It's morning in Obama's America

[garbon]

The only other thing I can see, from his bit of agreement with Sheilbh, is a stance of "I'm wise enough to understand that what he actually said was x, but it could easily be misunderstood as y by other individuals, so it makes no practical difference whether he said x or y. He's at fault."

I don't really understand that position though.

There is no way I can see that one can take Romney's statement and interpret it in the way CC did.  He added a bunch of words Romney never used, and deleted a bunch that Romney did use.  Plus, he gets the context completely wrong.

I can seeing that many other people have gleefully made the same misconstruction.

[CountDeMoney]

If he didn't do it, somebody else would've.

That's a pretty high standard.

You talk like politics is a noble profession.  You're so cute sometimes.

[grumbler]

I'm pretty sure you're wrong.

If anyone is going to push CC to make ad hominem attacks in this thread it's you, not Yi.

I'm not even responding to CC in this thread.

[grumbler]

I can seeing that many other people have gleefully made the same misconstruction.

A bunch of people dishonestly used just the five-word soundbite and left the listeners to fill in the negative connotations.  They haven't actually claimed that the man said more, and that the additional stuff was about "making a decision to fire employees because of economic requirements."

It is dishonest to mislead by omission, but even more so to lie outright.

I agree with Shelf that a perfect politician would never be human enough to use visceral language like "fire people who don't give me good service," but think that the perfect politician wouldn't get elected.

[The Minsky Moment]

There is a real issue lurking here - namely, whether Bain Capital as run under Mitt had a positive or negative impact on the American economy.  Mitt's campaign has put the matter in issue by citing his experience as a "turnaround" specialist and enterprise creator at Bain as evidence of his mangerial competence and ability to manage the economy as President.

Bain Capital ("BC") is what used to be called an LBO shop.  (Nowadays it is considered more polite to use the more generic and neutral term private equity)  The LBO model involves getting control of existing companies by using the assets of the target to finance the acquisition - that way the LBO firm limits its equity commitment and maximizes potential return on equity, albeit at the cost of heavy leverage and thus greater risk of a wipe out.  They way the LBO model works not every deal has to suceed.  In fact, LBO shops can make tons of money even if most their deals fail, because they only stand to lose a small amount of equity on each individual deal, but can make back many times that if a particular deal does well.  Bain Capital under Mitt worked like that.  Most of their deals didn't work out, and they made almost all their money on their 10 most successful deals.  And even with the latter, the successes sometimes consisted of BC stripping out assets by a special dividend or asset sale that brought a big return to BC but resulted in the company going belly up a few years later.

These kinds of transactions can bring nice profits to the LBO firm principals and their investors.  They are also good for the investment bankers that broker the transactions, the corporate lawyers who advise on the transactions, and of course the insolvency lawyers, trustees, and others who earn fees off the bankruptcy process if the leveraged company fails.  Whether there is a net benefit to anyone else is another question.  From a high-level POV of whether the productive forces of the American economy as a whole benefit, one could argue that all this activity is on a net basis diverting value from enterprises into income streams for fund managers, brokers, lawyers, accountants etc. for work that doesn't really add anything to the underlying business.  There are some that argue that the LBO model brings "discipline" and superior management to underperforming firms, but the empirical evidence supporting this is underwhelming to say the least.

The point to all this is not the Mitt was doing anything illegitimate - clearly he wasn't.  He did his job which was to make money for BC and its investors, and he did that job very well.  But having raised this experience as an affirmative qualification to be President, it is fair to consider the broader ramifications.

[Phillip V]

There is a real issue lurking here - namely, whether Bain Capital as run under Mitt had a positive or negative impact on the American economy.  Mitt's campaign has put the matter in issue by citing his experience as a "turnaround" specialist and enterprise creator at Bain as evidence of his mangerial competence and ability to manage the economy as President.

Bain Capital ("BC") is what used to be called an LBO shop.  (Nowadays it is considered more polite to use the more generic and neutral term private equity)  The LBO model involves getting control of existing companies by using the assets of the target to finance the acquisition - that way the LBO firm limits its equity commitment and maximizes potential return on equity, albeit at the cost of heavy leverage and thus greater risk of a wipe out.  They way the LBO model works not every deal has to suceed.  In fact, LBO shops can make tons of money even if most their deals fail, because they only stand to lose a small amount of equity on each individual deal, but can make back many times that if a particular deal does well.  Bain Capital under Mitt worked like that.  Most of their deals didn't work out, and they made almost all their money on their 10 most successful deals.  And even with the latter, the successes sometimes consisted of BC stripping out assets by a special dividend or asset sale that brought a big return to BC but resulted in the company going belly up a few years later.

These kinds of transactions can bring nice profits to the LBO firm principals and their investors.  They are also good for the investment bankers that broker the transactions, the corporate lawyers who advise on the transactions, and of course the insolvency lawyers, trustees, and others who earn fees off the bankruptcy process if the leveraged company fails.  Whether there is a net benefit to anyone else is another question.  From a high-level POV of whether the productive forces of the American economy as a whole benefit, one could argue that all this activity is on a net basis diverting value from enterprises into income streams for fund managers, brokers, lawyers, accountants etc. for work that doesn't really add anything to the underlying business.  There are some that argue that the LBO model brings "discipline" and superior management to underperforming firms, but the empirical evidence supporting this is underwhelming to say the least.

The point to all this is not the Mitt was doing anything illegitimate - clearly he wasn't.  He did his job which was to make money for BC and its investors, and he did that job very well.  But having raised this experience as an affirmative qualification to be President, it is fair to consider the broader ramifications.

When did those companies go belly up? It seems many of them failed shortly after the 2000-2001 recession; perhaps some "broader ramifications" to consider.

[Admiral Yi]

The takeovers that went belly up are not the negative for Romney (although I suppose Perry and Huntsman could run ads claiming Mitt's a business failure); what makes him vulnerable is the Michael Douglas asset poaching.

[The Minsky Moment]

When did those companies go belly up? It seems many of them failed shortly after the 2000-2001 recession; perhaps some "broader ramifications" to consider.

Lots of businesses survive recessions, including that one.
But it turns out that a very key variable in determining a company's ability to survive a recession is its ability to draw upon financial reserves and conversely, the lack of an immediate need to roll over financing.  So highly leveraged companies are at much greater risk to fail in a downturn.

According to the WSJ of BC's 10 most succesful deals, 4 ended up in Chapter 11 within 3-4 years of BC's exit.  The most successful of these from Bain's perspective was Dade Behring.  BC invested $30 million in equity to acquire control of Dade in 1994.  By 1999, Dade was doing pretty well.  BC owned 6 million shares, or more than 1/3 of the company.  The company was carrying about $860 million in short term debt.  A few months later, BC sold $365 million of its shares back to the company.  To fund the repurchase, Dade took on another $450 million in debt.  As a result of the deal, BC ended up making a net return of about 6 times its initial investment.

Three years later, though Dade filed for Chapter 11.  The company ultimately reorganized; as it turned out, the organization plan involved reducing debt back to to prior level of $800 million, which was a managable level even under recessionary conditions.  I.e. had BC never leveraged the company up to cash out, most likely it would have been able to operate through the recession without filing Chapter 11.

[Admiral Yi]

I don't see how you can pin that one on Bain Joan.  A 30% stake doesn't hold a gun to Dade's head.

[mongers]

There is a real issue lurking here - namely, whether Bain Capital as run under Mitt had a positive or negative impact on the American economy.  Mitt's campaign has put the matter in issue by citing his experience as a "turnaround" specialist and enterprise creator at Bain as evidence of his mangerial competence and ability to manage the economy as President.

Bain Capital ("BC") is what used to be called an LBO shop.  (Nowadays it is considered more polite to use the more generic and neutral term private equity)  The LBO model involves getting control of existing companies by using the assets of the target to finance the acquisition - that way the LBO firm limits its equity commitment and maximizes potential return on equity, albeit at the cost of heavy leverage and thus greater risk of a wipe out.  They way the LBO model works not every deal has to suceed.  In fact, LBO shops can make tons of money even if most their deals fail, because they only stand to lose a small amount of equity on each individual deal, but can make back many times that if a particular deal does well.  Bain Capital under Mitt worked like that.  Most of their deals didn't work out, and they made almost all their money on their 10 most successful deals.  And even with the latter, the successes sometimes consisted of BC stripping out assets by a special dividend or asset sale that brought a big return to BC but resulted in the company going belly up a few years later.

These kinds of transactions can bring nice profits to the LBO firm principals and their investors.  They are also good for the investment bankers that broker the transactions, the corporate lawyers who advise on the transactions, and of course the insolvency lawyers, trustees, and others who earn fees off the bankruptcy process if the leveraged company fails.  Whether there is a net benefit to anyone else is another question.  From a high-level POV of whether the productive forces of the American economy as a whole benefit, one could argue that all this activity is on a net basis diverting value from enterprises into income streams for fund managers, brokers, lawyers, accountants etc. for work that doesn't really add anything to the underlying business.  There are some that argue that the LBO model brings "discipline" and superior management to underperforming firms, but the empirical evidence supporting this is underwhelming to say the least.

The point to all this is not the Mitt was doing anything illegitimate - clearly he wasn't.  He did his job which was to make money for BC and its investors, and he did that job very well.  But having raised this experience as an affirmative qualification to be President, it is fair to consider the broader ramifications.

Thanks JR, fascinating viewpoint.

Maybe it would be appropriate if America elected an asset stripper to the Presidency, given it's role at the worlds largest debtor. 

2014 - USMC on 10 year contract to the PRC, anyone. 

[The Minsky Moment]

I don't see how you can pin that one on Bain Joan.  A 30% stake doesn't hold a gun to Dade's head.

They controlled the company.  They had the largest equity stake (35.9%) and controlled a majority of the board seats, plus their guy was CEO.  The sole purpose of the deal was to allow BC and a couple others to cash out.

I want to be clear - there was nothing improper about the deal.  The other major shareholders consented.  It was a legit transaction.  It served the interest of Mitt's firm and the investors he acted as fiduciary for.  But I think one can question whether it was a net benefit for the US economy.

[crazy canuck]

CC, you need to work on your "Gotcha" debating tactics.  Then you won't have to put up with Grumbler's bullshit.

Grumber, isnt worth playing with.  Both he and Yi want to put words in Romney's mouth to make Romney's statment seem justifiable and then he uses his old tired tactic of accusing people of doing exactly what he has just done.

[Admiral Yi]

Grumber, isnt worth playing with.  Both he and Yi want to put words in Romney's mouth to make Romney's statment seem justifiable and then he uses his old tired tactic of accusing people of doing exactly what he has just done.

Jesus Fucking Christ.  I was willing to drop the whole thing because I couldn't see a way to continue without making it personal, but I see you're not. 

You're the one who has shown through his comments that you don't even know what Romney said, and are arguing on the basis of what his opponents mischaracterized his statement as.  Then when Shelf shows up and repeats what I said, but throws a line in about still Romney shouldn't have said what he said, you pretend that was your point all the time.  I'll bet you still don't know what Romney said.

[crazy canuck]

I know what Romney said.  You and I disagree as to whether what he said was stupid.  You seem to think what he said its ok.  That says more about you then anything...

[Admiral Yi]

I know what Romney said.  You and I disagree as to whether what he said was stupid.  You seem to think what he said its ok.  That says more about you then anything...

You and I disagree as to what he said based on your posts.