Posted on 06/10/2011 3:15:41 PM PDT by Straight Vermonter
A year ago I wrote about the sad story of the Simmons Mattress company, a well run outfit that got caught in the cross hairs of the investment bankers, and while they never had a problem making and selling mattresses at a profit they were bought and sold by a series of investment bankers, each one artificially pumping up the book value of the company, borrowing against the inflated value to pay themselves outrageous fees and to repay their investment, and ultimately driving the company into bankruptcy. Factories closed, people were laid off, suppliers short-changed, as the investment bankers took close to a billion dollars out of the value generations of hard working people had created.
This view of manufacturing as a piggy bank to be looted by clever financiers is actually quite common. I could have just as easily written about American Pad & Paper - AMPAD - a paper products manufacturer bought and sold by by an investment banking outfit and ending up in bankruptcy. The investment bankers put $5 million into the deal, took AMPAD debt from $11 million up to $400 million - a fourth of that new debt going to pay the investment banker. $5 million in, $100 million out, and the company ending up broke, 200 employees laid off and a plant closed. Another chunk of the $400 million went toward buying an AMPAD competitor - and promptly closing the competitor's plant and laying off 185 people. That deal jacked up the revenues of AMPAD, making it appear more valuable, in turn making the $100 million to the investment banker possible.
These sorts of leveraged buyout games have made investment bankers millionaires, and destroyed tens of thousands of manufacturing companies over the last thirty years. It is a legal way to suck all of the value others have created from a company without adding anything. Said the head of the investment banking outfit when asked about the plant closings and payoffs, "Sometimes the medicine is a little bitter but it is necessary to save the life of the patient. My job was to try and make the enterprise successful, and in my view the best security a family can have is that the business they work for is strong." Given that the manufacturers went into bankruptcy, the security was apparently for the banker's own family, and the business that remained strong was the investment banking company.
For those wondering why the destruction of a couple of paper companies a few decades ago is worth a blog post today, I should mention that the investment banking company was Bain Capital. The guy in charge, the author of the quote, and the one who made the most from the looting was Mitt Romney.
Romney is touted as an accomplished business person who can bring private sector thinking and leadership to the White House. The reality is he went straight from Harvard to consulting to investment banking to politics (with a brief stint running the Olympics along the way). His publicists make a lot of noise about Staples and a few other high profile companies Bain Capital backed, but leaves out the dozens of others - like GS Industries, a steel company that ended up bankrupt with a plant closed and 750 people laid off - that were looted for incredible returns and left high and dry. And they certainly don't like to discuss the shell companies in the Cayman Islands and the Bahamas Romney set up to enable foreign investors to put money into Bain investments while ducking US tax rates.
I cannot imagine anything worse for American manufacturing than putting a slick bottom feeder like Romney in the White House. His web site says he has, "an intimate knowledge of how our economy works." You bet he does. His use of that intimate knowledge is why he's wealthy and a lot of manufacturers are in shambles.
Atlas shrugging?
I didn’t know this. I thought my dislike for Romney had to do with his utter lack of core beliefs i.e. he will say anything and do anything as long as he is going in the same drection as the wind regardless of the rightness or wrongness of the direction
Ping
The Mittster will jack our debt up even more, annex Canada to make us look profitable, then sell us to Elbonia just before everything comes unglued.
But Mitt, where then will YOU live?
Wow, thank you for this info. I once had an interview at Bain Capital in Boston but the people I interviewed with gave me the creeps.
Believable!!!!
I h@te m!tt now more than ever.
I knew Shite Romney was a scumbag.
Is article implying that Bain bought GS Industries then closed them down??
Romney has the soullessness of a Soviet leader that worked his way up from birth into the ruling class, then to the ruthless planning boards, and then on his way to the head of the party.
Those Ivy League grifters are just like the mob. Remember in Goodfellas where they become partners with a restraunt? They skim money off the top, order as much booze as they can to sell out the back door until they are completely bankrupt, then burn it down and collect the insurance money.
Ahh, now his belief in global warming makes sense.
Lots of loot to plunder if you initiate the scam....
Thanks for a badly needed post. I knew this already, but unfortunately many people do not realize that Romney (and Trump, for that matter) are not productive businessmen—the kind who create jobs and real wealth.
great info!!! thanks for posting this.
(i’m sure the liberal media will be covering this,
and Obama’s college records etc.,
right after they get done going through those 24,000 emails...)
I had no idea! Thanks for pulling the wool from my eyes
ping
Oh, I know! Let’s gas up the vehicle and drive to buy a foreign-made, $1000 mattress! LOL!
Investment Banking & the Law... dividing the spoils between them.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.