HAHAHA! There is no sex in this post…but since my post entitled America is Having Sex had over 100 hits, I thought, well, sex sells. Oh, who knows, maybe I will add a little sex to my blog to keep it interesting…
Since Mitt Romney became the Republican nominee for POTUS we
have been hearing quite a bit about Bain Capital. A recent Rolling Stone
article called his ties to Bain, “wildly irresponsible use of debt in pursuit
of personal profit.” I admit, I wasn’t sure what Bain Capital was, how it
functioned or what hand Romney had in the madness, but after some research here
is what I have deducted:
1.
Bain Capital is sort of responsible for
the too big to fail bank failures. I mean, not totally responsible, but a big
player in borrowing money from the very institutions that eventually crumbled
from the weight of greed and complete mismanagement. And greed. Lots and lots
and lots of greed. Oh, and did I mention greed?
2.
Lets say you are somehow undecided about how to
vote in the upcoming election…you feel like we need a business man to come in
on his white steed to pick up America and whisk them away to a land of unicorns and plentiful
of jobs. Well, unfortunately, Romney isn’t your man. His business model is
underhanded and at very best plain shady. In a nutshell: Bain
puts a minimal down payment to secure a loan (from Citigroup or Goldman Sachs)
buys out a struggling business with a decent cash flow, saddles it with more
debt, fires all the employees (except the top guys, who get a MASSIVE bonus to
keep them complacent), charges a hefty fee for “helping recover” their business
and pulls out before it fails. (See there is a sex referrence.)
Here is the best explanation I
have read so far:
“Now your troubled firm – let's
say you make tricycles in Alabama – has been taken over by a bunch of slick
Wall Street dudes who kicked in as little as five percent as a down payment. So
in addition to whatever problems you had before, Tricycle Inc. now owes Goldman
or Citigroup $350 million. With all that new debt service to pay, the company's
bottom line is suddenly untenable: You almost have to start firing people
immediately just to get your costs down to a manageable level.
Fortunately, the geniuses at Bain
who now run the place are there to help tell you whom to fire. And for the
service it performs cutting your company's costs to help you pay off the
massive debt that it, Bain, saddled your company with in the first place, Bain
naturally charges a management fee, typically millions of dollars a year. So
Tricycle Inc. now has two gigantic new burdens it never had before Bain Capital
stepped into the picture: tens of millions in annual debt service, and millions
more in "management fees." Since the initial acquisition of Tricycle
Inc. was probably greased by promising the company's upper management lucrative
bonuses, all that pain inevitably comes out of just one place: the benefits and
payroll of the hourly workforce.
Once all that debt is added, one
of two things can happen. The company can fire workers and slash benefits to
pay off all its new obligations to Goldman Sachs and Bain, leaving it ripe to
be resold by Bain at a huge profit. Or it can go bankrupt – this happens after
about seven percent of all private equity buyouts – leaving behind one or more
shuttered factory towns. Either way, Bain wins. By power-sucking cash value
from even the most rapidly dying firms, private equity raiders like Bain almost
always get their cash out before a target goes belly up.
This business model wasn't really
"helping," of course – and it wasn't new. Fans of mob movies will
recognize what's known as the "bust-out," in which a gangster takes
over a restaurant or sporting goods store and then monetizes his investment by
running up giant debts on the company's credit line. (Think Paulie buying all
those cases of Cutty Sark in Goodfellas.) When the note comes due, the
mobster simply torches the restaurant and collects the insurance money. Reduced
to their most basic level, the leveraged buyouts engineered by Romney followed
exactly the same business model. "It's the bust-out," one Wall Street
trader says with a laugh. "That's all it is."
This explanation was written for Rolling
Stone by Matt Taibbi.
I know, it was a long example of what and how Bain Capital operates,
but the whole article is 6 pages long and this bit was about 4 pages in, so I
thought that I would hit the highlights for you. Your welcome. This brings me
to my next point:
3.
SEX!! No, not yet. Romney isn’t the business man you want taking
over the American economy. This model has already failed. I find it difficult
to believe that Romney is capable of getting America out of debt when his own
business model borrows a shit-ton of money with very little regulation.
4.
Ok, sex. The Bain Capital business model will
fucking screw you in a very uncomfortable place…yes, like the back of a Volkswagon.
Thank you for your time and patience.
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