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Thread: Obama’s war on private equity

  1. #1
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    Obama’s war on private equity

    In politics, moments of honesty are few and far between. They can also be met with major blowback.

    Newark Mayor Cory Booker found that out the hard way when, Sunday, he took the Obama campaign to task for its attacks against private equity - specifically Bain Capital, the firm Mitt Romney founded.

    He said, in now infamous remarks on “Meet the Press”: “This kind of stuff is nauseating to me on both sides . . . it’s nauseating to the American public. Enough is enough. Stop attacking private equity. If you look at the totality of Bain Capital’s record, they’ve done a lot to support businesses, to grow businesses . . . and this, to me, I’m very uncomfortable with.”

    The administration, naturally, couldn’t countenance a fellow Democrat standing up for capitalism — not with so much riding on the Obama campaign’s decision to portray Bain as a “vampire.” Hours later, Booker slightly tweaked his comments in a YouTube video he posted online.

    Too bad. Damage done. Obama is still finding himself as a lonely messenger in a weak message war against Romney’s time at Bain.

    In fact, since the Obama anti-Bain assault began in earnest last week, Booker has been joined by a chorus of Democrats who have stuck up for the firm and the industry and refused to sing off the Obama song sheet that this one form of capitalism is inherently bad.

    Obama’s own former car czar, Steven Rattner, originally called Obama’s attacks on Bain Capital “unfair,” later clarifying them, perhaps feeling White House pressure, in a New York Times op-ed.

    Former Tennessee Rep. Harold Ford Jr., also a Democrat, backed Booker up and said he agreed with the core of his comments, and that he wouldn’t have backed off. Massachusetts governor and Obama ally Deval Patrick said Bain “isn’t a bad company,” former Pennsylvania Gov. Ed Rendell called Obama’s attacks on the company “disappointing” and California Senator Diane Feinstein said Obama should “move on” from the issue.

    Even Obama as recently as last week said there were people “who do good work in that area [private equity\]” and can help identify opportunities for new jobs and industries (when he was raising money for his campaign at the home of a New York private equity firm executive).

    What these Democrats and anyone who is being honest realize is that Bain Capital was and still is an extremely successful private equity firm — and it got that way for the post part by taking risks and buying companies, turning them around for a profit, often saving them from bankruptcy.


    Page 2 starts here: http://www.nydailynews.com/opinion/o...1084152?pgno=1

    It is good to see some abandoning the extreme left wing ideology that has defined Obama.

  2. #2
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    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.

  3. #3
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    Are you certain there wasnt ANY private equity involved in Solyndra?


    http://modernserenity.com/2011/11/so...-federal-loan/

    It is important to note that despite the Solyndra scandal, the Department of Energy’s renewable energy loan guarantee program has had many more successes than failures. It plays an important role in expanding renewable energy in the US and helps move solar, wind, geothermal, etc. towards economies of scale where they will be able to compete with traditional energy sources. We will cover some of the program’s successes in upcoming pieces.

  4. #4
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    Solyndra filed a pre-application for the government loan in 2006, in accordance with the Energy Policy Act of 2005, which secured roughly 10 billion dollars in tax incentives and loan guarantees for green-technology companies. In 2007, the Department of Energy invited the company to submit a full loan application, and in 2009, Solyndra received conditional government commitment for the $535 million loan.

    According to bankruptcy documents, the money was used to fund a second fabrication facility. The total cost for the facility was $753 million and the company secured private investment to secure the difference.

  5. #5
    SiriuslyLong is offline
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    Quote Originally Posted by Havakasha View Post
    Solyndra filed a pre-application for the government loan in 2006, in accordance with the Energy Policy Act of 2005, which secured roughly 10 billion dollars in tax incentives and loan guarantees for green-technology companies. In 2007, the Department of Energy invited the company to submit a full loan application, and in 2009, Solyndra received conditional government commitment for the $535 million loan.

    According to bankruptcy documents, the money was used to fund a second fabrication facility. The total cost for the facility was $753 million and the company secured private investment to secure the difference.
    Someone got burned........... A least it wasn't taxpayer's money. You know the guy who is getting by on $35,000 with kids...

  6. #6
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    Are you aware of any successes from the Department of Energy Policy Act of 2005? Would it matter to you if they had a decent success rate?

    I underststand you want to use the one example with which to push your ideological agenda. But maybe, just maybe
    its a little more complicated than you say? LOL.


    http://modernserenity.com/2011/11/so...-federal-loan/

    It is important to note that despite the Solyndra scandal, the Department of Energy’s renewable energy loan guarantee program has had many more successes than failures. It plays an important role in expanding renewable energy in the US and helps move solar, wind, geothermal, etc. towards economies of scale where they will be able to compete with traditional energy sources. We will cover some of the program’s successes in upcoming pieces.

  7. #7
    SiriuslyLong is offline
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    Quote Originally Posted by Havakasha View Post
    Are you aware of any successes from the Department of Energy Policy Act of 2005? Would it matter to you if they had a decent success rate?

    I underststand you want to use the one example with which to push your ideological agenda. But maybe, just maybe
    its a little more complicated than you say? LOL.


    http://modernserenity.com/2011/11/so...-federal-loan/

    It is important to note that despite the Solyndra scandal, the Department of Energy’s renewable energy loan guarantee program has had many more successes than failures. It plays an important role in expanding renewable energy in the US and helps move solar, wind, geothermal, etc. towards economies of scale where they will be able to compete with traditional energy sources. We will cover some of the program’s successes in upcoming pieces.
    Be my guest.

    The link doesn't work.

  8. #8
    SiriuslyLong is offline
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    Quote Originally Posted by SiriuslyLong View Post
    In politics, moments of honesty are few and far between. They can also be met with major blowback.

    Newark Mayor Cory Booker found that out the hard way when, Sunday, he took the Obama campaign to task for its attacks against private equity - specifically Bain Capital, the firm Mitt Romney founded.

    He said, in now infamous remarks on “Meet the Press”: “This kind of stuff is nauseating to me on both sides . . . it’s nauseating to the American public. Enough is enough. Stop attacking private equity. If you look at the totality of Bain Capital’s record, they’ve done a lot to support businesses, to grow businesses . . . and this, to me, I’m very uncomfortable with.”

    The administration, naturally, couldn’t countenance a fellow Democrat standing up for capitalism — not with so much riding on the Obama campaign’s decision to portray Bain as a “vampire.” Hours later, Booker slightly tweaked his comments in a YouTube video he posted online.

    Too bad. Damage done. Obama is still finding himself as a lonely messenger in a weak message war against Romney’s time at Bain.

    In fact, since the Obama anti-Bain assault began in earnest last week, Booker has been joined by a chorus of Democrats who have stuck up for the firm and the industry and refused to sing off the Obama song sheet that this one form of capitalism is inherently bad.

    Obama’s own former car czar, Steven Rattner, originally called Obama’s attacks on Bain Capital “unfair,” later clarifying them, perhaps feeling White House pressure, in a New York Times op-ed.

    Former Tennessee Rep. Harold Ford Jr., also a Democrat, backed Booker up and said he agreed with the core of his comments, and that he wouldn’t have backed off. Massachusetts governor and Obama ally Deval Patrick said Bain “isn’t a bad company,” former Pennsylvania Gov. Ed Rendell called Obama’s attacks on the company “disappointing” and California Senator Diane Feinstein said Obama should “move on” from the issue.

    Even Obama as recently as last week said there were people “who do good work in that area [private equity\]” and can help identify opportunities for new jobs and industries (when he was raising money for his campaign at the home of a New York private equity firm executive).

    What these Democrats and anyone who is being honest realize is that Bain Capital was and still is an extremely successful private equity firm — and it got that way for the post part by taking risks and buying companies, turning them around for a profit, often saving them from bankruptcy.


    Page 2 starts here: http://www.nydailynews.com/opinion/o...1084152?pgno=1

    It is good to see some abandoning the extreme left wing ideology that has defined Obama.
    Obama has lost his way. Must have taken a wrong turn in the Choomwagon........

  9. #9
    Havakasha is offline
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    Here's how President Obama began his case (full transcript here):

    Governor Romney has made his experience as a financial CEO the entire rationale of his candidacy for president. Now, he doesn’t really talk about what he did in Massachusetts. But he does talk about being a business—business guy. Right? He says this gives him a special understanding of what it takes to create jobs and grow the economy—even if he’s unable to offer a single new idea about how to do that, no matter how many times he’s asked about it, he says he knows how to do it. So I think it’s a good idea to look at the way he sees the economy.
    Obama then pointed out that Romney's goal was to earn a profit for Bain, not to create jobs. There's nothing inherently wrong with that, he said, but:
    When maximizing short-term gains for your investors rather than building companies that last is your goal, then sometimes it goes the other way. Workers get laid off. Benefits disappear. Pensions are cut. Factories go dark. In some cases, companies are loaded up with debt — not to make the companies more productive, not to buy new equipment to keep them at the cutting-edge, but just to pay investors. Companies may go bankrupt as a result. Taxpayers may be on the hook to help out on those pensions. Investors walk off with big returns, and working folks get stuck holding the bag.
    And experience in doing those sorts of things—in short, Mitt Romney's experience—is not what we want in the White House, Obama said.
    Now, that may be the job of somebody who's engaged in corporate buyouts. That’s fine. But that’s not the job of a President. (Applause.) That’s not the President's job. There may be value for that kind of experience, but it’s not in the White House. (Applause.)
    Obama then made the case for what he thinks a president should be focused on:
    See, the job of a President is to lay the foundation for strong and sustainable broad-based growth — not one where a small group of speculators are cashing in on short-term gains. It’s to make sure that everybody in this country gets a fair shake—(applause)—everybody gets a fair shot, everybody is playing by the same set of rules. (Applause.)
    Without using labels, Obama then contrasted the Democratic vision for American capitalism with Mitt Romney's Republican vision:
    Now, let me tell you something. We believe in the profit motive. We believe that risk-takers and investors should be rewarded. That's what makes our economy so dynamic. But we also believe everybody should have opportunity. (Applause.) We believe—we think everybody who makes the economy more productive or a company more productive should benefit.
    And the problem with our economy isn’t that the American people aren’t productive enough—you’re working harder than ever. Productivity is through the roof. It's been going up consistently over the last decade. The challenge we face right now—the challenge we’ve faced for over a decade—is that harder work hasn’t led to higher incomes. Bigger profits haven’t led to better jobs. And you can’t solve that problem if you can’t even see that it's a problem. (Applause.)

    And he doesn't see it's a problem. And so this experience explains why he is proposing the exact same policies that we already tried in the last decade, the very policies that got us into this mess. He sincerely believes that if CEOs and wealthy investors are getting rich, then the wealth is going to trickle down and the rest of us are going to do well, too. And he is wrong.

    http://www.dailykos.com/

  10. #10
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    And Obama is uniquely prepared to create jobs as a life long politician........ Please..........

    I spot another lie. Damn this guy.

    Sounds like he's setting up conflict between proletariat by the bourgeoisie.

    "And the problem with our economy isn’t that the American people aren’t productive enough—you’re working harder than ever. Productivity is through the roof. It's been going up consistently over the last decade. The challenge we face right now—the challenge we’ve faced for over a decade—is that harder work hasn’t led to higher incomes. Bigger profits haven’t led to better jobs. And you can’t solve that problem if you can’t even see that it's a problem. (Applause.)"

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