# What did Mitt do? **URL:** \ **Category:** Politics & Elections\ **Created:** [January 12, 2012, 2:31pm UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283 "2012-01-12T14:31:17Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![CJJ](https://avatars.discourse-cdn.com/v4/letter/c/ecc23a/32.png) [@CJJ](https://boards.straightdope.com/u/CJJ)\ **Post date:** [January 12, 2012, 8:02pm UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283/21 "2012-01-12T20:02:51Z")
> [@Chronos](#): > > OK, so these companies that he rescued… How are they doing now? Has he, in fact, increased their share prices in the long run? Unless Bain owns the shares, why does it matter if their prices increased in the long run? He has no obligation to improve assents his investors don’t own; that’s the essential argument of Romney’s GOP defenders ---
**Author:** ![cckerberos](https://avatars.discourse-cdn.com/v4/letter/c/f0a364/32.png) [@cckerberos](https://boards.straightdope.com/u/cckerberos)\ **Post date:** [January 12, 2012, 8:09pm UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283/22 "2012-01-12T20:09:45Z")
> [@John\_Mace](#): > > Watch the video. I don’t have a transcript, or I’d quote it. There’s one [here](http://www.pbs.org/newshour/bb/politics/jan-june12/romneybain_01-11.html). I thought it was an interesting piece. ---
**Author:** ![cckerberos](https://avatars.discourse-cdn.com/v4/letter/c/f0a364/32.png) [@cckerberos](https://boards.straightdope.com/u/cckerberos)\ **Post date:** [January 12, 2012, 8:11pm UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283/23 "2012-01-12T20:11:20Z")
> [@CJJ](#): > > He has no obligation to improve assents his investors don’t own; that’s the essential argument of Romney’s GOP defenders And you’re suggesting that he does? Based on what? ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [January 12, 2012, 8:16pm UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283/24 "2012-01-12T20:16:13Z")
> [@cckerberos](#): > > There’s one [here](http://www.pbs.org/newshour/bb/politics/jan-june12/romneybain_01-11.html). > > I thought it was an interesting piece. Thanks. Yes, it’s good to get a view from people who know what they’re talking about instead of just a bunch of anti-capitlist rants about “destroying” companies from people who haven’t the foggiest idea what Bain Capital did. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [January 12, 2012, 8:46pm UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283/25 "2012-01-12T20:46:11Z")
[Here’s an article that would describe his work as…inconclusive.](http://news.yahoo.com/mitt-romneys-much-maligned-career-bain-capital-instant-095400635.html) > [@Chronos](#): > > OK, so these companies that he rescued… How are they doing now? Has he, in fact, increased their share prices in the long run? “Bain recorded roughly 50 percent to 80 percent annual gains in this period, which experts said was among the best track record for buyout firms in that era. Romney himself earned the bulk of his $200 million-plus fortune during these years. The track record for the bought-out companies is a little less rosy, though: Within eight years of Bain’s intervention, 22 percent of these 77 companies filed for bankruptcy or shut down, and another 8 percent did so poorly that Bain’s investment was wiped out.” That’s not necessarilly a reflection on Bain or Romney. Private equity firms don’t buy up companies because they are doing so awesome. And if it was so easy to turn those companies around, then they would turn themselves around. ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [January 12, 2012, 9:07pm UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283/26 "2012-01-12T21:07:52Z")
> [@](#): > > Unless Bain owns the shares, why does it matter if their prices increased in the long run? He has no obligation to improve assents his investors don’t own; that’s the essential argument of Romney’s GOP defenders I thought that Bain did own the shares? Isn’t that what the Republicans are arguing, that his company owned the shares, and that he therefore had a moral and ethical obligation to increase the value of the shares as much as possible? Well, if they crashed as soon as they left Bain’s hands, then they never really had value, just the illusion of it. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [January 12, 2012, 11:11pm UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283/27 "2012-01-12T23:11:52Z")
> [@John\_Mace](#): > > Thanks. > > Yes, it’s good to get a view from people who know what they’re talking about instead of just a bunch of anti-capitlist rants about “destroying” companies from people who haven’t the foggiest idea what Bain Capital did. John, there were definitely private equity funds back then that were the capitalistic equivalent of chop shops. There were other companies that would buy cash rich companies, get actuaries to say that teh pension fund was overfunded and pay of the LBO loans with money that was supposed to go to their pension fund and added value to companies that approximated the amount they didn’t put into the pension fund. And there were a thousand other iterations that people would be turned off by today. If Bain did msotly venture capital or turnarounds then great, Romney should advertise that fact 9and it sounds like there was more of that than the other stuff), but if he did in fact make his money by gutting companies, well then its an honest criticism. ---
**Author:** ![BrainGlutton](https://avatars.discourse-cdn.com/v4/letter/b/82dd89/32.png) [@BrainGlutton](https://boards.straightdope.com/u/BrainGlutton)\ **Post date:** [January 13, 2012, 12:20am UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283/28 "2012-01-13T00:20:45Z")
> [@BobLibDem](#): > > Has anyone ever been sued for not shutting down a plant? I dunno, but [Henry Ford once was sued by his shareholders](http://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Company) for putting his profits into capital expansion instead of paying them dividends. The shareholders won. ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [January 13, 2012, 2:11am UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283/29 "2012-01-13T02:11:17Z")
Germany conducts capitalism just fine with rather more extensive worker protections. Whether they’ve struck the balance correctly is a separate matter (I think they went too far), but the idea that Bain Capital is a necessary component of any capitalistic system is laughable. Bain made a habit of buying companies, borrowing money, then selling the same while leaving the debt to be picked up by convenient bag-holders. In many cases the companies would collapse soon afterwards. That business model is in no way a necessary feature of capitalism and there is clear justification for putting curbs on it. Again, regulatory policy are certainly a matter of debate, but those who cry “Communist!” deserve ridicule. ---
**Author:** ![Miller](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/miller/32/481_2.png) [@Miller](https://boards.straightdope.com/u/Miller)\ **Post date:** [January 13, 2012, 2:38am UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283/30 "2012-01-13T02:38:31Z")
> [@John\_Mace](#): > > You seem to object to the existence of investment funds. Good thing most people don’t share your views, else we’d be talking to each other using cans with strings tied to them. > [@John\_Mace](#): > > Ah, the old strawman fallacy. Dude. ---
**Author:** ![Richard\_Parker](https://avatars.discourse-cdn.com/v4/letter/r/35a633/32.png) [@Richard\_Parker](https://boards.straightdope.com/u/Richard_Parker)\ **Post date:** [January 13, 2012, 2:39am UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283/31 "2012-01-13T02:39:44Z")
It is possible to be profitable but still harmful overall. Even if you accept the radical free market view that profit is indistinguishable from social welfare, we don’t operate in a free market. We have a bankruptcy system, a complicated tax code, subsidies, regulations, and a million and one ways in which heads-I-win tails-you-lose risks can be taken with companies. It is also not the case that the law requires maximum short-term profit for shareholders, as **John Mace** suggests. Making a fantastic short-term profit for a company based on creative leveraging of assets but ultimately dooming its long-term success is not better for shareholders than building a moderately successful company that is stable for a longer period. Unfortunately, Romney’s past at Bain will be measured by some arbitrary measure like jobs created, which even if capable of measurement isn’t really the meaningful metric. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [January 13, 2012, 3:53am UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283/32 "2012-01-13T03:53:11Z")
> [@Richard\_Parker](#): > > It is also not the case that the law requires maximum short-term profit for shareholders, as **John Mace** suggests. Can you quote the part where I talked about short term profits? ---
**Author:** ![Richard\_Parker](https://avatars.discourse-cdn.com/v4/letter/r/35a633/32.png) [@Richard\_Parker](https://boards.straightdope.com/u/Richard_Parker)\ **Post date:** [January 13, 2012, 4:13am UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283/33 "2012-01-13T04:13:57Z")
I took you to be suggesting that Bain was legally obligated to engage in the kind of tactics it employed, i.e. racking up short-term profit without regard to the long-term. If you didn’t intend to suggest that, then I’ve simply misunderstood. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [January 13, 2012, 4:27am UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283/34 "2012-01-13T04:27:21Z")
> [@Richard\_Parker](#): > > I took you to be suggesting that Bain was legally obligated to engage in the kind of tactics it employed, i.e. racking up short-term profit without regard to the long-term. If you didn’t intend to suggest that, then I’ve simply misunderstood. I don’t think you misunderstood. I think you are making an assertion about long term vs short term gain that you have offered no evidence to substantiate. Why don’t you outline the strategy that, according to you, Bain should have undertaken and explain how you know that “long term” results would have been better. ---
**Author:** ![Robot\_Arm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/robot_arm/32/18280_2.png) [@Robot\_Arm](https://boards.straightdope.com/u/Robot_Arm)\ **Post date:** [January 13, 2012, 4:47am UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283/35 "2012-01-13T04:47:26Z")
> [@Richard\_Parker](#): > > Unfortunately, Romney’s past at Bain will be measured by some arbitrary measure like jobs created, which even if capable of measurement isn’t really the meaningful metric. As I understand it, Staples is one of the companies funded by Bain and for which Romney takes credit in his tally of jobs created. Someone comes up with the idea for an office-products store. Someone buys a stake in the company. People come to the company and agree to manage and staff the stores. Other people come to the store and buy things. Why does just one of these people think he created all the jobs? For that matter, what was Romney’s role at Bain; was he risking his own money or just deciding where other people should risk theirs? ---
**Author:** ![waterj2](https://avatars.discourse-cdn.com/v4/letter/w/858c86/32.png) [@waterj2](https://boards.straightdope.com/u/waterj2)\ **Post date:** [January 13, 2012, 4:58am UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283/36 "2012-01-13T04:58:39Z")
From what I can tell, a lot of what Bain did was leveraged buyouts, where the company being bought borrows the money for the sale. For example, Worldwide Grinding Systems, a Kansas City steel mill was [taken over by Bain](http://www.reuters.com/article/2012/01/06/us-campaign-romney-bailout-idUSTRE8050LL20120106) in 1993: > [@](#): > > Nevertheless, Bain and its partners decided to buy the mill for $75 million. Bain put up about $8 million to gain majority control of the company, renamed GS Technologies Inc. GE Capital, former Armco executives and Leggett & Platt, a major customer for the mill’s wire rods, chipped in the rest of the equity. So that’s an $8 million investment from Bain. The company then sold bonds to finance the sale, and Bain makes a tidy profit: > [@](#): > > The new company issued $125 million in bonds and paid Bain a $36.1 million dividend in 1994. Eventually, there would be a series of bad business moves, a wider decline in the US steel industry, and the pension fund would be underfunded by $44 million with 750 laid off workers at the Kansas City plant in 2001. Naturally, though, it worked out pretty well for Bain. Probably not as well as it would have had the company done well. But I think that’s what galling about this sort of thing. The guys like Romney get paid out first thing, and everything after that’s just gravy for them. Their risk seems to be limited to how many millions they take home, not whether they have a chance of losing anything. Like any good capitalist, the Bain folks and their ilk have a certain fondness for using the tax code to their advantage. As Josh Cosman, author of _The Buyout of America: How Private Equity Is Destroying Jobs and Killing the American Economy_ [describes it](http://rortybomb.wordpress.com/2012/01/12/an-interview-with-josh-kosman-on-the-embeddedness-of-private-equity-in-the-tax-code/): > [@](#): > > The whole industry started in the mid-to-late 1970s. The original leveraged buyout firms saw that there were no laws against companies taking out loans to finance their own sales, like a mortgage. So when a private equity firms buys a company and puts 20 percent down, and the company puts down 80 percent, the company is responsible for repaying that. > > Now the tax angle is that the company can take the interest it pays on its loans off of taxes. That reduces the tax rate of companies after they are acquired in LBOs by about half. Banks, also realizing this tax effect, were willing to finance these deals. At the time, you could also depreciate the assets of the company you were buying — that’s not true today. > > They saw that you could buy a company through a leveraged buyout and radically reduce its tax rate. The company then could use those savings to pay off the increase in its debt loads. For every dollar that the company paid off in debt, your equity value rises by that same dollar, as long as the value of the company remains the same. Or Dean Baker of CEPR [puts more succinctly](http://www.cepr.net/index.php/blogs/beat-the-press/are-private-equity-firms-evil-doers): > [@](#): > > Private equity also profits by financial engineering. For example, it is standard practice for private equity firms to load their firms with debt. This means that interest payments, which are tax deductible, are substituted for dividend payments, which are not tax deductible. As for whether it’s useful to the companies, Josh Kosman again: > [@](#): > > I look at the 10 largest deals done in the 1990s, during ideal economic times, and in six cases it was clear that the company was worse off than if they never been acquired. Moody’s [just put out a report](http://www.moodys.com/research/Moodys-Lackluster-Performance-for-Bubble-Era-Leveraged-Buyouts--PR_232792) in December that looked at the 40 largest buyouts of this era and showed that their revenue was growing at 4 percent since their buyout, while comparable companies were growing at 14 percent. ---
**Author:** ![waterj2](https://avatars.discourse-cdn.com/v4/letter/w/858c86/32.png) [@waterj2](https://boards.straightdope.com/u/waterj2)\ **Post date:** [January 13, 2012, 5:03am UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283/37 "2012-01-13T05:03:37Z")
> [@Robot\_Arm](#): > > As I understand it, Staples is one of the companies funded by Bain and for which Romney takes credit in his tally of jobs created. > > Someone comes up with the idea for an office-products store. > Someone buys a stake in the company. > People come to the company and agree to manage and staff the stores. > Other people come to the store and buy things. > > Why does just one of these people think he created all the jobs? > > For that matter, what was Romney’s role at Bain; was he risking his own money or just deciding where other people should risk theirs? In the Josh Kosman interview I linked to in my last post, he mentions that Staples and Sports Authority, where Romney is claiming to be a job creator (and claiming credit for every job gained s from the time he was involved to the present day), were examples of venture capital investment, not leveraged buyouts like the steel mill I discussed. ---
**Author:** ![CJJ](https://avatars.discourse-cdn.com/v4/letter/c/ecc23a/32.png) [@CJJ](https://boards.straightdope.com/u/CJJ)\ **Post date:** [January 13, 2012, 5:25am UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283/38 "2012-01-13T05:25:52Z")
> [@CJJ\*](#): > > He has no obligation to improve assents his investors don’t own; that’s the essential argument of Romney’s GOP defenders > [@cckerberos](#): > > And you’re suggesting that he does? Based on what? Obviously he has no legal obligation; I’m sure he has a battery of lawyers on-call to make sure of that. But I do wonder why he isn’t touting Bain now that he’s running for president–seems the only folks talking about it are his opponents. If they did such wonderful work, why is Romney apparently so embarassed by it now? Romney is the poster child of the GOP economic philosophy. I wonder why he isn’t talking more about the specific ways he acquired the wealth that makes him such a perfect Republican candidate. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [January 13, 2012, 6:00am UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283/39 "2012-01-13T06:00:39Z")
I have admit that it’s rather humorous to see the apologists for Obama’s direction of Federal funds to Solyndra suddenly find fault with a private equity fund not having a 100% hit rate. ---
**Author:** ![Dag\_Otto](https://avatars.discourse-cdn.com/v4/letter/d/439d5e/32.png) [@Dag\_Otto](https://boards.straightdope.com/u/Dag_Otto)\ **Post date:** [January 13, 2012, 6:29am UTC](https://boards.straightdope.com/t/what-did-mitt-do/609283/40 "2012-01-13T06:29:58Z")
Trane, the US air conditioner company, made great products pre-Bain. Post-Bain, Trane is an Irish company that makes crap. Irish? WTF? [Previous page](https://boards.straightdope.com/t/what-did-mitt-do/609283.md?page=1) [Next page](https://boards.straightdope.com/t/what-did-mitt-do/609283.md?page=3)