A must read article from Matt Taibbi

[ESF]

I haven't finished reading it yet, but I tore myself away for a minute to share its glory here.

It's absolutely fascinating. Here's a good summary paragraph:

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. The result has been a brilliant comedy: A man makes a $250 million fortune loading up companies with debt and then extracting million-dollar fees from those same companies, in exchange for the generous service of telling them who needs to be fired in order to finance the debt payments he saddled them with in the first place. 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. If Romney pulls off this whopper, you'll have to tip your hat to him: No one in history has ever successfully run for president riding this big of a lie. It's almost enough to make you think he really is qualified for the White House.

Read more: www.rollingstone.com/politics/news/greed-and-debt-the-true-story-of-mitt-romney-and-bain-capital-20120829#ixzz2592SWmxM

[Daria Morgandorffer]

I want to have Taibbi's babies.

[Deleted]

Aug 31, 2012 12:14:05 GMT -5 Daria Morgandorffer said:

I want to have Taibbi's babies.

Im going to beat you to it!!

[Daria Morgandorffer]

Aug 31, 2012 12:21:52 GMT -5 @lauriergirl28 said:

Aug 31, 2012 12:14:05 GMT -5 Daria Morgandorffer said:

I want to have Taibbi's babies.

Im going to beat you to it!!

We can all have his babies in a fight against Idiocracy

[ESF]

I have just finished reading it.

It is one of the best pieces of journalism I've read. OMG. If you've ever wondered what Romney did at Bain, or if you think he's an excellent businessman, or you value his experience in Corporate America, you have to find 20-30 minutes to read this piece. It will blow your mind.

[llama]

Taibbi has to be my absolute most favourite person to read on politics.

[Daria Morgandorffer]

I'm just starting now that I've got my lunch ready and my DND sign on my cube (Yea, that'll work...)

[teflep]

How is debt an illusion? I am only a bitin but does he explain?greece? Has he heard of them?

[marie427]

This is one of the most eye-opening things I've read in a long time. Thanks for sharing. I was going to start highlighting my favorite passages and posting them here but there ended up being too many.

Now pray tell, why hasn't the Obama campaign been doing more to attack Romney based on, well, everything in this piece?

Viva Capitalism!

[soontobeka]

Here is another one by the staff at Rolling Stone (it was published 2 days ago):
The Federal Bailout that Saved Mitt Romney
www.rollingstone.com/politics/news/the-federal-bailout-that-saved-mitt-romney-20120829

[ESF]

Aug 31, 2012 12:41:21 GMT -5 teflep said:

How is debt an illusion? I am only a bitin but does he explain?greece? Has he heard of them?

I'm not sure how to answer your questions or even what they mean. The article doesn't talk about Greece. The article talks about Romney's experience at Bain Capital, and describes how Romney loaded up companies with debt for a profit, then made millions advising them on how to lay off workers so that the companies could afford the debt payments, then walked away, leaving the company to go bankrupt.

[ESF]

Aug 31, 2012 12:46:34 GMT -5 marie427 said:

This is one of the most eye-opening things I've read in a long time. Thanks for sharing. I was going to start highlighting my favorite passages and posting them here but there ended up being too many.

Now pray tell, why hasn't the Obama campaign been doing more to attack Romney based on, well, everything in this piece?

Viva Capitalism!

Yeah, I had this problem too.

BTW, I die every time I see Chuck Schumer. Just die.

[marie427]

Aug 31, 2012 13:03:18 GMT -5 ESF said:

Aug 31, 2012 12:46:34 GMT -5 marie427 said:

Yeah, I had this problem too.

BTW, I die every time I see Chuck Schumer. Just die.

Makes me wonder if the Obama campaign is saving some big guns for later? Beats me. I mean, there's been some mention of Bain but not enough for people to understand what Romney was actually up to.

As for Schumer - I love him so much and considering what an AW he is, I'm sure he'd love being featured in my avatar.

[Daria Morgandorffer]

I'm halfway though and nauseous.

[ESF]

Aug 31, 2012 13:02:15 GMT -5 soontobeka said:

Here is another one by the staff at Rolling Stone (it was published 2 days ago):
The Federal Bailout that Saved Mitt Romney
www.rollingstone.com/politics/news/the-federal-bailout-that-saved-mitt-romney-20120829

Good lord!

Why is a music magazine the only place that is doing good reporting on this issue?

Also, in the longer piece I posted, it says this about the Winter Olympics:

ot that Romney hasn't done just fine at milking the government when it suits his purposes, the most obvious instance being the incredible $1.5 billion in aid he siphoned out of the U.S. Treasury as head of the 2002 Winter Olympics in Salt Lake – a sum greater than all federal spending for the previous seven U.S. Olympic games combined. Romney, the supposed fiscal conservative, blew through an average of $625,000 in taxpayer money per athlete – an astounding increase of 5,582 percent over the $11,000 average at the 1984 games in Los Angeles.

WHY ISN'T THE MEDIA REPORTING ON THIS STUFF? All you people who think the media was in Obama's pocket by not covering Reverend Wright early on, do you think the media is also in Romney's pocket by waiting years to expose all of this?!

[marie427]

The part that really got to me was when they interviewed the man from KB Toys and he just said something like, "They don't hurt anybody. Just the people who work there." Ugh.

But, but...Romney cares about the common man!!!

[Daria Morgandorffer]

Interesting to know what happened to KB Toys. I loved that store as a kid:

In a typical private-equity fragging, Bain put up a mere $18 million to acquire KB Toys and got big banks to finance the remaining $302 million it needed. Less than a year and a half after the purchase, Bain decided to give itself a gift known as a "dividend recapitalization." The firm induced KB Toys to redeem $121 million in stock and take out more than $66 million in bank loans – $83 million of which went directly into the pockets of Bain's owners and investors, including Romney. "The dividend recap is like borrowing someone else's credit card to take out a cash advance, and then leaving them to pay it off," says Heather Slavkin Corzo, who monitors private equity takeovers as the senior legal policy adviser for the AFL-CIO.

Bain ended up earning a return of at least 370 percent on the deal, while KB Toys fell into bankruptcy, saddled with millions in debt. KB's former parent company, Big Lots, alleged in bankruptcy court that Bain's "unjustified" return on the dividend recap was actually "900 percent in a mere 16 months." Patnode, by contrast, was fired in December 2008, after almost four decades on the job. Like other employees, he didn't get a single day's severance.

[llama]

Aug 31, 2012 13:06:10 GMT -5 ESF said:

Aug 31, 2012 13:02:15 GMT -5 soontobeka said:

Here is another one by the staff at Rolling Stone (it was published 2 days ago):
The Federal Bailout that Saved Mitt Romney
www.rollingstone.com/politics/news/the-federal-bailout-that-saved-mitt-romney-20120829

Good lord!

Why is a music magazine the only place that is doing good reporting on this issue?

Also, in the longer piece I posted, it says this about the Winter Olympics:

ot that Romney hasn't done just fine at milking the government when it suits his purposes, the most obvious instance being the incredible $1.5 billion in aid he siphoned out of the U.S. Treasury as head of the 2002 Winter Olympics in Salt Lake – a sum greater than all federal spending for the previous seven U.S. Olympic games combined. Romney, the supposed fiscal conservative, blew through an average of $625,000 in taxpayer money per athlete – an astounding increase of 5,582 percent over the $11,000 average at the 1984 games in Los Angeles.

WHY ISN'T THE MEDIA REPORTING ON THIS STUFF? All you people who think the media was in Obama's pocket by not covering Reverend Wright early on, do you think the media is also in Romney's pocket by waiting years to expose all of this?!

I honestly think it's too complicated for the average American to understand. I am pretty confident that most people by now have heard the rhetoric around "Romney is a great businessman!" and choose to discount any information that runs counter to that assertion.

It's a lot easier for the media to sit back and allow that message to be predominant than it is for them to run more complicated stories with actual numbers that discredit Romney's successes in the business world, or at least point out how unethical/wasteful they are.

[llama]

Aug 31, 2012 12:41:21 GMT -5 teflep said:

How is debt an illusion? I am only a bitin but does he explain?greece? Has he heard of them?

I'm not sure what you mean about debt as an illusion, and as far as I know Taibbi hasn't written anything specifically comparing the situation in Greece to the situation in the US.

Your comment made me think of an article I read a while back by Fareed Zakaria on this topic in which he argues basically that the two situations aren't the same at all. I like his stuff on economics because it's easy to understand and he's pretty nonpartisan in explaining it (and just in general, although both conservatives and liberals have claimed him as one of their own 8-D )

So I offer this: www.time.com/time/world/article/0,8599,2080624,00.html

[Daria Morgandorffer]

But the way Romney most directly owes his success to the government is through the structure of the tax code. The entire business of leveraged buyouts wouldn't be possible without a provision in the federal code that allows companies like Bain to deduct the interest on the debt they use to acquire and loot their targets. This is the same universally beloved tax deduction you can use to write off your mortgage interest payments, so tampering with it is considered political suicide – it's been called the "third rail of tax reform." So the Romney who routinely rails against the national debt as some kind of child-killing "mortgage" is the same man who spent decades exploiting a tax deduction specifically designed for mortgage holders in order to bilk every dollar he could out of U.S. businesses before burning them to the ground.

[marie427]

The thing that really gets me is that people admire Romney for being a great businessman. Mainly because he's filthy rich, and rich = successful. Have our collective memories gone to shit these past 4 years? Wall Street was vilified but now things are hunky dory and we don't care anymore about all the crookedness.

Not everyone who's become rich did so unethically, but I figured we'd be more skeptical these days due to the recession. Now, I'm not saying OWS was a wonderful thing or was coordinated well at all, but somehow the general public still felt that they were spoiled brats going after "hard workers." Whyyyy do we still think this? Actually, I do know the answer - we all hope to make it big too.

So it makes me wonder - even if the Obama campaign goes after what's been mentioned in this article, will people actually care?

[ladybrettashley]

Lord knows I'm not a Romney apologist, but I did have one persistent question while reading this:

Every example cited of a leveraged buyout says that the targeted company had some problems already, which is why Bain targeted them. I would have liked a better explanation of what those problems were and if bankruptcy or massive layoffs were inevitable for some of these companies.


And I agree with llama that information like this is too complicated to explain to the public because it doesn't fit into quick soundbites about Romney being a 'great businessman.'

[ESF]

From the link soontobeka shared:
lmost as soon as the FDIC agreed to the loan restructuring, however, Romney's rescue plan began to fall apart. "The company realized early on that it would be unable to hit its revenue targets or manage the debt structure," the documents reveal. By the spring of 1992, Bain's decline was perilous: "If Bain goes into default," one analyst warned the FDIC, "the bank group will need to decide whether to force Bain into bankruptcy."

With his rescue plan a bust, Romney was forced to slink back to the banks to negotiate a new round of debt relief. There was only one catch: Even though Bain & Company was deep in debt and sinking fast, the firm was actually flush with cash – most of it from the looted money that Bill Bain and other partners had given back. "Liquidity is strong based on the significant cash balance which Bain is carrying," one federal document reads.

Under normal circumstances, such ample reserves would have made liquidating Bain an attractive option: Creditors could simply divvy up the stockpiled cash and be done with the troubled firm. But Bain had inserted a poison pill in its loan agreement with the banks: Instead of being required to use its cash to pay back the firm's creditors, the money could be pocketed by Bain executives in the form of fat bonuses – starting with VPs making $200,000 and up. "The company can deplete its cash balances by making officer-bonus payments," the FDIC lamented, "and still be in compliance with the loan documents."

What's more, the bonus loophole gave Romney a perverse form of leverage: If the banks and the FDIC didn't give in to his demands and forgive much of Bain's debts, Romney would raid the firm's coffers, pushing it into the very bankruptcy that the loan agreement had been intended to avert. The losers in this game would not only be Bain's creditors – including the federal government – but the firm's nearly 1,000 employees worldwide.

Read more: www.rollingstone.com/politics/news/the-federal-bailout-that-saved-mitt-romney-20120829#ixzz259K2Cyrm


I would really, really like to know if Romney would support an FDIC regulation that would prevent this exact scenario from happening.

[llama]

Aug 31, 2012 13:22:38 GMT -5 ladybrettashley said:

Every example cited of a leveraged buyout says that the targeted company had some problems already, which is why Bain targeted them. I would have liked a better explanation of what those problems were and if bankruptcy or massive layoffs were inevitable for some of these companies.

I could be wrong (lord knows this topic is not my strongsuit) but I was under the impression that what you are describing is exactly the reason Romney's business history is so problematic. He didn't come up with silver bullet solutions to revamp the companies he bought out. Instead, he preyed on companies both he and their executives knew were failing in order to make money. They knew the companies were going to close and they took that opportunity to basically screw anyone who wasn't at the top and to pay themselves out first, generating a huge personal profit off of company debt and failure.

ETA: I don't think the above is terribly clear. I mean that while the bankruptcy and layoffs and closings may have been inevitable, the really problematic part is the rush to make personal profit off of that situation by using loopholes to screw everyone but themselves.

[marie427]

LadyBrett -

The article mentioned very briefly that KB Toys was struggling with becoming a more modern toy company, i.e. focusing on video games and other tech toys. Can't speak about the rest.

[ESF]

Aug 31, 2012 13:21:29 GMT -5 marie427 said:

So it makes me wonder - even if the Obama campaign goes after what's been mentioned in this article, will people actually care?

I feel like there's got to be a way to spin it. Skip all the middle financing stuff and focus on the end results. Things like "Romney made millions advising companies on how to target workers for lay-off." Or, "During Romney's time at Bain, he advised _ companies. All of those companies laid off workers as a result of Romney's advice."

Just hammer home that he was successful because he laid people off and so the company could pay over their wages to him as a bonus. Keep driving home the fact that Romney doesn't want to talk about his time at Bain Capital, or his tax returns. Make it look like he's been stealing money from regular people. Because really, that's not too far from the truth.

[dev22]

Well. That was a freaking great article.

[ESF]

Aug 31, 2012 13:29:07 GMT -5 llama said:

Aug 31, 2012 13:22:38 GMT -5 ladybrettashley said:

Every example cited of a leveraged buyout says that the targeted company had some problems already, which is why Bain targeted them. I would have liked a better explanation of what those problems were and if bankruptcy or massive layoffs were inevitable for some of these companies.

I could be wrong (lord knows this topic is not my strongsuit) but I was under the impression that what you are describing is exactly the reason Romney's business history is so problematic. He didn't come up with silver bullet solutions to revamp the companies he bought out. Instead, he preyed on companies both he and their executives knew were failing in order to make money. They knew the companies were going to close and they took that opportunity to basically screw anyone who wasn't at the top and to pay themselves out first, generating a huge personal profit off of company debt and failure.

ETA: I don't think the above is terribly clear. I mean that while the bankruptcy and layoffs and closings may have been inevitable, the really problematic part is the rush to make personal profit off of that situation by using loopholes to screw everyone but themselves.

I think this is right. My understanding is that they found cash-rich companies that had major structural problems. Rather than use the cash to fix the structural problems, they first drained out the cash by loading the company up with debt, and collecting a huge profit, and then collected more money advising them on how to fix the structural problems that were made even worse by the extra debt.

The companies probably would have gone bankrupt or needed to lay people off. The problem was that Bain collected the money that would have gone towards things like paying severances to workers, keeping workers on the rolls for another year or two longer, and paying off other creditors.

[marie427]

Aug 31, 2012 13:41:42 GMT -5 ESF said:

The companies probably would have gone bankrupt or needed to lay people off. The problem was that Bain collected the money that would have gone towards things like paying severances to workers, keeping workers on the rolls for another year or two longer, and paying off other creditors.

Right. The article mentioned that the KB Toys worker (the one who worked at KB for the longest number of years ever) was laid off and got no severance. That's just wrong. This really shines a light on how business practices have changed through the years. "Thanks for 40 years of service, now get the hell out and don't bother trying to negotiate a severance package."

[ladybrettashley]

Aug 31, 2012 13:41:42 GMT -5 ESF said:

I think this is right. My understanding is that they found cash-rich companies that had major structural problems. Rather than use the cash to fix the structural problems, they first drained out the cash by loading the company up with debt, and collecting a huge profit, and then collected more money advising them on how to fix the structural problems that were made even worse by the extra debt.

The companies probably would have gone bankrupt or needed to lay people off. The problem was that Bain collected the money that would have gone towards things like paying severances to workers, keeping workers on the rolls for another year or two longer, and paying off other creditors.

No, I completely get that and I'm not saying that Bain was the solution to turn these companies around - in fact it was exactly the wrong thing for many of these companies. But I don't necessarily think it's entirely fair for Bain to be blamed for people losing their jobs if it was going to happen anyway. These companies clearly needed a real turnaround solution. They didn't seem to be able to execute on their own, and Bain certainly didn't help (except for themselves).