January 12th, 2012

Newt and the public’s right to know about Bain Capital

I almost feel I need to apologize for writing so much about this, but the Gingrich/Perry v Romney/Bain business has fascinated me far more than I expected it would, and much more than the usual campaign imbroglio. I think the reason is that it conjures up a host of deeper issues to ponder—about capitalism and free enterprise in general, and about the business of finance and how that fits into the mix.

So I may come out with quite a few posts related to this before it’s done. Not that I expect it to be done all that soon. And even if the Republicans start leaving the topic alone (which I doubt), the Democrats will be sure to pick it up if Romney is nominated. Of that you can be certain, if you can be certain of anything at all in this election.

Much of the brouhaha about Gingrich’s (and to a lesser extent, Perry’s) recent attacks on Bain’s tenure have centered on statements about looting and vulture capitalism. But these recent remarks by Gingrich in South Carolina about Romney and Bain had a somewhat different focus [emphasis mine]:

I think it’s funny that on the one hand [Romney] wants to run around touting his record, on other hand if anybody asks a question about his record, he hides behind an entire framework and to question the facts is to be anti-capitalist. That is nonsense — baloney is the term I think I was using the other morning. The fact is, we have a right to know. We have a right to know what happened at Goldman Sachs, we have a right to to know what happened with trillions of dollars in New York. We have a right to know what happens when companies go bankrupt. I think the country would like to know. And if we’re going to run a presidential campaign on a record, the record has to be open to review. Now this is not anti-capitalism. That is the smoke screen of those who are afraid to be accountable.

Just so you don’t think this “people’s right to know” meme was a momentary thing for Newt, he also said [emphasis mine]:

I am for entrepreneurship, but I am also for the American people’s right to understand how the games are being played: Are they fair to the American people, or are the deals being cut on behalf of Wall Street institutions and very rich people?

I’ve read that last statement of Gingrich’s several times, and it’s hard to escape the conclusion that he is suggesting that the deals should give some general “fairness” and benefit to the “American people” as a whole, rather than profit to the “Wall Street institutions” and the “very rich people” who populate them. I just can’t parse the statement any other way.

This actually doesn’t seem like a fiscally conservative notion or a capitalist one. What does Gingrich mean when he says that Bain or similar companies shouldn’t cut deals “on behalf” of themselves? Why not? Because they are “very rich” already? Should they make no profit at all? How much would be too much? And who gets to decide where to draw the line?

I keep saying that I’m no financial expert, and I’m not. But I was under the impression that capitalism and free markets were supposed to work this way: first and foremost, people work very hard to make money for themselves. In the process, if they start a company and grow and manage it well they make money not only for themselves, but for their stockholders too if stock is involved. They also provide wages and salaries to employees, and a service to the general public (the “American people”?): the company’s products, or whatever else it is that’s being offered, are bought and used if they are good enough and reasonably enough priced. Thus, it’s competition and the profit motive that end up benefiting us as a whole—with no significant sacrifice of liberty, and with the idea that everyone has an opportunity to make it although not everyone will.

Of course, it doesn’t always work out perfectly, or even nearly so. But built into the deal is that companies will sometimes do poorly, and then sometimes they will fail. When they’re on the cusp of failure, or just not doing very well, other companies (such as Bain, for example) may be asked to come in and evaluate the situation and do what’s necessary to save the struggling company, which often involves implementing rather Draconian measures. If that doesn’t work, the troubled company can go under. That means the loss of all the jobs there, not just some. In the process, the turnaround company often makes money for its pains (why else would it engage in the endeavor?), although it sometimes loses money because the entire undertaking is inherently very risky. That’s why not everybody attempts this sort of thing, and not everyone can make a profit at it when they do.

Certain transactions along the way are supposed to be open to public scrutiny. And of course, those who break the law in the process of doing business are supposed to be pursued and apprehended. But generally there are certain restrictions on that “right to know” that’s so dear to Newt, limits that protect the companies’ ability to do business:

Bain has blocked many of the avenues that would enable reporters to get information on their own, declining to give The Wall Street Journal a list of the companies it has invested in (“citing privacy reasons”) or even any information about when its involvement with its investments ended.

It’s not clear how much of a choice Bain has about what it can disclose. Private equity companies often tend to have confidentiality agreements with their investors (Bain would not comment on what agreements it has). Several equity experts interviewed for this story thought any disclosures from Bain were likely to spook its investors.

The private equity business model is based on taking companies out of the public markets, where reporting requirements are strict and investors punishing, making changes that will hopefully make them more profitable and then selling them or taking them public through an IPO.

The part that happens behind the curtain is not always pretty, and private equity firms have learned over the years that it’s hard to tell a complicated story in the media.

You better believe it.

So, do we have “a right to know what happened when companies go bankrupt [and companies such as Bain takes over in the private equity business],” as Gingrich insists? And how would he suggest that such a right be enforced? And what about those confidentiality agreements? Does he think they should be outlawed? And is that anti-capitalist?

79 Responses to “Newt and the public’s right to know about Bain Capital”

  1. DirtyJobsGuy Says:

    I used to like Mitt (His rescue of the Salt Lake Olympics from local crooks was first rate) but his enthusiastic support for RommneyCare and the New England version of the Kyoto Carbon treaty made me question his political spine. Also his tenure in MA was a continuation of the local voter’s need to have a republican governor to prevent the worst of the Democratic corruption (think Billy Bulger). They didn’t hire him to really change the state’s overstaffed public sector.

    Also he’s a finance guy not a general manager. That’s a big difference. Bain puts money into a large number of companies, gets them so they can stay afloat for a few years, hires new management for them and hopes to sell them as they recover. In the US government, he would make a great Treasury Secretary but lacks the skills for line management.

  2. davisbr Says:

    Neo, another branch of the question on this topic we could call “crony capitalism”.

    That terminology, to me, is a deeply disturbing concept. And not one that I would associate with “free markets capitalism” at all.

    What it is, is piracy. Legal it may be, and abetted by big government of a certainty …but it is piracy all the same. In all its iterations, it enriches the elites (both financial AND and political elites), by transferring the vast wealth of the middle class, further impoverishing the poor, to our – in their minds – “betters”.

    Am I fomenting or using the rhetoric of class warfare here?

    Maybe. But – just perhaps, in this case – it’s a justified use of the rhetoric.

    Understand: I don’t having anything against people making all the money they can make and keeping as much of it as they can.

    I just don’t think they should do that via what amounts to theft, whether “legal” or illegal.

    I believe this confusion happens in the first place because people don’t differentiate basic terminology finely enough …they hear “capitalism”, and they instantly rush to defend it. But their first question should be, is the thing they’re defending actually capitalism at all?

    Because there are times, there are modifiers, that are simply not suitable for arguments in defence of capitalism.

    “Vulture” capitalism? – Hell, I’m on board. Failing companies are going to fail (by definition) after all, and if someone can make a buck at it, good on ‘em. Because just like scavangers in the eco-system, they perform what is ultimately a healthy process that cleanses the system of carrion. Things die. Carrion eaters recycle the detritus.

    I get that.

    But when the players game the system and take out the healthy businesses with their financial and political muscle (as illustrated by the scene in the movie Pretty Woman, where Lewis calls on a banker that he “owns” to withhold loans from Morse Shipyards, and on a Senator he “owns” to delay a contract that Morse Shipyards has already won …keeping in mind that Morse Shipyards is a family business that is in a rough patch, but is NOT fresh carrion with vultures circling an already dying business), that is NOT vulture capitalism.

    That is crony “capitalism” (and we should give it a new name, since crony-ism is more related to “legal” crime than it is to the production and movement of goods in the free market). We shouldn’t be defending that nonsense …we should be resisting it and fighting it at every turn.

    Didn’t Ayn Rand base a book or two on that subject?

    …and the 2008 melt-down has torn the facade off the commonality and the sheer magnitude of the dealings of croyism for a lot of people (people who’d just like to live their lives and not worry about this kind of thing).

    We may not know crap about economics, but we know banditry and piracy when we see it.

    We may not understand the mechanics of the deal-making, but we very, very much understand the immorality and injustice of it.

    And – quite apparently – vastly unlike the Wall Street and Beltway elites, we DO understand that just because something is “legal”, doesn’t make it just.

    That statue of Blind Justice is such powerful symbolism to us in the west, because we know that rightness, that justice, isn’t always about The Law.

    The King does NOT have the right to take what we have worked for.

    …well, without JUST cause.

    …and yes, I do think that’s exactly what’s happened to some of the trillions of dollars in wealth that we’ve seen confiscated …stolen …from the middle class.

  3. J.J. formerly Jimmy J. Says:

    neo said, “I keep saying that I’m no financial expert, and I’m not. But I was under the impression that capitalism and free markets were supposed to work this way: first and foremost, people work very hard to make money for themselves. In the process, if they start a company and grow and manage it well they make money not only for themselves, but for their stockholders too if stock is involved. They also provide wages and salaries to employees, and a service to the general public (the “American people”?): the company’s products, or whatever else it is that’s being offered, are bought and used if they are good enough and reasonably enough priced. Thus, it’s competition and the profit motive that end up benefiting us as a whole—with no significant sacrifice of liberty, and with the idea that everyone has an opportunity to make it although not everyone will.”

    Wow, Milton Friedman couldn’t have said it any better. I think Romney would do well to hire you as a writer for his speeches and campaign ads.

    The problem with all this is, of course, it ain’t exactly pretty or simple, and is seldom understood by the average citizen. That’s why your narrative above is so valuable People pay lip servcie to “capitalism” when in fact they aren’t exactly sure what it means. The corporate model of pooling risk capital to create enterprises that are needed by society is a good one. Unfortunately, human nature being what it is, there will always be people who will cut corners, bend rules, grasp for every penny, and have no thought for their fellow man. Often these people are not caught, but when they are, they bring the whole system into disrepute. People like Bernie Madoff and Frank Lorenzo, to name but two, should be placed in public stocks where the citizens can daily remind them of their crimes and be held up as an example for others.

    Too few people ever sit down and think through the process of how wealth is created and why it creates a better life for all when there is competition and the possibility of failure involved. What we have needs some work (too many leveraged/complex derivatives, too much computer trading, out of whack executive compensation, Boards of Directors that are not doing their jobs, and a banking system that needs to be subject once again to the Glass/Steagal separation of banking from investing – to mention a few). However, even with all its imperfections, it is still the best way for improving the economic situation for the most people.

  4. Artfldgr Says:

    As Lord Macauley, the great 19th-Century English historian of American democracy, warned an American friend back in 1857:

    It is quite plain that your government will never be able to restrain a distressed and discontented majority. For with you the majority is the government, and has the rich, who are always a minority, absolutely at its mercy. The day will come, when in the State of New York a multitude of people, none of whom have had more than half a breakfast, or expect to have more than half a dinner, will choose a legislature. Is it possible to doubt what sort of legislature will be chosen? On one side is a statesman preaching patience, respect for vested rights, strict observance of public faith. On the other is a demagogue ranting about the tyranny of capitalists and usurers, and asking why anybody should be permitted to drink champagne and to ride in a carriage. Which of the two candidates is likely to be preferred by the working man?

    I seriously apprehend that you will, in some such season of adversity as I have described, do things which will prevent prosperity from returning: that you will act as people would in a year of scarcity, devour all the seedcorn and thus make the next year, a year not of scarcity but of absolute famine. There will be, I fear, spoliation. The spoliation will increase the distress. The distress will produce fresh spoliation. There is nothing to stay you. Your Constitution is all sail and no anchor.

    As I said before, when a society has entered on this downward progress, either civilization or liberty must perish. Either some Caesar or Napoleon will seize the reins of government with a strong hand; or your Republic will be as fearfully plundered and laid waste in the twentieth century as the Roman Empire was by barbarians who came from without, and that your Huns and Vandals will have been engendered within your own country by your own institutions.2

  5. vanderleun Says:

    Every day in every way more and more people are waking up with the thought, “You know, I used to like Newt…”

  6. DNW Says:

    As I am in general sympathy with what davisbr has written, I’ll limit myself to simply suggesting that we take a close look at what some of the supposedly objective economic terms we are all using, strictly imply; and recognize that conscienceless gamers will try and hide behind or warp and shift the meaning and connotations of the terms used in order to try and shield tawdry and morally or legally questionable behavior.

    To give an example of definitions, free markets and capitalism, are plainly not identical terms. And capitalism as the admirable practice of the private property right of ownership of the tools of production, is not strictly synonymous with the corporate form of business as in the joint stock and limited liability company; nor with what has justifiably been called the practice of crony capitalism.

    And I’ll let someone else expatiate on how it came to pass that antitrust law is now often referred to as a dead letter, and how it came to be that market manipulation is sometimes shrugged at as the price we pay for a supposedly free market.

    I am not opposed to venture capitalism, nor to leveraged buyouts, nor do I believe that the only way to add value is at the drop forge. But in our general and state abetted laxity we have given ammunition to people like Gingrich to questionably attack others like Romney; when it is Corzine and the like who most clearly should be staring at the legal gibbet.

  7. Don Carlos Says:

    All of this, as Artfldgr cites, was foreseen and is foreseeable. The economic ignorance of most–most– of the voting public will sink us all.

    For example: saving GM from bankruptcy by extralegal czarist action did NOT save jobs. A business bankruptcy is either a financial reorganization or an orderly liquidation. In the latter, corporate divisions (assets) are then sold to buyers, the buyers being the new employers. In the event of GM reorganization, certain parties, such as the unions, would have received adjudicated “haircuts”. Instead, legally entitled GM creditors got blitzed so’s the unions would not suffer, and indeed became partial owners of the new Government Motors.

    Similarly, personal bankruptcy does not result in the extinguishment of the bankrupted family, nor the individual members thereof.

  8. gcotharn Says:

    Newt is not speaking of a human right “to know”, as in a right which is endowed by our Creator and is written into law.

    Rather, Newt is speaking

    1. to voters, and

    2. is referencing the Principle of Reciprocity (Golden Rule, Silver Rule, et al) which is almost universal amongst the religions and philosophies of the world.

    Newt is saying: Voters, if Mitt is going to claim his time at Bain equates to proof of his fitness for office, then Mitt is honor bound to explain apparent questionable ethical conduct. We voters have a right (according to the Principle of Reciprocity) to demand that. Otherwise, we cannot credit his time at Bain.

    Mitt is not bound by law. Rather, Mitt is bound by decency.

  9. gcotharn Says:

    Separate conversation:

    Bain’s activities were not prohibited by law. However, were some of Bain’s activities prohibited by decency? i.e., prohibited by the Golden Rule or the Silver Rule? That is the question to which Gingrich and Perry want a response.

    It looks, to me, that, for instance, re the company in Florida which was in the film and which made commercial laundry equipment: Bain acted in legal, yet indecent, fashion.

    Bain wanted to turn companies quickly, i.e. no one at Bain anticipated that Bain would run any company for 20 years, or 10 years, or 5 years, and probably not even for 2 years.

    If Bain could change gain short term value for the company via changing management processes: great! Everybody wins! Reissue common stock and turn a profit for Bain!

    However, if changing management processes could not create short term value: then Bain would manipulate financial data in a way which allowed them to loot the company and then dump it, one way or another, including bankruptcy. In this scenario, Bain would win, employees (such as those in FL) would be on the street, and either Wall Street investors and/or creditors of the company would be left holding the bag. Meanwhile, Bain’s financial analysts had pre-identified ways in which Bain could walk away a financial winner.

    Absent a more detailed explanation from Romney: it looks to me as if the looting scenario is what occurred in Florida, and possibly (probably?) in the other companies which were highlighted in the film.

    Could the Florida company have kept operating, for decades, at a profit? Its employees think so, and Romney does not appear interested in explaining why those employees are wrong. Until Romney explains the situation better, it appears to me as if Bain was uninterested in reselling a company at a stock price which was based on multiple future decades of profit. Rather, Bain wanted to get in and out inside a very limited time frame. Bain’s most profitable short term option was to put the employees on the street and to leave creditors holding the bag. The Bain guys probably would not even be working for Bain in 5 years: they wanted to get their money and get out quickly.

    Exists no question of law. Rather, exists an ethical question: Golden Rule, Silver Rule, the judgement of Jesus. This is the standard by which Mitt ought defend himself. If Mitt is able to do so, and if Mitt will do so (drawing principled parallels between his own actions, the great principles of humanity, and the founding principles of America): then Mitt might lock up both the nomination and the general election. This is a giant moment: a giant opportunity for Mitt. He has done nothing, so far, to show he is up to this moment. I hope he will shift: will indicate he is a principled man who is up to the moment.

  10. neo-neocon Says:

    gcotharn: So you would have Romney break his confidentiality agreement by which he is bound. That,you may recall, was my question. Or perhaps you think people in his business should not run for office because they have such agreements.

    This has been so informative.

  11. neo-neocon Says:

    By the way–I’m doing this from my android phone right now, a real first for me. So if a I’m unusually terse or ungrammatical, you’ll know why.

  12. neo-neocon Says:

    I think I need to wait till I get back to my computer. Texting is not for me.

  13. gcotharn Says:

    @neo

    No, I would not have Romney betray either Bain, or any of Bain’s investors.

    I reject your supposition that Romney could not explain his principles, strategies, tactics – for instance, re the Florida company – w/o betraying confidentiality.

    If Romney’s strengths include making nuanced distinctions, and communicating: let Romney use his strengths to communicate w/o betraying confidentiality.

  14. gcotharn Says:

    Something else:

    if Romney cannot defend his actions w/o betraying confidentiality: then he ought never have trumpeted these particular actions in the first place. In doing so, he was playing around the edges of ethical behavior: was on the edge of risking confidential secrets which had been entrusted to him.

    But, in my own supposition: Romney can defend himself w/o betraying confidentiality.

  15. Conrad Says:

    Great OP. I have a bunch of scattered thoughts, which I’ll try to keep brief:

    1. My first reaction to Newt’s comments: What bunch of “pious baloney.” This isn’t about anyone “right to know,” it’s about Newt’s trying to bring down Mitt by appealing to people’s ignorance and envy.

    2. Let’s not forget Newt was on the board of directors for Fosrtmann Little, a leading LBO firm. Why hasn’t he released a detailed accounting of all the deals Forstmann Little worked on to see whether anybody got laid off?

    3. I agree with your interpretation of Newt’s call for an assessment of the “fairness” of deals made by private equity investors. Indeed, it’s NOT a very conservative notion that private economic actors should be “accountable” for how they manage or dispose of their assets. We may not like it when a company closes a store or a factory, but the whole idea of property rights is that we can all do as we please with the stuff we own.

    4. Related to #3, if we — as supposed CONSERVATIVES — are implictly willing to tell companies what they can and cannot do with their assets, in the hope of avoiding devastating layoffs from affecting communities, how can object when Obama’s NLRB tells Boeing it can’t start a plant in SC because that hurts workers in the State of Washington? Once you accept the premise that private employers have a duty to workers or to communities not to close plants, or automate processes, or take other steps that will reduce employment or local tax revenues, then you are opening the door to either the government or courts directly supervising how business is conducted in this country. Clearly, it will destroy what’s left of our economy and our freedom if businesses have to get a bureacrat’s permission before selling assets, taking on new debt, etc. (and think of the corruption that would result!). The point is, even though our current level of economic freedom (such as it is) often results in companies making decisions that workers or communities don’t like, the alternative, where government decides these things, would be horrifyingly worse.

    5. Even if conservatives don’t favor any kind of legal reforms to prevent a company like Bain from engaging in “vulture capitalism,” that doesn’t excuse what Newt is doing. Obama and the OWS crowd DO, in fact, want to gain vastly greater control over private businesses so that they operate more in the “public interest.” (This is just soviet-style central planning under a different name, BTW.) It’s flat-out dangerous for Newt to be exploiting the knee-jerk, populist impulse in favor of “making businesses behave responsibly” simply because a rival candidate is beating him at the polls. He’s fanning the flames on something that’s much bigger and more important than who the GOP nominee is.

    6. “Crony capitalism,” to me, refers to the whole regime of big government being in bed with business (or unions). It’s the bailouts, subsidies for favored industries (notably “green jobs” companies), payoffs to unions, etc. If someone thinks that’s too restrictive a definition and that “crony capitalism” applies to one private business doing favors for another, I’m open to persuasion, but I’m having trouble seeing where the government would have a proper role in regulating those kinds of relationships (where it doesn’t fall under antitrust, for example).

    7. I really object to people lumping together a whole lot of vaguely-defined, ostebnsibly bad business practices (“crony capitalism,” “corporate raiding,” “stripping,” “vulture capitalism,” etc.) and then simply deciding that Mitt Romney is the poster boy for all of these things. It strikes me as something Alinsky would do. Whatever Mitt did, he did, and it presumably is capable of being looked at, step by step. But the way people are unthinkingly attaching pejorative labels to his career in no way gets at that truth. It’s just a massive slur. This is part of the reason I find Newt to be incredibly hypocritical about this. He’s trying to stake out the intellectual high ground by claiming this is a search for information that the public has a “right to know.” But he’s engaging in such complete abstractions — was this deal “fair to the people”? — it’s impossible to know the standard by which Mitt’s actions at Bain are being judged. Which gets back to my first point: This isn’t about getting answers for the American people, it’s simply about trying to make Mitt look like a big meanie.

  16. davisbr Says:

    neo – Some of the Android speech-to-text apps are a wonder, and amazingly accurate. If you haven’t tried one, you should. I’ve found I have to do little to no editing corrections. And it’s a lot easier to speak and edit, than to write and correct.

    (The one that came on my inexpensive LG Optimus performs so well, that I haven’t even bothered with any other, so I have no particular recommendation …just noting that we’ve gone a long way toward semi-perfect dictation machines with these.)

  17. Mr. Frank Says:

    Newt is a blowhard and a bully. That may be why he has no friends among his former colleagues in the House.

  18. Parker Says:

    Conrad has raised many salient points, the most germane IMO is:

    “Once you accept the premise that private employers have a duty to workers or to communities not to close plants, or automate processes, or take other steps that will reduce employment or local tax revenues, then you are opening the door to either the government or courts directly supervising how business is conducted in this country.”

    I want someone to show me verifiable proof that Bain committed fraud or embezzlement or in any other way acted in an illegal manner. Otherwise, you are simply defending Newt (and Perry’s) talking points because he is your preferred candidate. Populist demagoguery is playing with fire. Artfldgr makes that point:

    “The day will come, when in the State of New York a multitude of people, none of whom have had more than half a breakfast, or expect to have more than half a dinner, will choose a legislature. Is it possible to doubt what sort of legislature will be chosen?”

  19. Don Carlos Says:

    Great. We face a mud-wrestling fight to the death with BHusseinO and we will insist our champion fight by the Marquis of Queensbury rules, as he must always have done.

  20. Mr. Frank Says:

    Once you go down the road described by Conrad’s post quoted by Parker, you are headed for a moribund economy that hurts lots of people. Such policies killed the British auto industry. Such policies lead to high levels of youth unemployment because employers fear hiring people who might not work out. Wages stagnate. Inefficient companies can’t compete and ultimately go under and everybody is out of work.

    Obama “saved” GM by closing lots of plants and dealerships. Thousands lost their jobs. Private leadership would have done the same had it not been for the government backed unions.

  21. gcotharn Says:

    “Once you accept the premise that private employers have a duty to workers or to communities not to close plants, or automate processes, or take other steps that will reduce employment or local tax revenues, then you are opening the door to either the government or courts directly supervising how business is conducted in this country.”

    We are constitutionally protected, for instance, against being forced to keep a plant open.

    The issue at hand is an issue of moral and ethical judgement. A POTUS makes a tremendous number of decisions in which moral and ethical judgements tip the scales in one direction or another. As do we all, in our own ways.

  22. Scott Says:

    I have read Newt’s “21st Century Contract With America”:

    http://www.newt.org/sites/newt.org/files/contract/21st_Century_Contract_Legislative_Proposals.pdf

    And skimmed most of Willard’s plan titled “Believe in America: Mitt Romney’s Plan For Jobs and Economic Growth”. It is so dense and long it is hard to read. The forward was written by Glenn Hubbard. It is really only tinkering around the edges of what we already have.

    http://www.scribd.com/fullscreen/64190325

    Newt’s plan, on the other hand, is truly bold and Reaganesque. It’s been endorsed by both Thomas Sowell and Art Laffer. The tax regime Newt wants to institute is not unlike that of Hong Kong, often ranked as the “freest” country in the world by Heritage (and Milton Friedman before he died). That freedom gives the people who live there among the highest per capita income in the world.

    It’s a travesty that Newt is not spending every minute of his campaign talking about his tax policy and economic plan – because it is the most aggressive pro-growth plan of all the candidates. Instead, Newt focuses everyone’s attention on idiotic things like talking about how he wants to bring activist judges before Congress and making stupid statements about Bain which causes people to accuse Newt of throwing capitalism under the bus — which is pretty silly considering his economic plan is a very bold embrace of capitalism.

    Let’s assume Willard’s plan will give us 2.5% annual economic growth over a decade and Newt’s will give us 4% (those are my assumptions for illustrative purposes – not the candidates’). In a $15 trillion economy per year, the 1.5% difference in growth rates amounts to an additional $225 billion in GDP per year, or an additional $2.25 trillion over a decade (assume no compounding for simplicity). That’s tens of millions of additional jobs created and trillions more of wealth creation.

  23. J.J. formerly Jimmy J. Says:

    Conrad,
    You bring up many salient points that reflect some rational thought about the Romney/Bain situation. Oh, that we could count on the average voter for such calm appraisal of the issues.

    While driving to and from an appointment today I heard an anti-Romney ad that is so fillled with innuendoes, half-truths, and outright lies that it made me furious. It is being run by a PAC that claims to represent no party or candidate. My guess is that it represents George Soros money and interests. I cannot believe any Republican candidate or PAC would run such a scurrilous ad. Whoever would stoop to such levels is working hard to outdo Alinsky.

  24. Ed Bonderenka Says:

    “And if we’re going to run a presidential campaign on a record, the record has to be open to review.”
    Like his Fanny Mae consulting…

    As an aside, I wonder if they wish they hadn’t chosen a DBA that is homophonic with “Bane”.

  25. gcotharn Says:

    This Fortune article points to some inaccuracies in the Bain film http://finance.fortune.cnn.com/2012/01/12/the-bain-bomb-fizzles/

    I hope the info was given to Fortune by the Romney campaign. That would indicate that the campaign is prepared to address at some specifics.

  26. Parker Says:

    “Great. We face a mud-wrestling fight to the death with BHusseinO and we will insist our champion fight by the Marquis of Queensbury rules, as he must always have done.”

    ???? You are talking about _______ ?

    BHO has a record, past and present, and its easy to attack. All it takes is the will to take on his record past and present. To do so, you have to have a thick skin when it comes to the MSM labeling you a racist, gun totting, evil capitalist pig. Rev Wright should be front and center:

    http://www.youtube.com/watch?v=pxzWhaqFy7s

  27. foxmarks Says:

    Neo is magnificently correct to say, “it conjures up a host of deeper issues to ponder—about capitalism and free enterprise in general, and about the business of finance…”

    Corporations are entities created by government edict. They exist to shield partners from liability should their mutual enterprise face financial or legal losses.

    Because the incorporated form of partnership is a government grant, the government can assign any conditions or requirements on the incorporated entity. Exhaustive disclosure is, in fact already, one of those requirements.

    Newt does not violate any principle of liberty or privacy by asserting that deals done by incorporated entities be required even more disclosure than current law. If you want privacy, work without the government shielding your liability.

    Capitalism is the product of free people making economic exchanges. It does not have its own principles or demands. Capitalism is a symptom of liberty, not a stand-alone condition.

    Bain or anyone in their line of business does not write contracts to deliver 1000 bushels of grain to a certain market at a certain time. They deal in the abstract of money, and derivatives of that abstract. Everything the financial sector does, it does with either tacit participation or explicit endorsement of gov’t regulators and quasi-governmental banks. The financial sector creates *money*, meaning the abstract unit of account. It does not create *wealth*, meaning the actual stuff one can use to live on.

    The financial sector depends on the public being ignorant of the distinction between wealth and money. They thrive on creating money and trading it for wealth. Those who find attacks on the financial sector to be the same as attacks on liberty or capitalism are cripplingly simplistic. Or they’re in on the scam and know that by wrapping the flag around the issue they can keep us confused.

  28. Oldflyer Says:

    In my opinion Newt has no chance; but like a spoiled child he is determined to inflict as much hurt as he possibly can.

    Vanderleun expresses my thought quite accurately.

    I believe the election is being sabotaged each and every day as this foolish fight escalates.

    As to Bain; I won’t repeat in detail my account of my personal brush with them. Suffice to say that if they had not taken the risk to invest in a fledgling airline, hundreds of jobs would not have been created in the short run. In the longer term, the seed investment in infrastructure at a major airport would not have occurred. Cause and effect are tricky to track, but that particular airport went on a documentable trajectory from a sleepy, white elephant on the edge of the Nation’s Capitol, and a running joke, to a major and busy facility that today employees thousand and thousands. Maybe it was only coincidence that this all followed Bain’s investment in an airline, that though it ultimately failed, started the process and established the trend.

  29. foxmarks Says:

    Venture capital seeks to fund good ideas and takes profits when the target businesses grow by satisfying demand. LBOs, corporate raiders and vulture capitalists seek to extract value from existing enterprises.

    It is regularly mentioned, but always glossed over, that Bain (or anyone in that line) takes apart not just failing companies, but also sustainable companies. Look for the term “undervalued”.

    Let’s use a human body to illustrate. When a person has a terminal injury, medicine can take parts of that failing body to restore function to another body. The dying person is worth only what it can offer to the living person. The corpse has no future of its own. Organ donation is the “creative destruction” of medicine.

    What if someone were to look at a healthy, functioning body, that was maybe a little fat and needed glasses. That body can produce enough value to keep itself alive, say $30k/year. If it got some training, both physical and vocational, it could produce $50k/yr. That’s what “venture medicine” would prescribe.

    Now take that same healthy-enough person at $30k/yr. Add up the value of 2 kidneys, a heart, 2 lungs, a liver, a spleen and 2 corneas. Surely those parts are worth millions of dollars. But to unlock the value, we have to cut apart the functioning person. We might even start by selling just one kidney and a piece of the liver, to fund some physical training, then entice others to bid on the remaining healthier parts. We take a cut of the kidney sale, charge a fee for the physical training program and take a percentage of the body’s increased value. Now we’re out of the deal.

    Somebody else tries to extract the other kidney and the body dies. We already have our cash. Or the body dies because it wasn’t healthy enough to continue with only half a liver. We already have our cash. That’s “vulture medicine”.

  30. Ed Bonderenka Says:

    In explaining the difference between venture capitalists, takeover specialists and corporate raiders to my wife, I realized that Herman Cain was employed to rescue Godfather Pizza in a way that Bain might have done.

  31. rickl Says:

    Something tells me we’ll be hearing Karl Denninger’s take on this tomorrow.

  32. Wm Lawrence Says:

    I had misgivings about Newt, but had put them aside and was ready to support him because he seems to be the only one with the cahones to tell the truth about Obama and the direction he’s taking us and a coherent way of explaining the true history and logic of our system of beliefs.

    That was before he got his feelings hurt and began channeling the OWS crapping on the police car guy.

    I think Romney has many vulnerabilities from the conservative viewpoint which could have been used against him with legitimacy. Newt, in attacking Romney from such an extremely left vantage has put himself back on my not with a ten foot pole list.

    We need someone who views the world from a mostly stable center right perspective, not a loose cannon who will pick up any cudgel, no matter how tainted with Marxist slime and use it to bludgeon his opponent while claiming to be the true conservative. A pox on Newt!

  33. J.J. formerly Jimmy J. Says:

    Color my face red! The PAC that is airing the scurrilous ads is “Winning Our Future.” It claims no allegiance to any party or candidate, but is, in fact, a pro Gingrich PAC headed by a fellow named Rick Tyler, a former Gingrich staffer. The money is coming from Sheldon Adelson, a Las Vegas casino owner. Here’s a link to a NYT story about it:
    http://tinyurl.com/7hq2hkb

    Yikes, if this is what a Republican will do to another Republican, I cannot imagine what things will be like when the dems get their ads rolling. I’m writing to the Gingrich campaign and protesting that this is way over the line. I knew Newt had a deep mean streak in him, but this isn’t just meanness, it’s down right stupidly sadistic. He has taken the idiotic stance that if he can’t win the nomination then no one from the Republican side should be able to win. Yes, he thirsts for the death of the Republican Party. IMO, Gingrich has single handedly destroyed his own candidacy and possibly destroyed the party’s chances in the general election. It is very, very sad.

  34. Parker Says:

    “I’m writing to the Gingrich campaign and protesting that this is way over the line.”

    Might as well write BHO and tell him he is well over the line. Newt is as narcissistic as BHO; but the difference between BHO & Newt is that Newt earned his cojones while BHO had them handed to him on a silver platter (currently at $30.25 on the NY spot market). I propose Newt challenge Barry to a duel instead of Romney or Paul; America benefits no matter who is the victor or if either Newt or Barry fails to show up.

  35. NJartist49 Says:

    A man is attacked and smeared and you say nothing. The man, having pride, fights back and you call him mean spirited and childish. Some of you people here need to put away your doilies and pull your pinkies back. Politics is street fighting by other means; if you are not willing to fight for the position or for the principles you believe in, then you you deserve neither the position or respect for your principles.

    I have no problems with Newt fighting back hard. I do have qualms as to whether or not he willing to fight as hard against Obama and a Democrat legislature. I do have qualms as to whether the whiners such as are on this site and other “conservative/libertarian/moderate sites can be taken seriously anymore.

    And I don’t want either Mitt or Newt as president.

  36. NJartist49 Says:

    I also find disgusting that the whiners here are willing to defend cutthroat, survival of the fittest capitalism yet are incapable of defending aggressive political speech.

  37. foxmarks Says:

    The following two lines from the Wikipedia entry for Bain Capital will be useful:

    “Romney led the business during the periods 1984 to 1990 and 1992 to 1999.”
    “Beginning in 1989, the firm, which began as a venture capital source investing in start-up companies, adjusted its strategy to focus on leveraged buyouts and growth capital investments in more mature companies.”

    Mitt wants us to see his first term as definitive. That’s when it was VC, investing in job-creating startups like Staples.

    Newt wants us to see his second term as definitive. That’s when the vulture deals in NewtPAC’s propaganda film (Ampad & UniMac) were done.

    I want us to focus on the difference in Bain’s funding sources for each of Mitt’s terms. In term 1 the money came from private equity, rich guys lending out chunks of their fortunes. In term 2 the money came from debt issued by banks, subsidized by FedRes policy and enabled by FedGov regulators.

    Mitt’s on both sides of yet another issue. And this time his trajectory is away from “conservative” capitalism and toward “crony” capitalism.

  38. Perfected democrat Says:

    For a little more perspective, tonite’s article from Power Line: what-really-happened-in-gaffney

  39. Parker Says:

    “I also find disgusting that the whiners here are willing to defend cutthroat, survival of the fittest capitalism yet are incapable of defending aggressive political speech.”

    Excuse me while I clear my throat…. okay, now I’m ready.

    Capitalistic, free markets are indeed the survival of the fittest. That is the very essence of a free market system. (Alas, we are not a free market economy thanks to people like BHO & Newt.)

    I have no problems with Newt’s “aggressive political speech”. Its his dime and he can buy all the “aggresive political speech” he can afford. But when I see a foul, I call foul. After all the unethical activities of the Newt, spread out over 3 decades, and he now calls ‘foul’ over legal activities???? Gimme a break!

  40. Parker Says:

    “Mitt’s on both sides of yet another issue. And this time his trajectory is away from “conservative” capitalism and toward “crony” capitalism.”

    As opposed to Newt earning millions as a ‘consultant’ to Fannie/Freddie and testifying to their soundness? And that is but the tip of the iceberg of Newt’s association with “crony capitalism”. Sorry, foxmarks, I agree with you in many areas, but on this one who are WRONG if you think Newt is somehow more ethical than Romney.

  41. neo-neocon Says:

    foxmarks: did you not read my post? Exhaustive disclosure is apparently not one of the requirements in the private equity business: “The private equity business model is based on taking companies out of the public markets, where reporting requirements are strict and investors punishing, making changes that will hopefully make them more profitable and then selling them or taking them public through an IPO.”

    If you don’t like it, change the law. That was the point of the questions at the end of my post.

  42. Parker Says:

    foxmarks,

    I forgot to add that I feel creepy having to defend Romney, but with regard to this specific situation, I feel compelled to defend him nonetheless.

  43. neo-neocon Says:

    foxmarks: you keep speaking in generalities of what Bain and companies like Bain have done. But name an actual sustainable company, doing well, that Bain has taken apart. I have read a bunch of articles that purport to do just that, and each time (so far) when I’ve checked the facts of what actually happened with each company, I’ve found that the articles are misrepresenting the facts in such a way as to reflect poorly on Bain. Also, many of the incidents occurred a significant time after Romney had left.

    I’m really really tired of general accusations. Make specific ones (as Gingrich should have) with names, dates, facts.

    Here, by the way, are a few of the lies in the PAC movie about Bain.

    Oh, and this is pretty interesting as well, from Powerline.

  44. gcotharn Says:

    The Fortune blogpost, and the Powerline blogpost, illustrate why this current circumstance is a great opportunity for Mitt Romney. If Romney and Bain acted in principled fashion: then getting all this information out now, and having this entire conversation now, is a huge gift to Romney’s chances of becoming POTUS.

    Romney, himself, has a giant opportunity to win conservatives to his side … if he will personally, forthrightly address the principles and ethics which are in question. This is a giant opportunity for Romney, if he will forthrightly seize it. Assuming he acted in principled fashion: this is a gift. A timely gift. He should seize it, forthrightly, sincerely, and without acting as if he has anything to hide, or anything to apologize for.

  45. Don Carlos Says:

    Let’a all resolve to have our own opinions, but not our own facts. I am with Neo on this, and appreciate the factual homework she did, which made this thread possible.

    I had hopes for Cain (viciously slandered, so collapsed), and Perry (clearly just jumped in, taking the test without studying) then Newt (sound on macro, but has turned into an IED). I am left with Mitt and I am gradually feeling better about him, especially since hearing him in NH on C-span with true passion in his words and voice for the USA.

    The bomb in our face will be Paul, who is never more than half right. His troops are Jonestown-tough.

  46. gcotharn Says:

    One thing I mean about an onstage Romney “acting as if he has something to hide”, is this: answers which are over-calculated. Romney ought be able to speak of Bain with the easy conversant confidence of THE ULTIMATE EXPERT ON ALL THINGS BAIN. Romney ought be able to speak casually, confidently, and without giving out over-calculated and cautious answers. This is a gift for him: he needs things about which he can speak casually, confidently, and with easy forthrightness.

  47. J.J. formerly Jimmy J. Says:

    Don Carlos said, “I had hopes for Cain (viciously slandered, so collapsed), and Perry (clearly just jumped in, taking the test without studying) then Newt (sound on macro, but has turned into an IED). I am left with Mitt and I am gradually feeling better about him, especially since hearing him in NH on C-span with true passion in his words and voice for the USA.”

    That just about sums up the trajectory that I’ve taken during this campaign. I liked Cain, but he was obviously weak on foreign policy and should have been prepared for the bimbo eruptions. I really, really liked Perry until I saw his brain freeze. Not up to the level needed to defeat Obama. Liked the nice, new Newt, but remembered the old, mean Newt. Mean Newt has appeared again. Have not been wild about Romney but I hope, like gcotharn, that Romney can step up and defend against the attacks on his Bain career. It appears to me that if he is unable to do that, no matter who is nominated, Obama is almost certain to win. I could be wrong but it seems to me that Newt’s PAC has fouled the Republican nest and recovery can only come if Romney can overcome the taint.

  48. Rose Says:

    Newt knows what makes Washington tic and he knows how to make it work. Pelosi et al won’t be able to pull the wool over his eyes, or pull any fast ones either, if Newt is elected.

    I watched the Bain expose – and, like most things Romney, my feeling was, meh.

    Romney fouled the nest. Newt was dead set on keeping the focus on Obama, not each other, but Romney is hte one with the dirty tricks department running around trashing everyone else. 96% of the negative ad money went against Gingrich.

    Oddly, some of my lib friends, watching the debates, have said, I have always detested Gingrich – and they repeat DETESTED – but they are impressed with his smarts, and his vision, and his ability – and that may be what would make they vote for him. They ain’t votin’ for Obama, that’s for sure.

  49. geran Says:

    “I almost feel I need to apologize for writing so much about this…”

    Apology accepted! (Maybe you’re starting to see you’ve become a Mitt groupie! Please, only one false messiah at a time.)

    The real issue is that public corporations do not always reflect the best capitalism offers. In my years working for major corporations, I was amazed at what I saw. Corporations can easily drift into everything from just another brothel to a slave plantation, all while the “owners” get millions in salaries, bonuses, buy-outs, golden parachutes, etc.

    Just one great book on this subject is “Fooling Some of the People All of the Time” by David Einhorn.

    Someone needs to write a book on why capitalism is good, but public corporations MUST be regulated and forthcoming with all financial data. (Hint, hint.)

  50. neo-neocon Says:

    geran:

    Your comparison of my rather tepid leaning toward Romney to those who consider Obama the messiah is both disingenuous and insulting. It is you who should be apologizing to me.

    I have made it clear in post after post what bothers me about Gingrich’s and Perry’s attacks, and it has nothing to do with Romney. In fact, this entire post has virtually nothing to do with Romney—although for Gingrich it is all about Romney. Gingrich has never pursued this line of attack on companies like Bain before; for Gingrich, it’s all about Romney—and about Gingrich winning.

    No doubt Rush Limbaugh has become a Romney groupie too. That must be what’s behind his criticisms of Gingrich and Perry for their remarks about Bain.

    Don’t bother accepting my apology for writing this post; my apology wasn’t directed at you. As I made clear, I am fascinated by the questions the Bain attack raises in the conservative camp about capitalism. My apology was for writing so many posts engendered by a single topic, that’s all.

    And perhaps you should try actually reading the post, especially the last section. Bain was a private equity company, not a public corporation [emphasis mine]:

    It’s not clear how much of a choice Bain has about what it can disclose. Private equity companies often tend to have confidentiality agreements with their investors (Bain would not comment on what agreements it has). Several equity experts interviewed for this story thought any disclosures from Bain were likely to spook its investors.

    The private equity business model is based on taking companies out of the public markets, where reporting requirements are strict and investors punishing, making changes that will hopefully make them more profitable and then selling them or taking them public through an IPO.

  51. neo-neocon Says:

    Rose: odd how you know the only liberals on earth who have anything nice to say about Newt Gingrich. All the liberals I know hate his guts.

    And he knows so well how Washington ticks that he had to resign.

  52. Daniel Says:

    No, we don’t.

    We also wouldn’t give a rat’s ass about any of these transactions if Romney (or any other Republican candidate) was not potentially involved in them.

    The only reason Gingrich and Obama (because he is or will be) are interested in Bain is to dig up dirt. Bad news. Something that can be spun to make Romney look evil. They could care less about general transparency.

    Romney should continue to embrace the work that he has done in general, and Bain should continue to say “none of your damned business” to everyone else.

  53. A.Men Says:

    Romney has never been a Conservative. Romney has never had any use for the Constitution.

    Perry 2012.

  54. Conrad Says:

    In the end, this Bain attack should hurt Newt more than help him. First, he only emerged as a frontrunner to begin with as a result of debate appearances in which he came across as the most intellectual and intellectually HONEST participant, and in which he combined obvious respect for the other candidates with obvious revulsion at the way the media was trying force them to go at one another. Now, regardless of what one thinks of the merits of the Bain attack, Newt has clearly relinquished all the goodwill he generated for initially staying above the fray.

    Second, he’s demonstating, in real time, one of the flaws his critics had been pointing out about him: his seeming inability to let a month go by without latching onto some peculiar new idea or project of dubious merit, usually in a fit of pique. When he gets in these modes (aka “Bad Newt”), he appears to be the very antithesis of a steady, consistent leader.

    Finally, attacking Romney from the LEFT is clearly just a bad strategy. The Bain attack ends up making Newt look like a possible OWS sympathizer while giving Romney a chance to burnish his credentials with conservatives.

    Of course, Mitt still needs to show he can withstand this line of attack, but I doubt it will turn out to be a net positive for Newt. Republicans tend not to like a lot of intra-party turmoil to begin with, and Newt’s strategy of going after Romney on Bain has riled everybody. Even if Mitt ends up being damaged, I think Republicans are going to resent being subjected to this bloodbath.

  55. DNW Says:

    Neoneocon writes,
    “Don’t bother accepting my apology for writing this post; my apology wasn’t directed at you. As I made clear, I am fascinated by the questions the Bain attack raises in the conservative camp about capitalism. My apology was for writing so many posts engendered by a single topic, that’s all. ”

    I started reading at the bottom here but decided to respond before reading all the recent posts anyway, so if I repeat someone else’s point …

    If Limbaugh is a shill of Romney, then CNNMoney must be as well, as they’ve done a partial analysis of the Gingrich attack ad; and, it appears that it’s historically incoherent. The event timelines make it impossible for Romney to have done what the Gingrich camp claim he has done.

    One would think that as an historian, or presumably a merely sane man even, Gingrich might have attended to such time sensitive “little details” before he allowed the ad to go forward.

    http://finance.fortune.cnn.com/2012/01/12/the-bain-bomb-fizzles/

  56. DNW Says:

    gcotharn Says:
    January 12th, 2012 at 7:47 pm

    This Fortune article points to some inaccuracies in the Bain film http://finance.fortune.cnn.com/2012/01/12/the-bain-bomb-fizzles/

    I hope the info was given to Fortune by the Romney campaign. That would indicate that the campaign is prepared to address at some specifics.”

    Oops. You can delete my post.

  57. Oldflyer Says:

    Well said, Conrad.

    I had hopes for Newt after the early debates. Interspersed were niggling concerns. I now conclude that Newt is almost Nixonian. A very talented politician; one who possesses real understanding of the world, one who is capable of a high level of analytical thought about complex problems–and deeply flawed.

    Neo encapsulates the world of venture capitalism very well. I dare to say that there is not a venture capitalist who could not be smeared with the same broad brush used on Romney; and the very same ones could also point with pride to success stories that have benefited individual companies and whole communities. (I have cited one that I am familiar with regarding Bain) But, the truth is that micro results are really irrelevant to the core of venture capitalism. The concept can only truly be judged on a Macro scale; and by those measures it is the engine that drives the most successful economy ever known to womankind (mankind too).

  58. J.J. formerly Jimmy J. Says:

    Here’s a favorable take on venture capitalism by Spengler:
    http://tinyurl.com/7coklhv

    Venture capital firms are, for the most part, a force for good in the economy. Too many people have not done the thinking and research to adequately understand how and why it works. Unfortunately, it is all too easy to tar them with the brush of populist class envy. And too many voters will buy into that concept. The Republican Party and its nomiee is going to have to spend the rest of this campaign digging out of this hole dug by the “Winning OurFuture” PAC.

  59. uncleFred Says:

    Cain failed not because of “bimbo eruptions” but because when unsubstantiated charges were made front page day after day he was not tough enough to deal with it, nor did he develop a credible answer that took the initiative away from his attackers.

    Romney was attacked over Bain when he ran for Senate. He should have had well prepared answers for this then. He was never close to beating Kennedy so the attacks were not as focused or bitter as these. He is very lucky that this attack has been made now and that it has been made in this fashion.

    Romney was faced with Newt gathering steam and leaving him behind in several early states. Romney’s strategy of indirectly getting the FL primary moved up placed him in danger of winning only NH out of the first five contests. So Romney’s supporting super pac launched an all out negative set of attack ads spending between 6-13 million (depending on which source you use) in a tiny state far from other markets to destroy Newt. Newt lacked the money to effectively answer those charges. He tried staying positive, but his numbers collapsed. The media largely gave Romney a pass on the ads and allowed him to stay out of the fray. Although the subject of the ads were raised they were not front and center. We were not treated to endless pundit speculation about Romney attempting to destroy Newt with negative ads. The result was that Romney was able to do this without suffering the flashback that is typical with a harsh negative campaign.

    The super pac supporting Newt got a chunk of money and attempted to go after Romney in NH. There was only a week and while the negative ads did lower Romney’s numbers to some degree, there was not enough time to level the playing field. Further the media did hang those ads around Newts neck. Further Newt was forced by the short time available to also make similar comments about Romney. As a result, we heard endlessly from media and punditry about the bad Newt, the loose cannon, attacks on capitalism etc. Newt suffered the flashback that Romney escaped.

    Now we are in SC. Newt is correct that if Bain is the basis on which we are to judge Romney’s job creating skills, Romney needs to explain it. But there is more here. Romney needs a forum to explain venture capitalism, and LBO, and the various factors that lead most of Bain’s interventions to succeed and the minority to fail. This is not a topic well suited to our sound bite informed voters, but it is necessary. If Romney does not find an answer, the attack ads in the general election will make the current set look like bed time stories for young children.

    As yet Romney has utterly failed to develop a narrative that answers these attacks. The best way, IMHO, would be a lincoln douglas style discussion with Newt on capitalism. Let the two of them square off and educate voters about this topic. Neuter the attack ads waiting in Sept now. This would also clear the air and go a long way to easing the difficulties the party will face uniting behind the nominee. Obviously there are other ways that Romney can do this, and he desperately needs to find one.

    As for Newt being anti-capitalist. Clearly he is not, but he sees the underlying meme that Bain will be portrayed by the left as “crony capitalism”. As he says, Romney should explain what happens when a company goes through bankruptcy. The readers on this site are pretty literate and generally well informed. What percentage of us can in general terms describe what happens in the various forms of bankruptcy? This is important for destroying the narrative that Obama “saved” the auto industry.

    Two street fighters going at it, where the commentators are only calling out one guy’s low blows. If you let that overly influence your opinions of the two men, you are sipping the media kool-aid.

  60. Conrad Says:

    @ Oldflyer: Your Nixon analogy is a good one. Even at the time of his resignation, everyone seemed to agree Nixon was an immensely talented guy from an intellectual standpoint. But he also had an obsession over the perceived machinations of his enemies that bordered on paranoia. Ironically, it was his worries about his enemies, rather than the enemies themselves, that brought him down.

    Newt’s flaw isn’t paranoia but rather a narcissistic need to be seen as the most grandiose intellect in public life. He’s always tossing out new paradigms to explain or solve the world’s problems, not because he believes in them, necessarily, but because he craves the rush he gets from impressing people with his divine intellect. This is perhaps a good trait for a “ideas” guy, but it’s not so good for a political leader or a chief executive. Voters need to know what a candidate stands for, and they expect a certain level of consistency. You can’t just toy with one novel policy prescription to another without confusing the voters or coming off looking erratic. It is said that Reagan was effective, in part, because he only had about three ideas, but he stuck with those ideas so much and for so long, people “got” him. Gingrich presents almost the opposite quality: a leader nobody quite “gets,” even after 20+ years in the national spotlight.

  61. armchair pessimist Says:

    I keep hoping that Newt has appointed himself Romney’s tough drill instructor to make him ready for combat. But it’s not a pretty sight.

    A lot of us out here intuitively make a distinction between a healthy capitalism and a senile capitalism. An example of the latter comes from GM, whose management thought themselves clever indeed to sign ruinous contracts with the UAW, because their smaller and poorer rivals would then have to sign them too. “We sink them by sinking slower!” Brilliant! We all know how that worked out.

    Maybe our present situation is like old France before 1789, with its permanently entitled noble and clergy orders. Today our permanently entitled orders are the crony capitalists, the unions and the government administrators.

    If this continues, the only place for the old-fashioned entrepreneur will be the criminal underworld.

  62. neo-neocon Says:

    armchair pessimist: yes, no doubt Newt is falling on his sword to help Mitt.

  63. neo-neocon Says:

    uncleFred: you know, I looked at many articles in an attempt to see what those anti-Gingrich ads were in Iowa by a Romney-supporting PAC, the ones so many people have cited as “Romney started it.” I can’t say I’ve heard about them all, but I’ve read about many and they seem like pretty ordinary political stuff, complete with some distortions and shading the truth but nothing special or unusual, nothing that isn’t done all the time. The single egregious lie I heard had to do with the amount of Gingrich’s consulting fee per hour for Fannie/Freddie; it was stated as being way higher than it really was, although if I recall correctly the total was correct. The worst thing Romney himself actually said to Newt or about Newt, (again, I’m doing this from memory right now) seemed to be something like that he got money from Fannie/Freddie and the agency helped the housing meltdown, so he should give the money back. There just wasn’t anything even remotely similar to what Newt has done, just typical political fighting, and nothing that could be considered an attack from the left. Am I missing something?

  64. armchair pessimist Says:

    Neo, and no doubt your green apple is concealing a sarcastic smile.

  65. neo-neocon Says:

    armchair pessimist: that’s one of the things that apple’s for.

  66. geran Says:

    well, then, I do apolgize!

  67. geran Says:

    *apologize

    (stupid keyboard)

  68. foxmarks Says:

    Regarding disclosure, I deleted a couple of lines about the even greater disclosure required to be listed on an exchange. BainCap is an LLC, required to make certain disclosures in exchange for gov’t shielding from personal liability.

    Parker, you misunderstand. I am not defending Newt or supposing there is an ethical sentence in his biography. The dissection of Romney and the Bains has presented an opportunity to expose the problem of debt and leverage.

    That the very nature of what Romney and Bain did (in Mitt’s second term there) was to create debt-money out of thin air, written against alleged assets of the target company. That is a general and systemic problem. BainII participated in the 90s credit bubble. They did not add productive value to the economy, they used financial techniques to extract value.

    BainII was the corporate version of a house-flipper from the mid-2000s. Easy credit and lax regulation allowed asset prices to rise more than the underlying performance would indicate absent the favorable policy.

    Neo wants specifics. We still have the rescue of BainCo to dispatch. There’s a $10M FDIC handout not yet explained. We have a KC steel mill to examine. Ampad appears to have been grown by debt-fueled acquisitions under Bain, then failed when the debt injections were cut off.

    It is accurate that KayBee failed after Romney’s time. Do y’all believe that the problems in the KB deal represent a sudden and dramatic shift in the BainCap business model? Was Mitt fighting against his partners for the previous nine years, urging them not to use debt to buy current income, pump up balance sheets and then cash out?

    I repeat that nothing Bain or Romney did was illegal. Anyone who does not appreciate the problem of easy credit and debt-fueled economic bubbles will likely find Bain to be a stellar example of capitalism.

    My assessment is that banks creating debt-money is *the* top economic problem faced by The US and the developed world. My threatened vote against Romney (for Obama) is mostly motivated by a desire to stop the looting and start the prosecuting.

    Mitt is even less likely than Barry to reign in banksters. Mitt sees Goldman as an ally. Barry, from his Progressive nature, should harbor some mistrust for the financial sector. Sadly, it mostly manifests itself in stupid anti-consumer regulations. Barry is getting played, while Mitt will play along.

  69. armchair pessimist Says:

    In case you have missed this piece of absurdity:

    tinyurl.com/e8t56

    Geez, even the capitalists don’t believe in capitalism. Or, more likely, they just want to close down the game while they’re on top.

  70. neo-neocon Says:

    geran: I accept your apolgy.

  71. neo-neocon Says:

    foxmarks: no one else has suggested for a moment that Bain is required to divulge the contents of the confidential agreements it signed with those companies.

    I have read many of the specifics. That “bailout” was discussed in this thread ad nauseum with you. The term “bailout” is incorrect, for starters.

    And in the meantime I also found this, which goes into a few more details about that “bailout” (the original “details,” as you recall, were in a single article from 1994 in the Boston Globe, which is behind a pay firewall):

    http://www.nationalreview.com/exchequer/287927/no-bain-did-not-get-bailout

    As for Ampad and Kaybee (and other allegations against Bain), these have been explained quite a few times in many articles. Here’s one:

    http://www.washingtonpost.com/blogs/fact-checker/post/four-pinocchios-for-king-of-bain/2012/01/12/gIQADX8WuP_blog.html

    And another:

    http://www.powerlineblog.com/archives/2012/01/what-really-happened-in-gaffney.php

    Oh, and about those 100,000 jobs:

    http://blogs.dailymail.com/donsurber/archives/49593

  72. gcotharn Says:

    uncleFred said:

    [Romney] is very lucky that this attack has been made now and that it has been made in this fashion.

    Yes (assuming Romney’s/Bain’s actions were principled actions).

    Romney needs a forum to explain venture capitalism, and LBO, and the various factors that lead most of Bain’s interventions to succeed and the minority to fail. This is not a topic well suited to our sound bite informed voters, but it is necessary. If Romney does not find an answer, the attack ads in the general election will make the current set look like bed time stories for young children.

    As yet Romney has utterly failed to develop a narrative that answers these attacks. The best way, IMHO, would be a lincoln douglas style discussion with Newt on capitalism.

    Yes, to all the above. Romney has failed to gain empathy from voter, i.e. to present himself in a way which voters can identify with. Romney has failed to clarify, for voters, his activities at Bain, i.e. how his activities at Bain constitute an argument that he would be a good POTUS; why his activities at Bain were principled.

    This history … makes this a huge moment for Romney: a huge opportunity for Romney. He has to grasp it!

    I keep mentioning the above b/c I DO NOT believe Romney is as electable as many in this forum judge him to be; I DO NOT believe Romney is as electable as current polling indicates.

    B/c Barack has nothing to run on, i.e. has nothing to motivate disenchanted left side voters to the polls, therefore Barack must run a scorched earth campaign. The Repub nominee WILL BE massively demonized. Currently unmotivated left side voters WILL become alarmed by the extremism of the Repub nominess; WILL be motivated to take themselves to the polls in Nov ’12. Axelrod will make certain of it. If Romney is the nominee, then, by September, Dems will believe Romney is the BEAST. Dems will go to the polls, in order to oppose that incredibly dangerous, racist, selfish jerk Mitt Romney.

    The only way a Repub can win is for conservative voters to be vastly more motivated than Dem voters. This is why, at this moment, I judge that Romney is only the 4th most electable Repub, after Perry, Gingrich, and Santorum, in some order. Romney is more likely to lose a general election than any of the Perry, Gingrich, Santorum group.

    This is why Romney must seize this moment, NOW, in which he has a chance to gain some empathy from conservative voters. He must seize this moment, and gain some love, or he would be in huge danger of losing in November. And he must inoculate himself re Bain. He can do it all, right now, in one two week period, if he will forthrightly speak about Bain and about principles. This, for him, is the moment. IMO. This is a golden opportunity to overcome his previous plastic campaigning.

  73. neo-neocon Says:

    gcotharn: I agree that Romney needs to defend himself. I’m not sure he has to give a big definitive speech now to do it. From what I’ve heard, he’s starting with ads in South Carolina, the next primary. He may take it state by state and then wait for the general for a bigger statement.

    If he doesn’t defend himself, I think it will probably hurt him, but it’s hard to say how much. Maybe a lot, maybe not. I certainly would be surprised and disappointed if he doesn’t mount a strong defense.

    But I’ve never understood this meme you and others state, which is that people on this blog (or many Romney supporters elsewhere) are saying he’s so very “electable.” For example, I don’t think I’ve ever used the word until just now, to respond to you. What I have done is pointed to polls that indicate he does considerably better than any of the other Republican candidates against Obama, and that in some he leads Obama, and that he does better than any of the other Republican candidates with Independents (again, according to polls, not according to my opinion).

    So I think what Romney-supporters are saying is twofold: (1) he would be a better president than Obama (irrelevant to this discussion, but it is part of the message of Romney-supporters); and (2) He would do better against Obama than the other Republican candidates, and therefore is more “electable” compared to them.

    That does not mean he’s invincible; hardly! And it does not mean he will win. Just that, among the group from which we have to choose, he is likely to do the best.

  74. gcotharn Says:

    Okay, then, instead of saying “most electable”, I shall say: from the group from which we have to choose, Romney would be the 4th most likely to win in Nov.

    I do not think Romney needs an Obama “Jeremiah Wright style” one big speech. Rather, Romney needs, during South Carolina campaigning: 60 speeches which, variously, touch on aspects of Bain, and on principles which are shared by Bain, Romney, Hayek, conservative voters, and America’s Founding Fathers. That is what South Carolina voters want to hear, anyway. Golden opportunity. Romney doesn’t have to talk about everything in any one speech: he can cover everything (and repeat/reinforce everything) over a series of speeches.

    If Romney becomes the nominee, I want him to win in Nov. To do that, he needs some conservative voter love. He has, now, an opportunity to gain some voter empathy.

  75. gcotharn Says:

    A last note: remember, also, that – compared to maybe everyone else here: I am MUCH more optimistic about Obama being defeated in Nov. I think Obama is going down … in one of the nastiest campaigns in history … yet, still is going down. I think Romney will defeat Obama in Nov. I just think that Romney’s chances of defeating Obama are less than the chances of Perry, Gingrich, Santorum, in some order. I would like for Romney to maximize his chances of defeating Obama – and especially so … as Romney is currently the lead candidate for the nomination.

  76. foxmarks Says:

    neo: I am getting confused. I wrap too many points together.

    On disclosure, my the point of my original comment was that all forms of liability shielding are a government grant. Gov’t can set whatever conditions it likes. Newt calling for more disclosure is not a violation of liberty and more than the entire notion of limited liability is. Calling for more *retroactive* disclosure is a separate point of law.

    What term would you prefer to “bailout”? “Write-down” might be an alternative. Mitt secured a beneficial write-down from his banker buddies. Nothing illegal, nothing unusual, but a multi-million-dollar payday for Bain producing nothing other than some financial paperwork.

    Now that you’re well-versed in BainCap history, do you see my point from one of our go-rounds the other week, that Mitt is a finance guy, not a manager? A district manager for Taco Bell supervises more headcount, a bigger org chart and more interlocking vendor relationships than Romney did in his vaunted private career.

    He “helped create” jobs by writing checks with other peoples’ money. Every time I buy a churro with my Visa card I “help create” jobs. Mitt could look like an even bigger hero if he started telling us how many jobs he helped create or helped save.

    And with that background in the two version of Bain, you have some foundation to look into the differences between equity and debt. The big money was made (created) by BainII’s debt vehicles. Debt is the FedGov and US economy’s central problem. How is Romney going to solve it? By floating some more Treasuries?

  77. foxmarks Says:

    The Ampad case fits my characterization. From the linked WaPo 4-pinocchio bit:

    Bain assembled Ampad …through what is known as a “roll-up strategy,” in which similar companies are purchased in the same industry. … The efficiencies of scale at first proved a success, and Bain made a fortune — some $100 million, according to the Globe.

    But the company floundered — ironically because of price pressure from companies such as Staples, which was started with help from Bain.

    How did Bain get the cash to buy the companies in the “roll-up”? Not with current income from Ampad, but by borrowing against Ampad’s assets and future income. It is glib to dimiss Ampad’s bankruptcy as due to an inability to complete. Why couldn’t Ampad reduce prices and remain competitive? Because it was saddled with the debt Bain used to roll it up. Because it had absorbed less-efficient and widely scattered plants in the roll-up. When Ampad went bankrupt because Bain weakened its ability to adapt, who ate the loss? Whichever suckers Bain sold the Ampad debt to during the roll-up.

  78. neo-neocon Says:

    foxmarks:

    The term I would prefer to bailouts is debt renegotiation. There was nothing especially unusual about this under the circumstances, and to call it a bailout is to muddy the waters and make it seem wrong or devious when you have no evidence and no indication that it was.

    I have no problem with the idea that some people are “finance guys.” I don’t have the attitude “business=good, finance=bad,” or that one is pure and the other tainted. The world of credit, and people making money by dealing in money, is both complex and necessary to the other world you find so pure and superior.

    Do I think the people at Bain were social-worker-saints in their work, just trying to make jobs for the workers? Of course not. Like most people in most businesses, they did some good and some bad, and they tried to make money for themselves and their shareholders. In general, they preferred to do so while keeping the mostly-struggling businesses they acquired afloat. But if they couldn’t do that, the next best thing was making money while the businesses went under. As far as I can see it is a perfectly legitimate business, and it fills a certain empty niche in the business ecology.

    Would I want to do it? No, no, a thousand times no, even if it made me a billionaire. Does it bother me that Romney did it? It’s not my favorite number one thing a presidential candidate might have done, but I see it as no worse than that of career politician (which Romney was not) or community organizer.

    What’s more important to me is that Romney exhibited certain characteristics I think would be advantageous in the presidency in the current climate: (a) whether you call him a businessman or a finance guy, he has a higher level of understanding of business and finance and how they work than most people in politics (b) he has a proven record of being able to implement efficiency (c) he is a creative thinker of a practical sort (d) he’s smart (not just book-learning smart) (e) most of the people he worked with seem to have respected him, from what I’ve read (f) he’s been a very hard worker (g) he has integrity in his private life.

  79. foxmarks Says:

    neo:

    In summary, fair enough. I do have a problem with finance guys. The proper place of finance is finance, an ancillary service to business. But since they control the flow of money, the finance guys have captured most of the economic growth over the past few decades and have supplanted “real” production, becoming the center of the economy. I’m not persuaded that finance guys deeply understand how business works, they just know how business is financed.

    On your point (a) I disagree sufficiently to want to see Romney’s political career destroyed. I see him as a threat. On all subsequent points, I agree sufficiently such that if Romney had continued as a consultant and VC manager, I would be arguing the weaknesses in his political record and his policy proposals.

    Thank you. :-)

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Previously a lifelong Democrat, born in New York and living in New England, surrounded by liberals on all sides, I've found myself slowly but surely leaving the fold and becoming that dread thing: a neocon.
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