More people are coming to understand this, however. Bloomberg's reporters seem to be among them. Just possibly, this might lead to some real soul-searching in the American business community about what has happened to capitalism in the US during the Reagan years and beyond. That discussion could lead to some very ugly revelations. We heard one of them this week from the journalist David Gergen, who was on FOX News defending Romney. Gergen touted his own detailed knowledge of the equity investment business as his credentials for being allowed to talk about it publicly, but he went on to reveal his credentials come from serving on boards of directors of Bain Capital companies, and getting lucrative speaking fees for appearing at Bain Capital corporate events. How many other major journalists are this compromised? Probably quite a few.
Romney's "very special" IRA account
Embarrassment is most likely why Mitt Romney will not release more than his previous two years of tax returns. In today's Bloomberg article on Mitt Romney's IRA, the author is curious how Romney was able to build his IRA account to over $100 million, which must make it by far one of the biggest retirement accounts in all of the US (you would think the IRS would wonder about this too). The type of IRA Romney has is funded by his company, and there are strict limits that govern how much can be added to the fund each year from Romney's earnings. With his type of IRA, the limit is $30,000, meaning over all the time Romney worked at Bain Capital, the most the balance could have grown from employer contributions would have been $450,000. So how does $450,000 get to be over $100 million?
Ordinary Americans can invest their IRA in stocks and bonds, but there are no markets in the past 30 years that would have returned such a phenomenal performance. Even granting that Romney took all his IRA money and put it in his highly lucrative equity extraction deals, his returns at 1,000%+ still would not have done the trick.
There is something deeply curious if not fishy here, and no wonder Romney is adamant that no one will see his detailed tax return beyond the past two years information he has released (when he was a professional candidate for the presidency and not making as much as he did in the past). In the past decade or so, the top earners in the US, other than celebrities like Oprah Winfrey, have been equity extraction practitioners from places like Bain Capital, Carlyle Group, Blackstone, KKR, and quite a few hedge funds. In good years, these men could earn as much as $500 million each.
Again, to repeat the obvious, there is no way anyone can earn $500 million in one year from investing in stocks, bonds, or in any other interest bearing instruments. The economy simply does not allow performance of that nature. There has to be something else going on here -- some way these people game the system and turn capitalism upside-down. Mitt Romney has given us a glimpse into one method: equity extraction. Other methods must involve the ability to raid the US Treasury, or play games with the tax system.
The tax returns of these billionaires and multi-millionaires would be fascinating to study. A forensic audit of their earnings would be even more fascinating. We have a long way to go before the public absolutely demands such an audit, including a follow-up on where these people sent money to buy influence with politicians, or with the media. It would take some pretty desperate economic times before the average person would demand to know how the faux-capitalism system worked, but we are heading for such times eventually, so there is still a chance the public will force the issue. But not until guys like Mitt Romney or the Koch brothers or quite a few others like them do everything possible to prevent such revelations no matter how many Americans are unemployed, homeless and hungry. And it would certainly help their cause if someone like Mitt Romney was sitting in the White House, not that they have much to complain about with Barack Obama there at the moment.
Posted with the permission of the author.