Mitt Romney’s Bain Capital was very good at making money for Mitt Romney. At the same time it loaded companies Bain bought with debt, borrowed even more money to pay dividends to Mitt Romney and destroyed or outsourced lots of jobs. It even raided pension funds. Then Romney turns around and holds himself up as a “successful businessman.” Sure he was successful in terms of making money for himself. But this was at the expense of those workers at previously successful companies who lost their jobs when those companies went bankrupt thanks to the debt loaded on them due to money borrowed from banks that went directly into Romney’s pocket.
Here’s how a private equity fund such as Bain Capital works. It picks a successful company and then takes it over with a leveraged buyout (LBO). The money borrowed from a bank to pay off the owner or stockholders does not become the debt of Bain Capital. It becomes the debt of the company that was taken over. You might ask, “Why would a bank even loan money to place a company in debt for the purposes of being taken over by Bain Capital which does not even assume the debt?” Well, it’s for the same reason that so many subprime loans were available. The bank does not continue to hold the debt. It offloads it to investors such as pension funds so the bank doesn’t really care. They have no skin in the game. Why not loan Mitt Romney money to take over companies? There’s good money in those commissions. [Read more…]