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You can blame Mitt, but not for Bain
Politico ^ | 01/12/12 | Steve Rattner

Posted on 01/12/2012 1:09:55 PM PST by freespirited

I’m all in favor of piling on Mitt Romney for any number of reasons: his come lately embrace of hard right conservatism, his periodic malapropisms (“I like being able to fire people”) and above all, the nonchalance with which he displays a dazzling shortage of principles by incessantly flip-flopping on issues, sometimes the same day.

But these latest salvos being fired at his service as the founder and head of Bain Capital go too far. Having spent nearly three decades on Wall Street, when it comes to Bain Capital, I feel equipped — some might say too equipped — to parse fact from fiction. (Full disclosure: In the post-Romney era, I worked with Bain Capital on several projects.)

Most important, Bain Capital is not now, nor has it ever been, some kind of Gordon Gekko-like, fire-breathing corporate raider that slashed and burned companies, immolating jobs wherever they appear in its path

Wall Street has its share of the vulture capitalists that Texas Gov. Rick Perry enjoyed mocking in South Carolina earlier this week. But Romney was almost the furthest thing from Larry the Liquidator.

Instead, with modest exceptions (keep reading to learn more about these), Bain Capital was a thoroughly respectable – nay, eminent – investment manager that successfully discharged its responsibility of earning high returns for its investors by deploying capital in companies privately rather than by buying shares in the public market. (Hence the name, private equity.)

Over Bain Capital’s 27 years, its private investments generally fell into two buckets. The firm, particularly in its early years, made dozens of venture capital investments — taking stakes of a few million dollars or less in young companies, in hopes that they would grow and prosper. A good example: Its investment of $2.5 million in Staples in 1986.

As the years clicked along, Bain’s emphasis shifted toward what was then known as leveraged buyouts, and is now called private equity. Typically, those investments are larger, made in more developed companies and heavily financed with debt. In 1998, for example, Bain invested $189 million in the pizza chain Domino’s, from which it reportedly reaped a fivefold return.

Overall, Bain Capital’s record was extraordinary, among the best in the business. According to a Bain placement document, through the end of 1999 (effectively, when Romney left), the firm had achieved annual returns of 88 percent per year.

That is not only wildly more than the single digit returns most investors achieve by buying stocks or bonds, it is far higher than those of typical private equity or venture capital firms.

Of course, a number of its early stage investments failed. That is the nature of venture capital — an industry not unlike baseball in that a .300 batting average can be excellent performance. But who can quarrel with an investment firm trying to nurture and finance young companies?

The story of the private equity business is somewhat more complicated. Almost by definition, a private equity investment is made with the hope of improving the profitability of the “portfolio company,” as it is known in the parlance. Often, this means replacing management or reducing unnecessary headcount – firing people.

While no one likes seeing jobs disappear, eliminating unnecessary overhead and even entire divisions if they cannot be made sufficiently profitable is at the heart of a successful economy — the process Joseph Schumpeter famously described as “creative destruction.” How strange for conservatives like Newt Gingrich and Perry to be questioning the core of free market economics.

I have no idea whether Bain Capital created 100,000 net new jobs, and I think Romney was silly to even engage in that debate. What we know for certain is that Bain Capital more than fulfilled its responsibility to a gaggle of investors, who were mostly foundations, endowments, pension funds and the like.

So what are the question marks (promised above) around the story of Romney and Bain Capital? First, it’s fair game to question the amounts of debt that are sometimes used in leveraged buyouts. While higher debt usually means higher returns — because debt is cheaper than equity, thanks in part to its tax deductibility — it also means higher risk of bankruptcy.

Bain had less than its share of bankruptcies, but it had a few – it appears four – that are particularly troubling. In all those cases, when the portfolio companies initially showed signs of promise, Bain took advantage of their progress to borrow more money, which it took out as a dividend. Later, the fortunes of each company turned down, ultimately into insolvency.

When Bain “releveraged” those companies and took the cash out, the investment managers of course had no idea that the companies would later falter. But with the benefit of hindsight, taking a more conservative approach and refraining from squeezing these dividends out of the companies would certainly have been more prudent.

Let’s be sure to keep these few problem children in perspective. During the Romney years, Bain made 77 significant investments —and a number of smaller ones. It made billions for worthy investors and, yes, doubtless created some incalculable number of net new jobs for the U.S. economy.

That’s the story of Bain Capital. It’s certainly fair game for any candidate’s opponents to dig into his record. But in Romney’s case, focusing on questions about his principles — and his currently staunchly conservative principles — could be more productive than trying to rewrite the firm’s history.


TOPICS: News/Current Events
KEYWORDS: baincapital; privateequity
If you can't place the author, he was WH Car Czar.
1 posted on 01/12/2012 1:10:01 PM PST by freespirited
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To: freespirited
"and his currently staunchly conservative principles"

Currently indeed.

2 posted on 01/12/2012 1:14:13 PM PST by moehoward
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To: freespirited
Repeat After Me: Bain Capital Is Not A VC Firm
3 posted on 01/12/2012 1:18:11 PM PST by Utmost Certainty (Our Enemy, the State | Gingrich 2012)
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To: freespirited
A dubious endorsement, but it is coming from a 'Rat, and an Obama flunky, at that. My overriding desire to defeat Obama leads me to think that this is good for Romney, excpet that Rattner isn't exactly a trustworthy guy.
4 posted on 01/12/2012 1:18:28 PM PST by Major Matt Mason (The Chicago Way isn't the American Way.)
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To: freespirited

Isn’t he also a communist or close to it?


5 posted on 01/12/2012 1:18:48 PM PST by juliej
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To: freespirited

You mean Obama’s car czar? They’re still trying to salvage that Romney nomination..

The man who made the movie used to work with Romney. He said he had trouble narrowing the choices to four in it. There were many many many more of healthy companies Bain took over, pumped up with loans, took out their precious dividends, then left them to go broke ...

with the sucker investors(like you and me) who got in at the releveraging level.. SOL.

Still a lot of questions. Still no answers from Mitt.


6 posted on 01/12/2012 1:19:45 PM PST by Reagan69 (I supported Sarah Palin and all I got was a lousy DVD !)
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To: freespirited
Mitt Romney company profited as steel mill it owned closed, government bailed out pension plan

What’s more, a federal government insurance agency had to pony up $44-million to bail out the company’s underfunded pension plan. Nevertheless, Bain profited on the deal, receiving $12-million on its $8-million initial investment and at least $4.5-million in consulting fees.

7 posted on 01/12/2012 1:24:02 PM PST by DJ MacWoW (America! The wolves are here! What will you do?)
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To: Reagan69
Looks like there are some inaccuracies in the movie. Check this out:

No Bain Did Not Get a Bailout

I still believe it would be far preferable to focus on his performance as governor.

8 posted on 01/12/2012 1:26:06 PM PST by freespirited
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To: freespirited

It took me a while to think it through, what with all the accusations of gutting companies for profit, but here goes anyway.

When Romney was head of Bain, what was and to whom was his duty? Wasn’t it to make money for the investors in the company? Didn’t he carry out that duty? He did not have to like what he was doing, so long as doing it fulfilled his obligations.

If he is elected, will he treat his duty to the citizenry and to the Constitution the same way?

I am NOT a Romney supporter, Romneycare alone being a disqualifier in my mind. But four more years of Obama is unthinkable! If he gets the nomination, I’ll have to vote for him, not very happily.

(Donning NOMEX overalls) Feel free to flame away.


9 posted on 01/12/2012 1:28:15 PM PST by JimRed (Excising a cancer before it kills us waters the Tree of Liberty! TERM LIMITS, NOW AND FOREVER!)
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To: DJ MacWoW
What’s more, a federal government insurance agency had to pony up $44-million to bail out the company’s underfunded pension plan.

True, but it wasn't taxpayer money as previously reported here.

10 posted on 01/12/2012 1:32:50 PM PST by freespirited
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To: JimRed

Pretty much my sentiments too. Don’t care for him as a candidate, but not for Occupy Wall Street reasons.


11 posted on 01/12/2012 1:34:23 PM PST by freespirited
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To: JimRed
When Romney was head of Bain, what was and to whom was his duty?

Bain Capital was founded in 1984 by Romney and 2 other men, T. Coleman Andrews III, and Eric Kriss.

12 posted on 01/12/2012 1:39:36 PM PST by DJ MacWoW (America! The wolves are here! What will you do?)
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To: freespirited

One wonders why he cares so much.


13 posted on 01/12/2012 1:42:37 PM PST by ReneeLynn (Socialism is SO yesterday. Fascism, it's the new black. Mmm mmm mmm...)
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To: freespirited

Uh.............if not taxpayers, where does government get their money?


14 posted on 01/12/2012 1:43:01 PM PST by DJ MacWoW (America! The wolves are here! What will you do?)
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To: freespirited
Don’t care for him as a candidate, but not for Occupy Wall Street reasons.

That is a misdirection! And I'm getting sick of it. Romney is a dishonest politician and you think he's an honest businessman? This has NOTHING to do with capitalism. It has to do with ROMNEY.

Bain ALWAYS made tons of money by getting loans on assets of companies then selling off the assets and bankrupting them. Did you watch King of Bain?

15 posted on 01/12/2012 1:48:28 PM PST by DJ MacWoW (America! The wolves are here! What will you do?)
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To: DJ MacWoW

Pension funds pay a premium to the Pension Benefit Guarantee agency. In the event of a problem like this one, the funds come out of the premiums paid by participants, not from the taxpayers.


16 posted on 01/12/2012 1:53:01 PM PST by freespirited
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To: Reagan69
with the sucker investors(like you and me) who got in at the releveraging level.. SOL.

Which ones did you invest in?

You should be a sophisticated investor to have invested in junk bonds, if not, sue your broker.
17 posted on 01/12/2012 1:53:10 PM PST by kenavi (1% of the 1% were born in the 1%.)
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To: freespirited

“How strange for conservatives like Newt Gingrich and Perry to be questioning the core of free market economics.”

Neither one has worked in private industry, very much at all.

Since they have been mostly in government, the would know about the crony capitalism involved, whereby those in government deal with quid pro quo opportunities, to benefit from dealings with companies, etc.

They would know much less about the activities described in the article, about venture capital, mergers & acquisitions, etc.


18 posted on 01/12/2012 1:56:42 PM PST by truth_seeker
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To: freespirited

Who are the participants?


19 posted on 01/12/2012 1:57:19 PM PST by DJ MacWoW (America! The wolves are here! What will you do?)
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To: freespirited
If you can't place the author, he was WH Car Czar.

A surprisingly reasonable essay, considering the source.

20 posted on 01/12/2012 1:58:18 PM PST by cynwoody
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To: truth_seeker

They know nothing about real entrepreneurship.


21 posted on 01/12/2012 1:58:25 PM PST by dfwgator (Don't wake up in a roadside ditch. Get rid of Romney.)
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To: DJ MacWoW
Bain Capital was founded in 1984 by Romney and 2 other men...

So it was not a publicly owned company with shareholders etc., if I understand correctly?

22 posted on 01/12/2012 1:58:57 PM PST by JimRed (Excising a cancer before it kills us waters the Tree of Liberty! TERM LIMITS, NOW AND FOREVER!)
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To: freespirited
Tell me why you think it was okay for Bain and Romney to make millions and leave everyone else holding the bag?

Did you watch King of Bain?

23 posted on 01/12/2012 1:58:56 PM PST by DJ MacWoW (America! The wolves are here! What will you do?)
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To: freespirited

No one is saying Bain got a bailout.

He stripped the companies, loaded them up with loans, walked away with his checks and bonuses.

The company collapsed and tax payers had to pay out for the pensions plans via The federal insurace on the plan. ($44 million dollars of OUR money.)


24 posted on 01/12/2012 2:02:04 PM PST by Reagan69 (I supported Sarah Palin and all I got was a lousy DVD !)
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To: freespirited

No one is saying Bain got a bailout.

He stripped the companies, loaded them up with loans, walked away with his checks and bonuses.

The company collapsed and tax payers had to pay out for the pensions plans via The federal insurace on the plan. ($44 million dollars of OUR money.)


25 posted on 01/12/2012 2:02:53 PM PST by Reagan69 (I supported Sarah Palin and all I got was a lousy DVD !)
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To: JimRed

OMG.

The only one he really cared about was Mitt Romney. A quarter of a billion... that we know about.


26 posted on 01/12/2012 2:04:22 PM PST by Reagan69 (I supported Sarah Palin and all I got was a lousy DVD !)
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To: freespirited
‘Pension funds pay a premium to the Pension Benefit Guarantee agency.’

Yes, and just like the FDIC and Fanny and Freddie they have a permanent loss and run a massive deficit that is taken care of by Government back stopping. IE OUR MONEY!

It has long been a game of corporatist like Romney to use OUR MONEY to to feather their own beds. It is easy to make money if you are willing to do any number of unsavory and repugnant things. Ask any drug dealer how profitable it is. The difference being that Bain and Romney simply used existing Bankruptcy and lending laws to over extend companies and bankrupt them after looting all the assets.

Romney is not now and never has been a capitalist. He is a Crony Capitalist and Corporatist.

27 posted on 01/12/2012 2:05:03 PM PST by Jim from C-Town (The government is rarely benevolent, often malevolent and never benign!)
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To: JimRed
Here's the problem, there is conflicting info. And he isn't clearing it up. There are certainly more than 3 guys in this photo. And, yes, it's listed as private. But many articles list it as having paid shareholders. It's as clear as mud.



28 posted on 01/12/2012 2:06:57 PM PST by DJ MacWoW (America! The wolves are here! What will you do?)
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To: kenavi

Oh, I’m sure we’ll get to meet each and every one that was screwed over by Bain and Lehmann Brothers.

But not now (because we’d be anti-capitalists if we ask any questions... so we must be quiet).. wait until Sept. and Oct.


29 posted on 01/12/2012 2:07:37 PM PST by Reagan69 (I supported Sarah Palin and all I got was a lousy DVD !)
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To: Jim from C-Town
‘Pension funds pay a premium to the Pension Benefit Guarantee agency.’ ...Yes, and just like the FDIC and Fanny and Freddie they have a permanent loss and run a massive deficit that is taken care of by Government back stopping. IE OUR MONEY!

I'm no expert on its operations. You'll have to take it up with PBGC, which says the following on its website:

PBGC receives no funds from general tax revenues

30 posted on 01/12/2012 2:55:27 PM PST by freespirited
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To: DJ MacWoW
Who are the participants?

Employers who have defined benefit pension plans for their workers.

31 posted on 01/12/2012 2:57:00 PM PST by freespirited
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To: DJ MacWoW
Did you watch King of Bain?

I watched the first 12 minutes then couldn't take anymore. Obvious to me that it was a lefty hatchet job.

Bain did 77 deals during Romney's tenure. When someone will only talk about four, you have to suspect cherry-picking of facts. Not to mention that Romney was gone from Bain when the steel company that has been discussed so much went under.

I still believe that the focus should be on his time in office.

32 posted on 01/12/2012 3:01:41 PM PST by freespirited
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To: Reagan69

Don’t take my word for it, read this:

http://www.nationalreview.com/blogs/print/287927

According to NRO, Romney left Bain two years before that company collapsed.


33 posted on 01/12/2012 3:06:34 PM PST by freespirited
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To: freespirited
Obvious to me that it was a lefty hatchet job.

Romney supporter are ya?

King of Bain was made by Jason Killian Meath who writes for Breitbart and The Daily Caller. He also worked for Romney in 2008.

Bain did 77 deals during Romney's tenure

If you had actually watched the film you'd know that the SEC has docs that say Romney did NOT leave Bain.

But you're certain a right-winger made a liberal hatchet job. Riiiiiight.

34 posted on 01/12/2012 3:29:25 PM PST by DJ MacWoW (America! The wolves are here! What will you do?)
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To: freespirited

General Tax Revenues.................OK! Technically neithjer does fannie or fredie


35 posted on 01/12/2012 3:33:04 PM PST by Jim from C-Town (The government is rarely benevolent, often malevolent and never benign!)
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To: DJ MacWoW
King of Bain was made by Jason Killian Meath who writes for Breitbart and The Daily Caller. He also worked for Romney in 2008.

What matters is accuracy, not affiliation. Last night Bay Buchanan indicated that Romney did not work on two of the four companies in the film. Also read elsewhere that accusations made about KB Toys are off, the problems happened post-Bain.

If you had actually watched the film you'd know that the SEC has docs that say Romney did NOT leave Bain.

I think Romney will have little difficulty establishing that he left Bain to run the Olympics. The claim that he did not leave based on what sounds like a routine SEC filing has been refuted. He still had an interest in the company but no longer worked there.

Romney supporter are ya?

Nooooooooooooooooooooo way. Just don't like hatchet jobs.

36 posted on 01/13/2012 10:31:26 AM PST by freespirited
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To: freespirited
I see. You can make wild accusations but the truth isn't important. Got it.

I think Romney will have little difficulty establishing that he left Bain to run the Olympics.

He FOUNDED Bain. In 1984 with 2 other men. He wasn't/isn't some hired CEO.

The claim that he did not leave based on what sounds like a routine SEC filing has been refuted. He still had an interest in the company but no longer worked there.

He NEVER "worked" there. He OWNS it.

I searched Edgar which are SEC filings.

The following is an excerpt from a DEF 14A SEC Filing, filed by ONESOURCE INFORMATION SERVICES INC on 4/18/2001.

(4) According to a Schedule 13G filed on February 14, 2000, the sole general partner of Information Partners Capital Fund, L.P. is Information Partners. The general partners of Information Partners that have a beneficial interest in the shares listed in the table above are David Dominik, a former director of the Company, Mark Nunnelly, Stephen G. Pagliuca, and Bain Capital Partners IV, L.P., whose general
page 5

partner is a corporation wholly-owned by W. Mitt Romney.

Want more links?

The following is an excerpt from a S-1 SEC Filing, filed by NETLIBRARY INC on 8/17/2000.

(o) Includes 527,129 shares held by Bain Capital Fund VI, L.P., whose sole general partner is Bain Capital Partners VI, L.P., whose sole general partner is Bain Capital Investors VI, Inc., a Delaware corporation wholly owned by W. Mitt Romney; 115,138 shares held by BCIP Associates II, a Delaware general partnership of which the managing general partner is Bain Capital, Inc., which is wholly owned by W. Mitt Romney; 16,645 shares held by BCIP Associates II-B, a Delaware general partnership of which the managing general partner is Bain Capital, Inc., which is wholly owned by W. Mitt Romney;

FReepers used to actually do their own research rather than rely on the press and talking heads. Alternative media? Not anymore. Pajamas media? HA!

37 posted on 01/13/2012 11:15:51 AM PST by DJ MacWoW (America! The wolves are here! What will you do?)
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To: DJ MacWoW
I don't get your point. Sounds like you are saying that anyone with an ownership interest is intimately involved in all decision-making. Meanwhile, this is interesting:

Four Pinocchios for King of Bain

You can despise him all you want for his time at Bain; I say it's his time in office where you find what really matters.

38 posted on 01/13/2012 12:53:51 PM PST by freespirited
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To: freespirited
I don't get your point.

That's telling.

Have a nice day.

39 posted on 01/13/2012 12:59:43 PM PST by DJ MacWoW (America! The wolves are here! What will you do?)
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