 3rd of that, which has no discernible value for the company they just bought/put further into debt? These are just judgement calls about judgement calls. And that’s ultimately what we want to know about our President…how will he or she act when in office? Will they be more on the side of business or the people who work?

    Again, nearly all of us believe in capitalism, but to what degree and at what costs?

  14. mdgeorge Says:

    Tully says:

    Getting paid in stock is no different than getting paid in toilet paper

    and then says:

    they made out most handsomely, including 17.5% ownership of the company and billions in 9% preferred-dividend stock

    Just sayin’

  15. Exasperated Says:

    I think it would be a lot of fun and to do an ad comparing the success of Nucor’s model (Kenneth Iverson) and the failure of GST’s model. It would stick it in the eye of both wings of the Demopublican(Republirat) party.
    “Iverson vigorously advocated a lean management staff, decentralized decision-making structure, and egalitarian work environment. At Nucor, he brought the number of levels of management down to 4 – a janitor was literally four promotions away from the CEO’s job. Furthermore, he located the corporate headquarters far away from any production facilities and gave each mill great leeway in its own marketing and production decisions. Under his leadership, Nucor did away with executive perks such as reserved parking spaces and special health benefits, and Iverson is known to have personally answered his own phone whenever he was in the corporate office- where a staff of 22 was sufficient for managing the entire multibillion dollar corporation.” Wikipedia
    “Local sharecroppers, carpenters, and teachers were hired to work the plant — a work force, Iverson says, that would initially prove a mixed blessing. None had ever been in a steel mill before, so they were nonunion and in thrall to no outmoded procedures or work rules. ….By 1984, Iverson has molded that work force into one of the most productive in the steel industry, producing almost twice the steel per man-hour as workers in the large companies. From the outset, Nucor workers have been motivated by a generous, and simple, plan: the more steel produced, the more money earned. Although technological improvements have boosted production levels dramatically, the base level on which the bogus is figured remains unchanged. (This really flies in the face of current reality in which workers don’t benefit much from stunning gains in productivity.)
    That same bonus policy extends to the executive suite……Management is kept lean to ensure its responsiveness to workers, to manufacturing improvements, and to the marketplace. When Nucor was reconstituted in 1965, it had a corporate staff of 2; today(1984) it stands at just 16. If Iverson ever did get his hands on a really big steel company, it would be management that he would want to awaken. (Consider that the union failed to respond to the hand writing on the wall in GST’s case and rejected all attenpts at restructure.)
    “We’re not overseeing the demise of the steel industry,” he says. “We’re seeing its transformation into a high-tech business.” Inc article 1984

  16. cranky critter Says:

    @mdg: the gov’t got the stock in return for, ahem, money.

    What did the UAW get the stock for?

    @Justin No, it isn’t ad hominem. What it is is light on details and context. And very heavy on pathos laden anecdotes.

    It doesn’t come out and say “therefor Mitt Romney is a cold, heartless, rich bastard.” It only invites you to jump to that conclusion. Via selective presentation of some parts of the story.

  17. Exasperated Says:

    Kimberley Strassel’s WSJ article, “Vampire Capitalism. Please” (May 17th), effectively guts the mawkish, contrived, and insincere Obama ad claiming that GST was a thriving quality steelmaker gutted and stripped by Bain. The devil is in the details. What Bain actually did was give them life support for 8 years beyond their expiration date.
    Strassel recapped:
    “When Bain bought the Kansas City mill in 1993, steel was a scene of carnage. ….The industry had lost 200,000 jobs in preceding years. In 1992 alone, the six largest U.S. steel mills had lost a combined $3 billion( Armco alone lost $641 million in 1993). Over the 20 years prior to Bain, Armco had laid off 3500 out of 4500 employees and the plant was hopelessly obsolete.
    Bain nonetheless saw some potential and in 1993 joined other investors to acquire it for $80 million. Management renamed it GS Technologies and poured an additional $100 million into modernization. There was some initial success, enough to distribute a dividend , followed by a cascade of events that overwhelmed the company: even cheaper imports, severe contraction of the mining industry (the primary customer) due to the Asian financial crisis, skyrocketing energy costs, an intractable union and spiking labor demands. “ By April 1997, it was on strike, shooting bottle rockets at guards. Labor costs spiked, and by 1999 GSI was reporting $53 million in net losses.”

  18. Justin Gardner Says:

    Cranky, your words, not mine. And how exactly do you want Obama to present the other side? “Oh, the labor unions were an issue too.” What are labor unions designed to do? Fight for the workers. What are Boards designed to do? Fight for the shareholders. Why did labor unions come about? Because big business abused, intimated and killed workers without recourse. Blame the unions all you want.

    Exasperated, that $100M wasn’t Bain’s money. It was borrowed. See above for the big payday they gave themselves just for doing the deal. Ahh, the salad days where banks would agree to anything, including paying yourself nearly a third of the $120M+ loan you got. Some of their other bets paid off. Great. Romney lived by the venture capital sword, he may die by it. That’s for the voters to decide. But his record has skeletons and successes. Which will people care about? What do you expect the Obama campaign to do? Highlight the successes along with the failures?

  19. Jim S Says:

    Tully has gone to the Fox side. Unions are evil. Everything they do is some Machiavellian scheme. In case anyone hasn’t noticed, the accusations that Tully is making is the standard fare of conservative blogs and pretty much every Republican activist around. Management consists of saints. He speaks of the thousands of jobs cost by the bailout while refusing to acknowledge those saved. Let me guess. If they’d only left the government out of it and let regular bankruptcy take its course, things would have worked out fine. Here’s the problem. For regular bankruptcy to work you still have to have people willing to pump capital into the companies while they are going through the process. The bigger the company, the more capital needed. At the time you had two huge companies that would have needed billions in capital at a time that no one was providing that kind of capital. You can’t separate the auto bailouts from the overall fiscal situation. What Tully and his ideological brethren refuse to acknowledge is that the unions have been making concessions for years at this point. How is it that this is never mentioned by the right wing in this country? It goes against their long term goal of eliminating organized labor, which is, after all, the source of all that’s wrong in the American economy.

  20. Exasperated Says:

    Yes, Bain borrowed the money for the rebuilding of Armco which should be a red flag that Armco was over and done in 1993. They also borrowed funds to make the initial $80M purchase, oh, yeah,that had to be paid back too. My post of the WSJ article is a very brief recap of a much longer and more detailed article.
    Bottom line, I’m just agreeing with cranky critter that the ad was “carefully chosen evasion”, which I understand works for “true believers” and gins up the base.
    As I pointed out, a better approach to bring Centrists on board, would have been to compare and contrast the Iverson approach(Nucor) and the Bain approach. It is a worthwhile conversation to have for its own sake. Alas, it doesn’t fit the “white hats”, “black hats” paradigm that partisan cranks need.

  21. cranky critter Says:

    Exasperated. You sound you get it. Swing by rise of the center some time.

    Jim, I know it’s hard for you to understand. But you don’t have to believe unions are evil or be a fox news true believer to understand the factual math of the GM bailout.

    You know, I think I’m probably glad that we preserved a big part of the domestic auto industry. To believe that, I DO NOT need to turn a blind eye to the nature of the deal. The UAW got an extremely good deal under the circumstances. Especially in contrast to many other people who got screwed in that deal.

    One part of the deal involved simply screwing a number of creditors who loaned money to GM under the understanding that they’d have primacy in getting repaid. Now, any true-blue liberal can toe the usual line and say something like, “screw those bastards, I care about the common workers.” Well, sure. Fine. But the problem comes the next time a big struggling company is looking for a capital infusion to get them over a rough spot. Who’s going to loan such a company money when there’s a risk that the loan agreement could be simply disregarded with Uncle Sam’s help?

    If people can’t make big money deals confident that the terms of the deal will be honored, they’ll avoid those sorts of deals.

  22. cranky critter Says:

    Exasperated. You sound you get it. Swing by rise of the center some time. Hope to see you there.

    Jim, I know it’s hard for you to understand. But you don’t have to believe unions are evil or be a fox news true believer to understand the factual math of the GM bailout.

    You know, I think I’m probably glad that we preserved a big part of the domestic auto industry. To believe that, I DO NOT need to turn a blind eye to the nature of the deal. The UAW got an extremely good deal under the circumstances. Especially in contrast to many other people who got screwed in that deal.

    One part of the deal involved simply screwing a number of creditors who loaned money to GM under the understanding that they’d have primacy in getting repaid. Now, any true-blue liberal can toe the usual line and say something like, “screw those bastards, I care about the common workers.” Well, sure. Fine. But the problem comes the next time a big struggling company is looking for a capital infusion to get them over a rough spot. Who’s going to loan such a company money when there’s a risk that the loan agreement could be simply disregarded with Uncle Sam’s help?

    If people can’t make big money deals confident that the terms of the deal will be honored, they’ll avoid those sorts of deals.

  23. cranky critter Says:

    Huh. Exasperated. You sound you get it. Swing by rise of the center some time.

    Jim, I know it’s hard for you to understand. But you don’t have to believe unions are evil or be a fox news true believer to understand the factual math of the GM bailout.

    You know, I think I’m probably glad that we preserved a big part of the domestic auto industry. To believe that, I DO NOT need to turn a blind eye to the nature of the deal. The UAW got an extremely good deal under the circumstances. Especially in contrast to many other people who got screwed in that deal.

    One part of the deal involved simply screwing a number of creditors who loaned money to GM under the understanding that they’d have primacy in getting repaid. Now, any true-blue liberal can toe the usual line and say something like, “screw those bastards, I care about the common workers.” Well, sure. Fine. But the problem comes the next time a big struggling company is looking for a capital infusion to get them over a rough spot. Who’s going to loan such a company money when there’s a risk that the loan agreement could be simply disregarded with Uncle Sam’s help?

    If people can’t make big money deals confident that the terms of the deal will be honored, they’ll avoid those sorts of deals.

  24. Tillyosu Says:

    Exasperated, that $100M wasn’t Bain’s money. It was borrowed. See above for the big payday they gave themselves just for doing the deal. Ahh, the salad days where banks would agree to anything, including paying yourself nearly a third of the $120M+ loan you got.

    I always thought this was a stupid argument, and I was going to take a minute to refute it today, but instead, the WSJ beat me to it:

    The basic Obama-liberal critique goes like this: Bain buys a company, loads it with debt and then sucks out cash before foisting the wounded business upon an unsuspecting buyer or a bankruptcy court. In the risk-taking world of private equity such a scenario can certainly happen, and it’s true that Bain likes management fees and dividends as much as the next partnership.

    But then how to explain the history of Bain Capital? Mr. Romney started the business in 1984. The company has since bought and sold many businesses and executed thousands of financing transactions.

    If Bain’s standard operating procedure were to hand the next owner of one of its companies a ticking bankruptcy package, how is Bain still finding buyers nearly three decades later? And who would agree to lend money to a company backed by Bain? Wouldn’t word have gotten around by, say, 1987 that Bain’s portfolio companies weren’t creditworthy?

    Exactly.

  25. Mudge Says:

    I’m reminded of the Sopranos episode in which a victim of loan sharking is simply held in his office and forced to order all kinds of goods on the company accounts that the mobsters can then sell to pay off his “debt”. The victim is then left to deal with his company’s debts, and presumably goes bankrupt.

    Bain is not much different.

  26. Exasperated Says:

    Look, here’s the deal; we were talking about the attack ad based on GST here, which was, ahem, “borrowed” from the Gingrich PAC, apparently with equally sloppy fact checking. My interst was piqued because I have a passing interest in the steel industry and because I have friends and family in the “Northeast” of KCMO. I ridiculed the Gingrich campaign for this ad, too. It’s cherry picked stats are geared to appeal to those whose raison detre is faux outrage. If you can back the claims with facts from GST’s demise, I will listen. I have read at least a dozen articles all half baked (incomplete), fuzzy facts(who, what, when, how much), and contradictory.

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Also, sometimes even if you've commented before, it may still get placed in a moderation queue and/or sent to the spam folder. If it's just in moderation queue, it'll be published, but it may be deleted if it lands in the spam folder. My apologies if this happens but there are some keywords that push it into the spam folder.


One last note, we will not tolerate comments that disparage people based on age, sex, handicap, race, color, sexual orientation, national origin or ancestry. We reserve the right to delete these comments and ban the people who make them from ever commenting here again.


Thanks for understanding and have a pleasurable commenting experience.


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