Why voters love Donald Trump's wealth — but despised Mitt Romney's. Rubio: Trump is 'an embarrassment' and Republicans will pay big in November. Read more. In the past few decades, in fact, Romney has piled more debt onto more unsuspecting companies, written more gigantic checks that other people have to cover, than perhaps all but a handful of people on planet Earth.
By making debt the centerpiece of his campaign, Romney was making a calculated bluff of historic dimensions — placing a massive all-in bet on the rank incompetence of the American press corps. That same man then runs for president riding an image of children roasting on flames of debt, choosing as his running mate perhaps the only politician in America more pompous and self-righteous on the subject of the evils of borrowed money than the candidate himself.
Four years ago, the Mitt Romneys of the world nearly destroyed the global economy with their greed, shortsightedness and — most notably — wildly irresponsible use of debt in pursuit of personal profit.
The sight was so disgusting that people everywhere were ready to drop an H-bomb on Lower Manhattan and bayonet the survivors. Instead of cars and airplanes, we built swaps, CDOs and other toxic financial products. Instead of building new companies from the ground up, we took out massive bank loans and used them to acquire existing firms, liquidating every asset in sight and leaving the target companies holding the note.
A takeover artist all his life, Romney is now trying to take over America itself. Is America really ready for another Republican president who was a prep-school cheerleader? And like other great presidential double-talkers such as Bill Clinton and George W.
Bush, Romney has shown particular aptitude in the area of telling multiple factual versions of his own life story. It was not my desire to go off and serve in Vietnam. Like John F. Kennedy and George W. Then, faced with making a career choice, Mitt chose an odd one: Already married and a father of two, he left Harvard and eschewed both politics and the law to enter the at-the-time unsexy world of financial consulting. He could have done anything — but what does he do? Romney started off at the Boston Consulting Group, where he showed an aptitude for crunching numbers and glad-handing clients.
The reality is that toward the middle of his career at Bain, Romney made a fateful strategic decision: He moved away from creating companies like Staples through venture capital schemes, and toward a business model that involved borrowing huge sums of money to take over existing firms, then extracting value from them by force.
It then puts down a relatively small amount of its own money and runs to a big bank like Goldman Sachs or Citigroup for the rest of the financing. Most leveraged buyouts are financed with 60 to 90 percent borrowed cash. The takeover firm then uses that borrowed money to buy a controlling stake in the target company, either with or without its consent.
Once management is on board, the rest is just math. So in addition to whatever problems you had before, Tricycle Inc. Fortunately, the geniuses at Bain who now run the place are there to help tell you whom to fire. So Tricycle Inc. Once all that debt is added, one of two things can happen. The company can fire workers and slash benefits to pay off all its new obligations to Goldman Sachs and Bain, leaving it ripe to be resold by Bain at a huge profit.
Or it can go bankrupt — this happens after about seven percent of all private equity buyouts — leaving behind one or more shuttered factory towns. Either way, Bain wins. By power-sucking cash value from even the most rapidly dying firms, private equity raiders like Bain almost always get their cash out before a target goes belly up. Think Paulie buying all those cases of Cutty Sark in Goodfellas. When the note comes due, the mobster simply torches the restaurant and collects the insurance money.
Reduced to their most basic level, the leveraged buyouts engineered by Romney followed exactly the same business model. There are many stories of successful turnarounds fueled by private equity, often involving multiple floundering businesses that are rolled into a single entity, eliminating duplicative overhead.
Experian, the giant credit-rating tyrant, was acquired by Bain in the Nineties and went on to become an industry leader. Everyone had a stake in the success of those old businesses, which spread prosperity by putting people to work. The objective of the LBO business is maximizing returns for investors.
The mortgage analogy is so obvious, in fact, that even Romney himself has made it. Subscriber Account active since. So, barring a miraculous rate of return from as-yet-unspecified "investments," it's hard to see how Romney's IRA could have grown so large.
The speculation is that Romney probably placed some investments in the IRA when they were worth little or nothing, only to have them explode in value over the ensuing years. And the perfectly fair question that arises from that theory is whether the "little or nothing" value that Romney attributed to the investments when he contributed them was actually a fair valuation--or whether Romney low-balled the value to dodge some taxes. But since Romney's IRA investments are disguised via a byzantine series of offshore entities designed at least in part to minimize US taxes, it is impossible to do this analysis without having access to his returns.
This is one reason why it's so important for Romney to release his returns --so the public can understand the truth about Romney's finances, as well as the reality of tax laws that allow super-rich Americans to take advantage of sophisticated loopholes that most Americans, for all practical purposes can't. This morning, the Boston Globe published what could be a bombshell story about how Romney has been saying he left his private-equity firm, Bain Capital , three years before he actually left.
Romney first made this claim when he was running for Governor of Massachusetts--as a way of dodging blame for some layoffs that occurred at one of Bain's investments. And Romney has repeated this claim ever since. The Romney campaign has said the Globe story is "inaccurate," but hasn't offered any explanation of why four Bain entities would have made 9 filings with the SEC claiming this if it weren't true.
SEC filings, needless to say, are serious business. If Romney was actually not associated with Bain when Bain was saying he was the "Chairman, CEO, and President," Bain may well have committed fraud and if Romney knew about it and didn't correct it, he also might have committed fraud. Meanwhile, if Bain's filings were correct, Romney's repeated claims that he left three years earlier than he did will be a huge blow to his credibility.
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