Pete Kotz, Palm Beach New Times - Mitt Romney had been running Bain Capital since 1984, minting a reputation as a prince of private investment. A future prospectus by Deutsche Bank would reveal that by the time Romney left in 1999, Bain had averaged a shimmering 88 percent annual return. Romney would use that success to launch his political career.
His specialty was flipping companies — or what he often calls "creative destruction." It's the age-old theory that the new must constantly attack the old to bring efficiency to the economy, even if some are destroyed along the way. In other words, people like Romney are the wolves, culling the herd of the weak and infirm.
His formula was simple: Bain would purchase a firm with little money down, then begin extracting huge management fees and paying Romney and his investors enormous dividends.
...Bain would slash costs, jettison workers, reposition product lines, and merge its new companies with other firms. With luck, they'd be able to dump the firm in a few years for millions more than they'd paid for it.
But the beauty of Romney's thesis was that it really didn't matter if the company succeeded. Since he was yanking out cash early and often, he would profit even if his targets collapsed.
…In the midst of that 1994 campaign, one of Romney's companies, American Pad & Paper, bought a plant in Marion, Indiana. At the time, it was prosperous enough to be running three shifts. Bain's first move was to fire all 258 workers, then invite them to reapply for their jobs at lower wages and a 50 percent cut in health-care benefits.
"They came in and said, 'You're all fired,' " employee Randy Johnson told the Los Angeles Times. " 'If you want to work for us, here's an application.' We had insurance until the end of the week. That was it. It was brutal."
…."Romney is not a vulture capitalist, as Rick Perry says, since vultures eat dead carcasses," notes Josh Kosman, who's written about the private equity business for 15 years. He's "more of a parasitic capitalist, since he destroys profitable businesses."
….Bain is a private company, meaning it has no obligation to reveal its practices. It's never made public a list of companies it has purchased. Nor would Bain or the Romney campaign comment for this article.
So in January, the Wall Street Journal did its best to piece together Romney's track record, reviewing 77 investments made under his direction. It turned out that nearly one in three of the companies experienced severe financial trouble. One in five wound up in bankruptcy.
The more telling figure: Of Romney's ten biggest moneymakers, he ultimately destroyed four of them, leaving bankruptcy judges to clean up the mess.
Don’t miss the detailed examples. This is a must read
One of Romney’s top advisers is R. Glenn Hubbard, among those who designed the Bush tax cuts that helped to create the current crisis. Romney also signed an anti-tax increase pledge in 2007, even though in 2002 he had called such a pledge “government by gimmickry."
Romney’s 2011 solution to the foreclosure crisis: “As to what to do for the housing industry specifically, and are there things you can do to encourage housing? One is, don't try and stop the foreclosure process. Let it run its course and hit the bottom. Allow investors to buy homes, put renters in them, fix the homes up, and let it turn around and come back up.”
Several years into the crisis, he added, “I think the idea of helping people refinance homes to stay in them is one that's worth further consideration. But I'm not signing on until I find out who's going to pay and who's going to get bailed out, and that's not something which we know all the answers to."
Romney isn’t happy with unemployment insurance, either: “The indisputable fact is that unemployment benefits, despite a web of regulations, actually serve to discourage some individuals from taking jobs, especially when the benefits extend across years.” Romney didn’t explain where the jobs were that they were avoiding.
While governor of Massachusetts, aid from the state to localities declined, forcing property taxes up five percent to their highest level in five years.
Wikipedia: According to an analysis of his tax reform proposal by the Brookings Institution and the Tax Policy Center, Romney's plan would charge parents earning minimum wage about $1,000 more per year, while affording those earning over $1 million per year about half of his proposed $600 billion per year tax cuts.
Memo from Stephanie Cutter of the Obama campaign: Romney argues that his business experience would translate to more jobs for Americans. (In Massachusetts, it didn’t. During his term there, the state fell to 47th in the nation in job creation.)
But in fairness, Romney’s objective in business was never job creation. As one of his colleagues recently told the Los Angeles Times:
“I never thought of what I do for a living as job creation,” said Mark B. Walpow, a former managing partner at Bain, who worked closely with Romney for nine years before forming his own firm. “The primary goal of private equity is to create wealth for your investors.”
To achieve that end, Romney closed over a thousand plants, stores and offices, and cut employee wages, benefits and pensions. He laid off American workers and outsourced their jobs to other countries. And he and his partners made hundreds of millions of dollars while taking companies to bankruptcy.
Although some of the businesses in which he took a stake undoubtedly added jobs, neither Romney’s campaign nor any independent fact checker has supported his claim of producing a net increase of 100,000 American jobs – or even anything close to it.
When asked by TIME Magazine whether Mitt Romney is a job creator or destroyer, Warren Buffett said that while businesses shouldn’t hang on to people they don’t need, “I don’t like what private-equity firms do in terms of taking out every dime they can and leveraging [companies] up so that they really aren't equipped, in some cases, for the future.”
Andrew Sum and Joseph McLaughlin, Boston Globe, 2007 - |On all key labor market measures, the state not only lagged behind the country as a whole, but often ranked at or near the bottom of the state distribution. Formal payroll employment in the state in 2006 was still 16,000 or 0.5 percent below its average level in 2002, the year immediately prior to the start of the Romney administration. Massachusetts ranked third lowest on this key job generation measure and would have ranked second lowest if Hurricane Katrina had not devastated the Louisiana economy.
While the number of employed people over age 16 in the United States rose by nearly 8 million, or close to 6 percent, between 2002 and 2006, the number of employed residents in the Commonwealth is estimated to have modestly declined by 8,500. Massachusetts was the only state to have failed to post any gain in its pool of employed residents. The aggregate number of people 16 and older either working or looking for work in Massachusetts fell over the Romney years.
We were one of only two states to have experienced no growth in its resident labor force. Again, without the devastating effects of Hurricane Katrina on the dispersal of the Louisiana population, Massachusetts would have ranked last on this measure. The decline in the state's labor force, which was influenced in large part by high levels of out-migration of working-age adults, helped hold down the official unemployment rate of the state. Between July 2002 and July 2006, the US Census Bureau estimated that 222,000 more residents left Massachusetts for other states than came here to live. This high level of net domestic out-migration was equivalent to 3.5 percent of the state's population, the third highest rate of population loss in the country
…Between 2002 and 2006, the median real (inflation adjusted) weekly earnings of full-time wage and salary workers in Massachusetts is estimated to have fallen by $10 or nearly 2 percent. The real income of the average (median) family in Massachusetts in 2005 was 1 percent below its value at the time of the 2000 Census while median household income was 3 percent below its 2000 value. Median household income fell even more sharply in the nation.
… There is one additional area in which Massachusetts was a national leader over the past five years, the rise in housing prices. Between 2000 and 2005, the median self-reported home price in Massachusetts increased by nearly 95 percent versus an increase of only 40 percent for the United States. The median home price ranked fourth highest among the 50 states, and the median value of homes relative to household income was the third highest in the country.
… Real world experience has shown that a governor is limited in his power to influence the course of economic development in a state. A full-time governor who is deeply committed to the economic well-being of a state's workers can, however, make some difference. The state unfortunately did not receive such leadership over most of the past four years. Jokes about Massachusetts may receive some half-hearted laughter on the national campaign trail, but few working men and women in Massachusetts should see anything funny about the state's lackluster economic performance during the Romney years.
Andrew Sum is director and Joseph McLaughlin is research associate at the Center for Market Studies at Northeastern University.