Bain: Makes a Man Take Things Over

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Elias Isquith

Elias Isquith is a freelance journalist and blogger. He considers Bob Dylan and Walter Sobchak to be the two great Jewish thinkers of our time; he thinks Kafka was half-right when he said there was hope, "but not for us"; and he can be reached through the twitter via @eliasisquith or via email. The opinions he expresses on the blog and throughout the interwebs are exclusively his own.

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27 Responses

  1. Avatar North says:

    Agreed, Obama has certainly lucked out. I’d had a feeling Newt might be significant but I’d actually thought for a scintillating moment (silly me) that he’d somehow run off with the nomination. This eviscerating Romney is surely the next best thing from Obama’s perspective.

    The optics of this are utterly terrible. Bain parachutes in; re-orgs the company; leverages it to the hilt with debt then disburses those borrowed funds to itself in the form of dividends and flies off to leave a hollowed out corporate shell to implode destroying the company, its’ employees jobs and pensions (and screwing with the creditors too). Short of being caught in bed with a dead girl or a live boy I don’t know it this could look worse for Mitt.

    I would say, however, that this is far too early to be very definitive in my mind. Romney will have almost all of a year to make this into a roll your eyes and sigh “this again” subject. Unless it has a heck of a lot more legs than anything I’ve seen in my meager decade and change of politics watching then I imagine this is going to be old news by election time.

    There’s no doubt the economy is the 800 lb gorilla in the room. If Obama gets 10 months of uninterrupted job growth the GOP is going to have some serious problems selling their narrative.Report

  2. Avatar Tom Van Dyke says:

    Very sharp & fair analysis, Elias.  The buzz on the right is that Romney’s lucky the Bain thing is coming out now.  It’s a national argument we need to have on the nature of capitalism, and high finance is its weak spot.  It’s a component of capitalism, but the worst part, and isn’t synonymous with free enterprise and entrepreneurship, the good part.

    Those on the left do miss one important thing—any discussion whatsoever of BHO’s record as president.  But with a quarter-billion dollars of campaign money, BHO might succeed in turning the election into a referendum not on his own record in office, but on capitalism and its surrogate, Mitt Romney.

    He who defines the debate usually wins it.

     

     Report

    • Avatar North in reply to Tom Van Dyke says:

      Quite so, Tom. To say nothing of the fact that the President’s record is a book that’s still being written. That can go either way for him.Report

    • Avatar Patrick Cahalan in reply to Tom Van Dyke says:

      Oddly enough, I regard what Bain does as a necessary part of capitalism.

      It’s not the best part of capitalism, but vultures have their place in the circle of life, too, and unlocking frozen capital in moribund firms is kind of a necessary part of the business cycle.  It’s a sad fact of organizational zoology that they don’t do a consistent job of cleaning their own house.

      Granted, it doth offend many that you can get so rich off doing it, but that’s like bitching about the guy at the craps table that bets “Don’t Pass”.

      Still, I think this is Romney’s full court press problem, and it’s going to get worse.  I also don’t exactly think of this as “lucky” on BHO’s part… this was going to be part of the campaign if Romney got the nod, and pretty much everybody here on the blog thought it was likely that Romney was going to get the nod, right?Report

      • “It’s not the best part of capitalism, but vultures have their place in the circle of life, too, and unlocking frozen capital in moribund firms is kind of a necessary part of the business cycle.”

        Is what those firms do really “unlocking” anything, though? The theory that rich folks makin’ money will eventually turn into jobs is harder to believe when the money is made specifically by gutting companies that were providing jobs, and firing the employees.

        Creative destruction is cool from a macroeconomic perspective, but like natural selection it’s not terribly helpful for the people on the “destruction” side. When you eliminate the “Creative” side as well — by simply shredding companies and hoovering up the resulting savings — there’s not much of an upside.Report

        • Avatar Murali in reply to Jeff Eaton says:

          Its easy to see it that way, and there is a  certain plausible intuition about this. But the thing is this: Bain capital wouldnt have been able to buy upall these crappy companies if they weren’y already in trouble and already running inefficiently. Everything else being equal, the costs of inefficiencies fall to a greater extent on the worst off. Its easy to think that without companies like bain capital, things would have been hunky dory for the worst off, but its unlikely that that is true. Also, the mere fact that Romney got rich while dissolving companies and firing people doesnt mean that he profited at their expense. We must resist the obvious intuition that the financiaal sector adds no value to the economy. The financila sector does, including companies like Bain capital.Report

          • Avatar Jeff Eaton in reply to Murali says:

            “The mere fact that Romney got rich while dissolving companies and firing people doesnt mean that he profited at their expense.”

            It’s a bit hard to make sense of this statement. Even assuming that Bain Capital did nothing more than accelerate the inevitable, should a worker be happy that they received a few months less pay so that someone else could make a quarter-of-a-million dollars dissolving their employer?

            Mind you, this isn’t much of a problem if you’re willing to embrace the idea that money and the accumulation of it is an inherent moral good, and that any legal activity that results in it should be above question. That’s not the argument being made these days, however. Rather, the argument is that financial success is, by definition, an act of job creation. Witness the reflexive newspeak insistence that anyone sitting on a large pile of cash be referred to as “A Job Creator.”

            How many jobs are created by the dissolution of an underperforming company? Some, certainly, but to argue that it’s inherently a net gain is rather suspect.Report

      • Avatar Scott Fields in reply to Patrick Cahalan says:

        Granted, it doth offend many that you can get so rich off doing it, but that’s like bitching about the guy at the craps table that bets “Don’t Pass”.

        This is apt analogy. It’s the economy as casino aspect of the FIRE sector that many find so unsavory.Report

      • Avatar DarrenG in reply to Patrick Cahalan says:

        The problem with this is that many, perhaps most, of the companies that Bain bought weren’t moribund, but were in fact growing and healthy before Bain got involved.

        Bain’s primary acquisition model was “strip ‘n flip” where they took an acquisition, killed off everything that didn’t contribute to immediate, short-term results like R&D and operations, this artificially inflating short-term profitability, then they’d sell it off at a large profit.

        If the “flip” part didn’t materialize before the adverse effects of Bain’s decisions became apparent, they’d switch to plan B and drain the cash and every other asset they can, leverage the remainder into as much debt as they can use to produce more cash to siphon, then bail, also making a huge profit.

        As others have pointed out, Bain’s model isn’t Schumpeter-style creative destruction. It’s just destruction.

        They’re modern-day vikings without the cool beards and hats, just interested in plundering places and leaving them burning in their wake.Report

  3. Avatar sonmi451 says:

    But if you look up there at your browser’s address bar, you’ll note that you’re not at Slate, so I’m going to resist these contrarian impulses and rely on that most sober analyst, Nate Silver.

    Hah! But I think Slate has gotten less bad since David Plotz took over from Jacob Weisberg, not anywhere close to good, just less bad.

    But with Romney, we have a singular example of someone who made a quarter of a billion dollars by firing the WHITE middle and working class in droves in ways that do not seem designed to promote growth or efficiency, but merely to enrich Bain…

    The bolded part is Romney’s main problem, isn’t it?Report

  4. Avatar Jeff Eaton says:

    Agreed that we’re in desperate need of a public dialogue about those issues. The problem is that — like many of Moore’s films — it appears to play it fast and loose with the facts to ensure that Romney comes out as the unambiguous moustache-twirling villain. FactCheck just issued a cold release about King Of Bain, and mentions a couple of interesting examples.

    The irony is that Gingrich is making a stronger case than Obama for the meta-issue, that there are healthy, productive kinds of market behavior and poisonous, counterproductive ones that we have to grapple with as a society. If I decide to view it as a sign that ideological lines are blurring around the issue, it’s encouraging. More likely, this line of dialogue will vanish once primary season ends and the “normal” battle lines will form up again.

    It would be nice if these issues could be discussed in our country without being immediately framed as part of the horse race.Report

  5. Avatar Mike Dwyer says:

    I accidentally listened to the Glenn Beck show this afternoon (in my defense I didn’t know it was his show because he was out sick and two other guys were filling in). They put together a pretty damn good defense of Romney against the Gingrich hit-piece. Seems the Gingrich team played fast and loose with the facts 9or simply made them up). I agree with Tom Van Dyke that this is good timing for Romney. Get this conversation out of the way now.Report

  6. Avatar Kolohe says:

    The analysis in the Sullivan excerpt  might even understate the harm this may cause in the solid Republican part of the electorate.  The Tea Party is (was?), when you strip away the cultural aspects of it*, fundamentally a complaint about (to borrow the phrase above) bad capitalism vs good capitalism.  And the fundamental existing complaint about Romney from the right (again stripping away the cultural aspects) is that is a pro-TARP type of capitalist.

    On the other hand, so is Obama.  And Occupy has, when stripped of *its* cultural aspects, the same exact complaint about bad capitalism vs good capitalism.  (though maybe less enamored of ‘capitalism’ as an end in and of itself, of course)

    So perhaps it all cancels out.

    *which is, to be clear, a Blaze Starr level of stripping.Report

  7. I’m no world of finance expert but it seems to me that firms like Bain don’t buy up top-performing companies.  There’s no bargains to be had there.  They buy underperforming companies.  If you invest in enough underperforming companies, you’re going to end up with some dogs that don’t work out, so it’s easy for someone to point to them as “evidence” that the investment firm made its money by destroying a company.  And a lot of companies that are underperforming do have too many people working for them–too many managers, or too many production or distribution centers that can be combined for greater efficiency and productivity.  But of course that means some people will get laid off (the assumption among critics seems to be that an underperforming company will never actually go under, costing all those jobs and more, if extraneous employment isn’t reduced).

    So in the end, most of this criticism seems to be based on lots of heart-string tugging anecdotes, but little serious evidence.Report

    • Avatar Plinko in reply to James Hanley says:

      I agree with your analysis here James, but it’s not as if Romney is even making this basic level of case for his time at Bain. I’m extremely disappointed in Romney as the defender of capitalism. He’s had ample opportunity to state the case for his work and even as someone who admires it, I’ve been put off by the way he’s run from his own record and tossed of half-true platitudes about the ‘jobs’ HE created.

      I think Elias is right, that if these attacks are hurting him with Republican primary votes, there’s a really good chance it will only hurt more when independents are looking at who to vote for this Fall.Report

    • Avatar North in reply to James Hanley says:

      James I’m sympathetic to this line but the whole leveraging the company up to get money with which to pay to themselves fat dividends part sure doesn’t smell good to me. I’m thinking it’s going to take a lot of explaining to describe how this was adding value to the economy.Report

    • Avatar DarrenG in reply to James Hanley says:

      As I just mentioned above, no, Bain didn’t generally buy underperforming companies, they bought relatively healthy ones (generally not top performers, true, but not turnaround candidates, either).Report

    • Avatar Michael Drew in reply to James Hanley says:

      The annoying thing to me is that assessing all this requires us to gain, if not expertise, at least enough familiarity with the details and context of this area of industry so as to be able to make an informed jugment.  I have heard contradictory accounts from the one you provide, James, wherein frequently the job elimination or offshoring is done in a way that is not based in an analysis of the prospects of the business itself (and certainly not taking onto account human realities), but simply as to how the investing company can maximze profits (which we understand to be its end).  But who knows how to judge these interpretations?  I don’t.  And yet it is the candidate himself who has made this part of his career a major part of his pitch.  It’s not just that he’s being attacked for this part of his life and is seeking to exclude it from his own self-presentation.  He’s making rather extensive claims regarding what he accomplished there on his own behalf.)We either swallow it or roll up our sleeves and assess his claims.  Meanwhile, he is running as far away as possible from the part of his record that will always be generally of interest to people in judging candidates for government office: his record as a holder of public office.  I just find this rather inconvenient.  Acumen in private equity or venture capital is not, as Romney himself points out when he talks about the auto bailouts, what we are looking for in a president.  And yet, to a great degree it’s what he’s running on.  So we all have to go to school on it.  I find this annoying and not what I’m interested in having an election about.Report

      • Avatar BlaiseP in reply to Michael Drew says:

        When it comes to Bain Capital, we see Romney lui-même, the model for a whole generation of corporate pillagers.  The Biz Schools of that era were chiefly interested in teaching the navigational skills of driving up the stock price at the expense of every other consideration.Report

  8. Avatar BlaiseP says:

    Romney’s problem isn’t so much Bain Capital but his Brigham Young degree.   He’s the Republican version of John Kerry on the stump, a plastic man.   Oh, I’m pretty sure the Republicans will find him less-objectionable than the rest of the GOP field.   That won’t make the nation love him.

    He’s a square in a world which doesn’t really like squares.  Romney is obviously a child of privilege, no fault in and of itself, but the faint squiffy stench of Bush43, Al Gore, John Kerry and Dukakis is all over this guy.   He is just not an Ordinary Guy in a time when Fortunate Sons are in considerable disrepute.

    And the GOP has seen Romney lose before.   That’s the cinch.   That party doesn’t like losers and also-rans.   Forget Bain and its problems, fact is, Romney rescued Bain from itself by applying the lessons he’d heard at Harvard Biz in the 1970s.   At one time, Bain was an actual management consulting firm, you know, the kind that comes into a company and looks at the corporate charter and figures out how to put the company back on a profitable basis.  Romney wasn’t trained for that sort of approach.  He was all about da money.

    Now people like us, with more book larnin’ than good sense at our disposal, if we were in charge of a turnaround and someone said, ‘Fish this little company,  put some lipstick on this pig, get it ready for an IPO, load it up with debt and screw it.” we’d roll our eyes to heaven and yell “Don’t be so greedy, dumbass.   We’re working the P&L data just now and just spotted how we can cut out most the middlemen.  You’re sposta be working out why the sales department hasn’t been able to do bigger deals.  Get wise, we need to justify our existence on this gig if we want any more business.  Killing the patient to make a buck, what the hell provoked you to even say such a thing?”

    But that’s the way things went down in the 80s, folks.   Yes they did.   Nobody gave a shit about quality or customer satisfaction.   We’re talking about the era of the Chevy Citation, a well-named car, because its makers should have gotten a dozen for rolling that hunk of merde off the end of the assembly line.   The Chevette, the AMC Eagle.   The Pinto.  I won’t even go into how bad everything else was, if you’re less than 40, consider yourselves spared a grim and ugly stretch of potholes in the road of the American Dream.   Crap was king, everywhere and where it wasn’t, anyone who gave a shit was fired.   They ran Steve Jobs out of Apple, for crissakes.

    Romney represents the very worst America ever had to offer.   Trying to pin Bain Capital’s greed on him is pointless, it was the most effective way to make money at the time and all the hungry young wolves were doing exactly the same thing.    Romney is the Chevy Caprice of American politics, with a jammed up PCV valve.Report

  9. Avatar Michelle says:

    For what it’s worth, I’m don’t know that the Newt’s line of attack, on its own, is going to be enough to take Mitt down, although both the Newt and Paul are now gaining ground on Romney in South Carolina, if the latest polls are to be believed.

    However, this attack when taken together with Romney’s reputation as a soulless shape-shifter, his numerous tone deaf comments (corporations are people; I like to be able to fire the people who provide me with services; yada yada yada), and his inability to exhibit a shred of empathy for anybody not related to him could certainly provide independents with plenty of incentive not to vote for him. Whether or not the video makers have all their facts straight  doesn’t matter as much as the emotional hit of the video and its ability to seam together Romney’s career with his robot-like rich jerk persona. No doubt,  there’s a reason his fellow 2008 Republican presidential hopefuls couldn’t stand him by the time he withdrew from the race. He’s a poster boy for condescending pricks everywhere.

    If the economy sucks badly enough, Romney might be able to gather in enough independents to win the presidency, but if things continue to improve, however slowly, then the race is Obama’s to lose.Report

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