It's one thing to criticize Mitt Romney for being
a businessman with the wrong values. It's quite another to accuse him
and his former company, Bain Capital, of doing bad things. If what Bain
Capital did under Romney was bad for society, the burden shifts to
Romney's critics to propose laws that would prevent Bain and other
companies from doing such bad things in the future.
Don't hold your breath.
Newt Gingrich says Bain under Romney carried out "clever legal ways
to loot a company." Gingrich calls it the "Wall Street model" where "you
can basically take out all the money, leaving behind the workers," and
charges that "if someone comes in, takes all the money out of your
company and then leaves you bankrupt while they go off with millions,
that's not traditional capitalism."
Where has Newt been for the last 30 years? Leveraged buyouts
became part of traditional capitalism in the 1980s when enterprising
financiers began borrowing piles of money, often at high interest rates,
to buy up the stock of ongoing companies they believe undervalued.
They'd back the loans with the company assets, then typically sell off
divisions and slim payrolls, and resell the company to the public at a
higher share price -- pocketing the gains.
It's a good deal for the financiers (the $25 billion buyout of
RJR-Nabisco in 1988 netted the partners of Kohlberg, Kravis, and Roberts
around $70 million each -- and most of Mitt Romney's estimated $200
million fortune comes from the same maneuvers), but not always for the
company or its workers.
Some workers lose their jobs when the company downsizes. Others, when
the company, now laden with debt, can't meet its payments to creditors
and has to go into bankruptcy. According to the Wall Street Journal, of
77 companies Bain invested in during Romney's tenure there, 22 percent
either filed for bankruptcy or closed their doors by the end of the eighth year
after Bain's investment.
But, hey, this is American capitalism -- at least as it's been
practiced for the past three decades. Is Newt proposing to ban leveraged
buyouts? Or limit the amount of debt a company can take on? Or prevent
financiers -- or even CEOs and management teams -- from taking a public
company private and then reselling it to the public at a higher price?
None of the above.
Rick Perry criticizes Romney and Bain pushing the quest for profits
too far. "There is nothing wrong with being successful and making
money," says Perry. "But getting rich off failure and sticking someone
else with the bill is indefensible."
Yet getting rich off failure and sticking someone else with the bill
is what Wall Street financiers try to do every day. It's called
speculation -- and at least since the demise of the Glass-Steagall Act,
investment bankers have been allowed to gamble with commercial bank
deposits, other people's money.
So, is Perry proposing to resurrect Glass-Steagall? Not a chance.
Gingrich, Perry, and others are putting particular focus on the
people who lost their jobs as a result of Romney's Bain Capital.
Gingrich's Super PAC will be running $3.5 million of ads featuring
emotional interviews with some of them.
But what, exactly, are Romney's opponents proposing to do about
layoffs that harm so many people? Millions of Americans have lost their
jobs over the last four years -- and as a result have often lost their
health insurance, their homes, and their savings.
Are Gingrich, Perry, and others proposing to expand health insurance
coverage for jobless Americans and their families? All I hear from the
Republicans is their determination to repeal the law that President
Obama championed -- which still leaves millions of Americans uninsured.
Do Romney's opponents have plans to keep people in their homes even when
they've lost their jobs and can't pay their mortgages? No. Do they
propose expanding unemployment insurance? If memory serves, most of them
were opposed to the last extension.
I'm all in favor of reforming capitalism, but you'll permit me some
skepticism when it comes to criticisms of Bain Capital coming from
Romney's Republican opponents. None of these Republican candidates has
exactly distinguished himself with new ideas for giving Americans more
economic security. To the contrary -- until the assault on Romney and
Bain Capital -- every one of them has been a cheerleader for financial
capitalism of the most brutal sort.