Gavin: “Throughout his 15-year career at Bain Capital, which bought, sold, and merged dozens of companies, Romney had other chances to fight to save jobs, but didn’t—His ultimate responsibility was to make money for Bain’s investors, former partners said.”

January 27, 2008 in 2008, analysis, argument, conservatism, election 2008, GOP, mitt romney, policy, republicans, romney, stupidity, the dark soul of Mitt Romney, triumph of unreason
Tags: ampad paper, anti-american, Bain Capital, Boston Globe, economic ruin, economy, employment, equity-sector, financial services, insanity, investors over workers, jobs, lies, obscene profits, randy johnson, www.boston.com

“In early 1995, as the Ampad paper plant in Marion, Ind., neared its shutdown following a bitter strike, Randy Johnson, a worker and union official, scrawled a personal letter to Mitt Romney, pouring out his disappointment that Romney, then chief executive of the investment firm that controlled Ampad, had not done enough to settle the strike and save some 200 jobs,” writes Robert Gavin of the Boston Globe in an article titled As Bain slashed jobs, Romney stayed to side

“We really thought you might help,” Johnson said in the handwritten note, “but instead we heard excuses that were unacceptable from a man of your prominent position.”

Romney, who had recently lost a Senate race in which the strike became a flashpoint, responded that he had “privately” urged a settlement, but was advised by lawyers not to intervene directly. His political interests, he explained, conflicted with his business responsibilities.

Now, Romney’s decision to stay on the sidelines as his firm, Bain Capital, slashed jobs at the office supply manufacturer stands in marked contrast to his recent pledges to beleaguered auto workers in Michigan and textile workers in South Carolina to “fight to save every job.”

Throughout his 15-year career at Bain Capital, which bought, sold, and merged dozens of companies, Romney had other chances to fight to save jobs, but didn’t. His ultimate responsibility was to make money for Bain’s investors, former partners said.

Much as he did when running for Massachusetts governor, Romney is now touting his business credentials as he campaigns for president, asserting that he helped create thousands of jobs as CEO of Bain. But a review of Bain’s investments during Romney’s tenure indicates that job growth was not a particular priority.

Romney’s approach at Bain Capital was more reflective of the economic philosophy articulated by his opponent, John McCain: to acknowledge that some less efficient jobs will be lost and concentrate on creating new jobs with potential for higher growth.

In many cases, such as Staples Inc., the Framingham retailer, and Steel Dynamics Inc., an Indiana steelmaker, the companies expanded and added thousands of jobs. In other cases, such as Ampad and GS Industries, another steelmaker, Bain-controlled companies shuttered plants, slashed hundreds of jobs, and landed in bankruptcy.

But in almost all cases Bain Capital made money. In fact, the firm earned substantially more from Ampad than Staples. Staples returned about $13 million on a $2 million investment; Ampad yielded more than $100 million on $5 million, according to reports to investors.

“It’s not that employment grows, it’s that their investment grows,” said Howard Anderson, a professor at MIT’s Sloan School of Management. “Sometimes its expansion, and sometimes it’s shutting things down” […]

[…] Bain acquired GS Industries in 1993. The steelmaker borrowed heavily to modernize plants in Kansas City and North Carolina, as well as pay dividends to Bain investors. But as foreign competition increased and steel prices fell in the late 1990s, the company struggled to support the debt, according to Mark Essig, the former CEO. GS filed for bankruptcy in 2001, and shut down its money-losing Kansas City plant, throwing some 750 employees out of work.

Ampad, too, became squeezed between onerous debt that had financed acquisitions and falling prices for its office-supply products. Its biggest customers – including Staples – used their buying power and access to Asian suppliers to demand lower prices from Ampad.

Romney sat on Staples’s board of directors at this time.

Creditors forced Ampad into bankruptcy in early 2000, and hundreds of workers lost jobs during Ampad’s decline. Bain Capital and its investors, however, had already taken more than $100 million out of the company, in debt-financed dividends, management fees, and proceeds from selling shares on public stock exchanges.

By the time Ampad failed, Randy Johnson, the former union official in Marion, Ind., had moved on with his life. After the Indiana plant shut down, he worked nearly six months to help the workers find new jobs. He later took a job at the United Paperworkers union.

“What I remember the most,” said Johnson, “were the guys in their 50s, breaking down and crying.”

In his reply to Johnson’s letter, Romney said the Ampad strike had hurt his 1994 bid to unseat Senator Edward M. Kennedy, and no one had a greater interest in seeing the strike settled than he.

“I was advised by counsel that I could not play a role in the dispute,” Romney explained, adding, “I hope you understand I could not direct or order Ampad to settle the strike or keep the plant open or otherwise do what might be in my personal interest” […]

Yuh-huh. See:

• Romney: MY feelings are more important than YOUR jobs
• Flaherty: “Layoffs are a common result of private equity takeovers, with [Romney’s] Bain Capital no exception”
• Samuelson: “it is becoming clear that capitalism’s most dangerous enemies are capitalists”—our conclusion: capitalists like Romney
• Etc., etc.

yours &c.
dr. g.d.

Flaherty: “Layoffs are a common result of private equity takeovers, with [Romney’s] Bain Capital no exception”

January 24, 2008 in 2008, analysis, argument, conservatism, election 2008, GOP, mitt romney, republicans, rhetoric, romney, strategy, the dark soul of Mitt Romney, triumph of unreason
Tags: economy, equity-sector, financial services, jobs, lies, michael flaherty, reuters.com

“NEW YORK (Reuters) – Recalling his days as a businessman, Republican U.S. presidential contender Mitt Romney often cites the 25 years he spent in the private sector creating jobs,” which apparently isn’t true, writes Michael Flaherty of reuters.com in an analytical discursus titled Private equity past may cloud Romney’s jobs pitch

But as the leader of private equity firm Bain Capital from 1984 to 1999, Romney’s record shows that while some of the firm’s investments helped companies grow, others ended in thousands of layoffs, and in some cases, bankruptcy.

Layoffs are a common result of private equity takeovers, with Bain Capital no exception. Although Romney is credited with helping make Bain the private equity powerhouse it is today, buyout firms are known more for cutting jobs — not creating them.

“I believe most Americans want their next president to remind them of the guy who they work with, not the guy who laid them off,” Republican rival Mike Huckabee said in a campaign ad and in many campaign speeches.

Companies such as office supplier Staples Inc. and pizza company Domino’s were successful Bain investments under Romney.

But medical test maker Dade Behring, circuit board maker DDi, American Pad & Paper and auto parts company Cambridge Industries are among the companies that went bankrupt after Bain invested in them with Romney at the helm.

“The bottom line of a private equity buyout is not to create jobs. The point is to make money,” said Marisa DiNatale, senior economist at Moody’s Economy.com. “In many cases, the point is to pare down the company and make it run as efficiently and as profitably as possible. Oftentimes that includes cutting jobs.”

Private equity firms buy companies by borrowing most of the money, and sell them later, keeping about 20 percent of the profit on the sale and giving the rest back to their institutional investors.

Romney worked as a consultant at Boston-based Bain & Co before he was tapped to run Bain Capital. The firm started out with more of a venture capital strategy and later moved more toward traditional leveraged buyouts.

The private equity model is built on loading companies up with debt — which can ultimately prove too heavy a load for the business, as was the case with DDi […]

Precisely. This is not jobs creation or even wealth creation. Private equity is about gaming the system; it is about optimizing, eking out hairline efficiency gains, discovering opportunities for consolidation or liquidation etc. We harp on these strings often around here:

Romney in FL wants credit for being a major player in the financial services sector—at the very moment that that sector is crashing and taking the US economy down with it

This is what interested us the most in Flaherty’s analysis:

[…] Romney knows a lot about the economy, says a former Bain Capital employee who worked under him. But on the topic of jobs, he says Romney was never one to put expanding a company’s payroll ahead of keeping costs low.

“It’s fair for him to claim that he spent 20 years of his life in the private economy. And therefore he understands what makes businesses succeed and fail,” said the former Bain employee, who did not want to be identified. “But that’s different from saying he was in a position to oversee job creation as a whole. Bill Gates grew a business from scratch. That’s not what you do in private equity. You’re an investor” […]

A former Bain employee willing to speak frankly?

yours &c.
dr. g.d.

Huckabee contra the inequities and inequalities of the financial services industry; is Huckabee sending signals to the Romneys?

October 10, 2007 in 2008, analysis, argument, campaign literature, election, election 2008, GOP, mitt romney, republicans, romney
Tags: debate, economy, equity-sector, eyeon2008.com, finance, financial services, Huckabee, labour, NYT, team romney, unions

“Does Mike Huckabee think that the financial services industry is today’s robber barrons? Is he right? Certainly in a post-industrial economy, there’s an analogy between railroads and financial services, even if it is somewhat strained,” asks the eye of the influential and precise eyeon2008.com in a post titled Huckabee against the robber barrons?

I contrast this with John Edwards. He targets the rich. Huckabee may be targeting Wall Street. That’s a difference. Perhaps an important one. What would Huckabee have to say about the housing crisis? … more

An interesting question to be sure—some sort of redacted, reconstructed populism seems to be forming itself on the margins of the center-right. BUT: Here is a question that interests us more: who among the GOP candidates springs super-rich from the financial services industry like a venus on the half-shell?—like Athena, fully formed, from the forehead of Zeus, not because of hard work or native genius, but because of an opportunity offered him by a mentor?—answer: Willard Milton Romney formerly of Bain Capital. We have harped upon this string for weeks. See:

Romney’s millions—more on the equity-sector candidate from the NYT

Is it possible—we ask, just possible—that Huckabee is sending a signal to Team Romney and his equity sector and banking industry constituencies?—if so, Huckabee needs to be clearer, plainer, and probably a lot more direct. Team Romney is not known for its subtlety or intellectual rigour.

yours &c.
dr. g.d.

P.S. Not since the temple-based, central-storage economies of absolute antiquity—urban concentrations like Sumer, Akkad etc.—has there existed a social and material order the primary basis of which was not production, consumption, and trade, but hoarding and redistribution from a central site or sites. Post-capitalism—with its gigantic pension funds and other vast pools of spare money—seems to be taking us back to the future.

Does anyone remember the story of Joseph and the power that accrued to Pharaoh as he appropriated all the productive instruments of land and labour in exchange for the contents of his granaries?

Our laws and institutions have yet to adapt to the new regime of non-capital and its non-capitalists. It is from this new regime that Romney springs; see: Romney and private equity: the new ruling class. The first historical test of the new regime, already unfolding all around us—as eyeon2008.com intuits—is the so-called housing crisis, which is but the surface irritation of a global crisis of liquidity. See:

world financial system in crisis; Romney, who made his fortune in the equity sector, has nothing to say