Results 1 to 8 of 8

Thread: Tall Tales About Private Equity

Hybrid View

  1. #1
    Havakasha is offline
    Legend
    Havakasha's Avatar
    Joined: Sep 2009 Posts: 5,358

    Tall Tales About Private Equity

    http://www.nytimes.com/2012/05/23/op...ys-job.html?hp


    Tall Tales About Private Equity
    By STEVEN RATTNER
    Published: May 22, 2012


    PRESIDENT OBAMA started his general election campaign by taking aim at Mitt Romney’s job creation record at Bain, setting off a lively debate over the fairness of the attacks.


    I am among those who have been drawn into the argument — there was even a snippet of me defending private equity in a Romney campaign ad.

    As a former Obama administration official, I was uncomfortable about being used in a Romney ad in support of his position.

    However, I was also concerned that the Obama ads, while narrowly accurate, might be seen to portray Bain Capital (and implicitly, private equity) in an ugly light because a few of the companies the firm invested in went bankrupt while Bain Capital still made money

    On Monday, Mr. Obama struck the right balance, emphasizing that he wasn’t attacking private equity but was questioning Mitt Romney’s Bain Capital credentials to be the job creator in chief.

    That’s fair, particularly because Mr. Romney himself has been foolishly reweaving history to claim, as recently as last week, that he helped create 100,000 jobs during his time at Bain.

    In fact, Bain Capital — like other private equity firms — was founded and managed for profit: ideally, huge amounts of gain earned legally and legitimately. Any job creation was a welcome but secondary byproduct.

    The language in one prospectus seeking Bain Capital investors was clear: “The objective of the Fund is to achieve an annual rate of return on invested capital in excess of the returns generated” by other investments. Any job creation was accidental.

    In Mr. Romney’s case, his jobs assertion rests heavily on just a few early investments.

    Originally hatched to provide venture capital to young enterprises, Bain Capital notched a few such successes, notably Staples and Sports Authority. These were small stakes in companies — about $2.5 million in Staples — over which Bain had little influence.

    While I defend the role financiers play in making our economy work, I also concede that Mark Zuckerberg was far more central to the success of Facebook and its 3,200 jobs than the venture capitalists who invested early.

    Although Bain Capital sold off those early investments years ago, Mr. Romney takes credit for every job ever created at every company Bain Capital invested in during his tenure — while ignoring jobs eliminated after his departure.

    “The steel factory closed down two years after I left Bain Capital,” he said last week about GST Steel, the Kansas City, Mo., company that went bankrupt in 2001. “I was no longer there, so that’s hardly something which is on my watch.”

    Meanwhile, when Staples went public in 1989, it had 1,100 employees; at the end of 1998, right before Mr. Romney exited Bain, it had 42,000 workers. Yet Mr. Romney takes credit for the 89,000 employed at the close of 2010.

    As the years clicked by, Bain Capital and Mr. Romney smelled the chance to make more money by raising larger amounts. That, in turn, led them toward classic leveraged buyouts — the purchase, often heavily financed by debt, of more established companies.

    These enterprises were often what Wall Street describes as “undermanaged,” which means the Bain Capital team could take “aggressive action” that often included cutting costs — read: jobs — to increase profitability.

    That’s not wrong; it’s part of capitalism. Whatever its flaws, private equity has made a material contribution to sharpening management. But don’t confuse a leveraged buyout with job creation.

    Under Mr. Romney’s leadership, Bain Capital engaged in the less attractive practice of putting more debt on seemingly successful investments in order to take dividends out. In at least four instances of Bain Capital investments during Romney’s tenure, these “recapped” companies, of which two were featured in the Obama ads, subsequently went bankrupt, costing thousands their jobs.

    To be sure, some of Bain’s large leveraged buyouts — notably, Domino’s Pizza — added jobs. But Mr. Romney left Bain Capital two months after the Domino’s investment (7,900 new jobs claimed) was finalized.

    Aware of private equity’s reputation, Mr. Romney still trots around the country erroneously calling himself a “venture capitalist.”

    And in a further effort to deflect attention from the Bain Capital debate, Mr. Romney last week argued that President Obama was responsible for the loss of 100,000 jobs in the auto industry over the past three years.

    That’s both ridiculously false (auto industry and dealership jobs have increased by about 50,000 since January 2009) and a remarkable comment from a man who said that the companies should have been allowed to go bankrupt and that the industry would have been better off without President Obama’s involvement.

    Adding jobs was never Mitt Romney’s private sector agenda, and it’s appropriate to question his ability to do so.

    Steven Rattner, a contributing opinion writer, was a Treasury Department official in the Obama administration.

  2. #2
    SiriuslyLong is offline
    Guru
    SiriuslyLong's Avatar
    Joined: Jan 2009 Location: Ann Arbor, MI Posts: 3,560
    Cory Booker May Not Want To, But Robert Reich Goes Right Ahead And Indicts Private Equity

    May 22, 2012 11:04 pm
    By Scott Nance
    Democrat Cory Booker may not want “to sit here and indict private equity” like that once run by Republican presidential hopeful Mitt Romney, but a former Labor secretary was more than happy to take that plunge.

    Booker, the mayor of Newark, N.J., stirred up a firestorm Sunday by appearing on national TV to seemingly undercut President Obama’s attacks on the way Romney handled his time at the head of private-equity firm Bain Capital.

    However, Robert Reich, the Clinton-era Labor secretary and noted liberal economist, teamed up with MoveOn.org to create a lively and clever Web video which describes just why a political critique of private equity firms is entirely valid — “in eight simple steps.”

    WATCH THE VIDEO HERE: http://thedemocraticdaily.com/2012/0...rivate-equity/

    I wish Solyndra could have found some private equity.... That way ALL OF US don't have to pay for one political parties mistake.

    Here's a primer on "private equity": http://en.wikipedia.org/wiki/Private_equity

    Don't let the left tell you "it's bad!"

  3. #3
    Havakasha is offline
    Legend
    Havakasha's Avatar
    Joined: Sep 2009 Posts: 5,358
    I quess he couldnt find a way to contradict Steven Ratner. Lol.

    Look over there.....

  4. #4
    SiriuslyLong is offline
    Guru
    SiriuslyLong's Avatar
    Joined: Jan 2009 Location: Ann Arbor, MI Posts: 3,560
    Quote Originally Posted by Havakasha View Post
    I quess he couldnt find a way to contradict Steven Ratner. Lol.

    Look over there.....
    Politics as usual. Don't care if he did create or didn't create jobs while at Bain. He's doesn't adhere to liberal ideology and that's good for me.

    You see what liberal ideology has already achieved with "government equity" lol. A $585 MM "investment" in Solyndra... Simply foolish and bad for the common good of society. That's downright anti progressive.

  5. #5
    Havakasha is offline
    Legend
    Havakasha's Avatar
    Joined: Sep 2009 Posts: 5,358
    Only one thing you can talk about and thats the continued talking point Solyndra. Thats kind of pathetic when there is a whole word of good "liberal ideology" has done for this countnry.
    Lets just start with Social Security and Meciare for starters.

  6. #6
    SiriuslyLong is offline
    Guru
    SiriuslyLong's Avatar
    Joined: Jan 2009 Location: Ann Arbor, MI Posts: 3,560
    Quote Originally Posted by Havakasha View Post
    Only one thing you can talk about and thats the continued talking point Solyndra. Thats kind of pathetic when there is a whole word of good "liberal ideology" has done for this countnry.
    Lets just start with Social Security and Meciare for starters.
    It's quite relevent to the topic. Why didn't Solydra seek private equity? Why didn't private equity seek Solyndra? Probably because no one would touch it with a ten foot pole.

    So what does the Obama administration do? Invests the tax dollars from all Americans and borrows on our childrens future to "invest" in Solydra. Priceless, don't you think?

  7. Ad Fairy Senior Member

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •