Among the things largely absent from the 2012 Republican National Convention has been any mention of Bain Capital and any fidelity to the truth. After the first two days, the GOP's twin frauds about welfare and "we built that" were once again demolished, prompting Team Romney to protest that "we're not going to let our campaign be dictated by fact checkers." Adding to the embarrassment was a prime-time presentation on how to build your small business by selling to the government.
As it turns out, the silence about Mitt Romney's old company (which only ended on the ceonvention's last night) and the Republican sham that "you didn't build it" are related. Because when it comes to Bain Capital, in a very real sense you did build it. After all, your United States tax code doesn't merely allow the "carried interest exemption" that enables the likes of Mitt Romney to pay a lower rate than many middle class families. Without the public subsidy that is the corporate debt interest deduction, there might not be a Bain Capital--or a private equity industry as we know it--at all.
As the history shows, on his road to becoming a $250 million captain of private equity at Bain Capital, Mitt Romney had a lot of help from his uncle. Uncle Sam, that is. Writing in Rolling Stone, Matt Taibbi explained how:
Essentially, Romney got rich in a business that couldn't exist without a perverse tax break, and he got to keep double his earnings because of another loophole - a pair of bureaucratic accidents that have not only teamed up to threaten us with a Mitt Romney presidency but that make future Romneys far more likely. "Those two tax rules distort the economics of private equity investments, making them much more lucrative than they should be," says Rebecca Wilkins, senior counsel at the Center for Tax Justice. "So we get more of that activity than the market would support on its own."
Then-Bain Capital CEO Mitt Romney concluded as much when he acknowledged, "There's a lot greater risk in a startup than there is in acquiring an existing company." So he fatefully redirected his firm from venture investments in new companies like Staples and instead became a leveraged buyout king. To understand both why he did that and how all American taxpayers helped make it possible, a little background is in order.
Private equity owes its success in no small part to that uniquely American provision of the corporate tax code. The New York Times recently helped explain why:
Companies can finance investment from either debt or equity. Companies can finance investment from either debt or equity. But profit on an investment financed with equity -- stock issued by the company -- is taxed. In contrast, if the project is financed with debt, then only the profit after interest payments are made is taxed. This means debt-financed investments are cheaper than equity.
And not just a little cheaper. As the Treasury Department recently explained, "The effective corporate marginal tax rate on new equity-financed investment in equipment is 37 percent in the United States. At the same time, the effective marginal tax rate on the same investment made with debt financing is minus 60 percent--a gap of 97 percentage points." The result:
This creates a bias by corporations toward debt.
Or, for the likes of Mitt Romney, a business model.
Liz Claman hosts a show on the Fox Business Network, the Murdoch outfit that exists solely to carry the water for the MOTUs on Wall Street. And on "This Week" Sunday morning, she did just that -- suggesting that any criticism of Willard's record at Bain Capital is akin to claiming the president was born in Kenya.
BROWNSTEIN: -- broader point, though, when Rush Limbaugh called the Georgetown student a slut, Romney was almost silent. Rick Santorum said Kennedy made him want to throw up. Mitt Romney was silent. These were all opportunities to identify yourself as kind of a more centrist. And he's not taking it. And it is having a cost.
If you look at some of those upper middle class, socially liberal, economically moderate white voters, Obama is holding them -- especially the women -- and that is the thin margin that is keeping him on top, and I think it's a consistent challenge for Romney.
CLAMAN: Both of these people, President Obama and Mitt Romney, better get off the whole birther issue, the cars on dog roofs, the Bain Capital, these are side shows. Americans care about the main act and that is jobs, the economy.
And at this point, we're not seeing enough jobs. The economy incrementally getting better, and where are the ideas? We better start presenting them.
Stop talking about Bain Capital -- it's a distraction! Except when Mitt Romney does it.
You see, since Willard's running away from his record as governor of Massachusetts, he's primarily citing his experience and accomplishments at Bain Capital as the justification for his candidacy. This is from his campaign website:
After graduating from Brigham Young University in 1971, he earned dual degrees from Harvard Law and Harvard Business School. After working as a business consultant for several years, Mitt founded the investment firm Bain Capital in 1984. Under his leadership, Bain Capital helped to launch or rebuild hundreds of companies, including household names such as Staples, Bright Horizons, and The Sports Authority. As Bain Capital was growing in prominence, Mitt returned to his old consulting firm, Bain & Company, as CEO. In a time of financial turmoil at the company, he led a successful turnaround.
You knew there had to be one. When you've got the worst candidate on the planet running for President, there's only one thing left to do. Pull out the corporate mudslingers and start tossing it all over the place.
On Friday's edition of Hardball, Michael Smerconish hosted non-partisan spokesman for OpSec -- Gabriel Gomez, and Jon Soltz from VoteVets for a discussion of the OpSec Swiftboat effort.
It's interesting to hear Soltz disclose that he voted for Barack Obama in 2008 and donated to his campaign, but represents an organization of 220,000 veterans who are Republicans, Independents, and Democrats, but nary a peep from Mr. Gomez about his associations.
It's interesting to hear Gomez say he donated to the Obama campaign in 2008 ($230) and fail to disclose his firm's relationship to Bain Capital, a firm Mitt Romney still has much invested in. He attacks Soltz and the 220,000 members of VoteVets as partisan, but nary a peep from Mr. Gomez about his associations.
So be enlightened. Gabriel Gomez is a principal of Advent International, a Boston-based private equity group. All of these equity firms are intertwined with each other through various deals, but Advent and Bain trumpeted their joint acquisition of RBS WorldPay in 2010. One of the participating members of the deal was Sankaty Advisors, the offspring of Sankaty High Yield Capital and other Sankaty entities which have Mitt Romney's brand stamped all over them.
Gomez sort of forgot to tell that part of the story while he was busy being earnest about how much he resents the President not taking all the glory for the capture and killing of Bin Laden. But he should have.
Back in 2007, Republican White House hopeful Mitt Romney declared that taking a big payment from a company that later failed "would make me sick, sick at heart." If so, Romney by now must be badly in need of a quadruple by-pass. Because as the New York Times became just the latest to report, through massive consulting fees, sales of stock and, most perversely, dividend payments, Romney and his partners at Bain Capital reaped whirlwind profits even when the companies they acquired collapsed.
But as the New York Times documented Friday, large sums of that money were going to Mitt Romney and his Bain colleagues whether their portfolio companies were profitable or not. Put another way, Bain won either way:
Bain structured deals so that it was difficult for the firm and its executives to ever really lose, even if practically everyone else involved with the company that Bain owned did, including its employees, creditors and even, at times, investors in Bain's funds.
Cambridge Industries, which filed for bankruptcy in 2000 after amassing $300 million in debt, is hardly unique when it came to Bain's "win even when they lose" business model:
Yet Bain Capital, the private equity firm that controlled the Michigan-based company, continued to religiously collect its $950,000-a-year "advisory fee" in quarterly installments, even to the very end, according to court documents.
In all, Bain garnered more than $10 million in fees from Cambridge over five years, including a $2.25 million payment just for buying the company, according to bankruptcy records and filings with the Securities and Exchange Commission. Meanwhile, Bain's investors saw their $16 million investment in Cambridge wiped out.
"Traditionally," Josh Kosman wrote in his 2009 book The Buyout of America, "cash-rich public companies have paid dividends to lure and reward investors." But private equity firms, he explained, stand this process on its head:
Fourteen of the largest American private equity firms had more than 40 percent of the North American companies they bought from 2002 until September 2006 pay them dividends. In thirty-two of the eighty-three case, 38 percent, they took money out in the first year.
Mitt Romney was a pioneer of this strategy. His private equity firm, Bain Capital, was the first large PE firm to make a serious portion of its money not from selling its companies or listing them on the stock exchange, but rather by collecting distributions and dividends, which in this context is the exact opposite of reinvesting in a company. Bain Capital is notorious for failing to plow profits back into its businesses.
Mitt Romney cannot tell the truth. It isn't that he won't. It is that he cannot. He cannot because he is afraid of what it might mean and the damage it might do.
One of the most revealing passages in The Real Romney is the author's description of how young Mitt Romney took the demise of his father's campaign for President after George Romney claimed he had been "brainwashed" by the generals and diplomats into believing war in Vietnam was justified.
Mitt did not view the "brainwash" footage that caused his father such trouble until it was shown to him thirty-nine years later. But his sister Jane said the episode had a lasting impact on her brother. "The brainwash thing -- has that affected us? You bet. Mitt is naturally a diplomat, but I think that made him more so. He's not going to put himself out on a limb. He's more cautious, more scripted."
Mitt Romney took the wrong lesson from his father's disastrous campaign. He assumed George Romney's honesty is what cost him a shot at the White House. But it wasn't the elder Romney's honesty at all. People did not take kindly to the idea that the future leader of the free world, fraught as it was with Commies in the corners, was weak enough to let himself be brainwashed. Rick Perlstein's brilliant Rolling Stone article in January is required reading on this. Just a tease for you here:
When people call his son the "Rombot," think about that: Mitt learned at an impressionable age that in politics, authenticity kills. Heeding the lesson of his father's fall, he became a virtual parody of an inauthentic politician. In 1994 he ran for senate to Ted Kennedy's left on gay rights; as governor, of course, he installed the dreaded individual mandate into Massachusetts' healthcare system. Then he raced to the right to run for president.
He's still inauthentic – but with, I think, an exception. Every time he opens his mouth on the subject of capitalism, he says what he sincerely believes, which happens to fit neatly with present-day Republican ideology: that rich people deserve every penny they have, and if people complain about anything rich people do, it's only because they're envious.
In the video at the top there's another example of how Romney reacts to situations, especially when he's put on the spot. Raw Story reports:
There's a great diary over at Daily Kos and if the author's information is correct, Mittens has quite a situation on his hands - he's lying about his departure date from Bain to cover up his personal connection to Stericycle, the company that disposed of aborted fetuses. Obviously, that information would cause a real problem with getting out the religious fundamentalists on election day. Do read the whole thing, but here's the pertinent part:
And inside both Bain and the Romney campaign, there is a strong belief that either the Obama campaign or a Democratic ally wants to use another Bain investment against Romney late in the campaign but cannot do so with any credibility under the February 1999 departure scenario.The investment in question: Stericycle, a medical waste company that, among other things, disposed of aborted fetuses.
How could the Stericycle investment be used against Romney?
Bain's involvement in a company that disposed of aborted fetuses could make a powerful final week direct mail piece or attack ad on Christian radio. And in a close election, turnout of the religious right is one of the keys to a Romney victory in November. (emphasis mine)
Moreover, Bain Capital was, in fact, also directly part of the acquisition of Stericycle stock.
More importantly, this SEC filing represents W. Mitt Romney as "the sole shareholder, Chairman, Chief Executive Officer and President of BCI, BCP VI Inc., Brookside Inc. and Sankaty Ltd." (emphasis mine).
That pretty much speaks for itself-- he's not only the chair, CEO, and president of Brookside, but also Bain Capital Investments ("BCI") and other the other Bain parties involved in the acquisition. This kind of declaration is repeated over and over throughout the document.
Moreover, unlike many of the other SEC filings, including the SEC filings for the acquisition of Global-Tech Appliances that David Corn exposed three days ago, W. Mitt Romney actually signed this one:
Date: November 19, 1999 s W. Mitt Romney
W. Mitt Romney
This is not merely some document formed by Brookside and signed on Romney's behalf by Dominic Ferrante, like the acquisition of the Grey Global Group stock or the Global-Tech Appliances stock were.
And he didn't just sign it once. He signed it twice.
Meanwhile, at least some anti-abortion groups are already circling the wagons. I don't think all of them will be as supportive.
Hey, Democrats! Can we get a coherent message going about Bain Capital or are we going to have to constantly watch surrogates step on the Obama campaign's message? It's not like Romney staffers aren't trying their best to drown it out anyway, right?
So here's the Obama campaign's message on Bain capital: Mitt Romney's role at Bain was to take over companies, loot their pensions, strip their assets, saddle them with incredible debt, pay out Bain investors and let the companies sink into bankruptcy. It's no different than what Romney recommended for the entire US auto industry in 2008. It's an established record, it's fact, and it's a powerful message, particularly to unemployed people who have been on the receiving end of vulture capitalists.
WEINSTEIN: Now Governor Romney keeps talking about his experience at Bain Capital as a producer of jobs and that he had 25 years in the private sector. It seems to play with a certain group, but do you think that really will affect people and think that he can produce jobs that the president can't?
CLINTON: I think it will affect some people who relate well to businessmen. And I think he had a good business career. The -- there is a lot of controversy about that. But if you go in and you try to save a failing company, and you and I have friends here who invest in companies, you can invest in a company, run up the debt, loot it, sell all the assets, and force all the people to lose their retirement and fire them.
Or you can go into a company, have cutbacks, try to make it more productive with the purpose of saving it. And when you try, like anything else you try, you don't always succeed. Not every movie you made was a smash hit.
WEINSTEIN: That's for sure.
CLINTON: So I don't think that we ought to get into the position where we say this is bad work. This is good work. I think, however, the real issue ought to be, what has Governor Romney advocated in the campaign that he will do as president? What has President Obama done and what does he propose to do? How do these things stack up against each other?
That's the most relevant thing. There's no question that in terms of getting up and going to the office and, you know, basically performing the essential functions of the office, the man who has been governor and had a sterling business career crosses the qualification threshold. But they have dramatically different proposals. And it's my opinion, anyway, that the Obama proposals and the Obama record will be far better for the American economy and most Americans than those that Governor Romney has laid out. And that's what the election ought to be about.
Now there's no question that Clinton was threading a narrow needle with that particular statement. On the one hand, he says Romney did "good work" but on the other, he offers two examples of how venture capitalism can work. It is the first example -- the pension-stripping, debt-running, job-killing one -- that was the Willard Romney style of capitalism. On the other hand, he mentions those who go in and "try to save companies," calling that "good work." So if anyone was paying attention, it could at least be argued that Clinton was damning Romney with faint praise.
Here's the thing: Clinton's comments weren't just "off message." They were a declaration of war on the message. They underscore a fundamental split within the Democratic Party that's less about Romney's record at Bain than it is about whether the party as a whole is perceived as a friend or foe of Wall Street and the world of business and high finance.
Remember, Clinton went to great lengths as president to make the Democratic Party appear more pro-business than it had in decades – supporting free trade, ending "welfare as we know it," and explicitly courting more affluent supporters, particularly on Wall Street.
Once again, a surrogate steps all over the campaign message in order to praise...Bain Capital? And not just any surrogate, either. Bill Clinton, who signed the repeal of Glass-Steagall into law, which is ultimately responsible for the 2008 meltdown on Wall Street. That very same Bill Clinton. Gosh, thanks so much, pal.
By any standard, Bill Clinton runs to the right politically of Barack Obama. It's not surprising to hear him defend Wall Street considering that some of his best friends are Wall Street movers and shakers. And it's not surprising when Democrats are facing a $1 Billion onslaught of right wing money to know that Bill Clinton would not like to offend venture capitalists who are on his side of things.
But what Bill Clinton said on CNN last night leaves the Obama campaign on an island, abandoned by party movers and shakers and even attacked, a la Cory Booker. Like it or not, it's Obama out there calling Romney out on his corporate piracy and dismal record of governance with little to no assistance from surrogates. Since Bain Capital represents everything wrong with today's capitalist mindset, it seems to me some pushback on Mr. Clinton is warranted, despite his trip to Wisconsin Friday and other somewhat-good things he may do.
After all, Clinton just gave Romney his second video of a Democrat praising his record at Bain. If we piled on Cory Booker for a week, Bill Clinton deserves at least two weeks of it.
This message war inside the so-called liberal establishment is ground zero for progressives. Either the Harold Fords, Ed Rendells, Cory Bookers, and Bill Clintons are going to speak for Democrats or else we are. Let's make sure it's us.
Once again, to review: This video right here is the Obama 2012 message about Romney. This one is about his time as Massachusetts' Governor, but it is exactly what he did at Bain: Cut benefits, cut services, raised fees, raised debt, and left the state in a mess.
I would appreciate it if Bill Clinton, et al would review it and memorize it before any more public appearances.
Update: Mr. Clinton was taken aback by the reaction to his statements, and told CBS this:
"I said, you know, Governor Romney had a good career in business and he was a governor, so he crosses the qualification threshold for him being president," Clinton said. "But he shouldn't be elected, because he is wrong on the economy and all these other issues.
"So today, because I didn't attack him personally and bash him, I wake up to read all these stories taking it out of context as if I had virtually endorsed him, which means the tea party has already won their first great victory: 'We are supposed to hate each to disagree.' That is wrong."
Look, I don't think we have to hate each other, but could we possibly just be consistent with regard to the message? I don't see Obama "hating" on Bain. I do see the campaign struggling to make the case that Romney's Bain behavior is relevant to how he would run this country. Since no one in media has bothered to ask Mitt Romney what he would have done during our meltdown to save the country from financial ruin, the only benchmark we have is Bain and Romney's attitude toward the auto industry.
So Bill, I don't hate you, but could you simply stay on message? No hate, just facts.
This Obama campaign ad received four pinocchios from the Washington Post's Glenn Kessler, the fact-checking guru of WaPoLand.
Regarding the outsourcing claims, we have frowned on these before. The Obama campaign rests its case on three examples of Bain-controlled companies sending jobs overseas. But only one of the examples — involving Holson Burns Group — took place when Romney was actively managing Bain Capital.
Regarding the other claims, concerning Canadian electronics maker SMTC Manufacturing and customer service firm Modus Media, the Obama campaign tries to take advantage of a gray area in which Romney had stepped down from Bain — to manage the Salt Lake City Olympics — but had not sold his shares in the firm. We had previously given the Obama campaign Three Pinocchios for such tactics.
The Modus Media case is also not an example of shipping jobs overseas. The company closed one plant in California and transferred the jobs to North Carolina, Washington and Utah. At the same time, it opened an unrelated plant in Mexico. The Obama campaign once trumpeted the fact that we had dinged a conservative Super PAC for making the same leap in logic.
Bad, naughty Obama campaign, misleading viewers that way. Oh, wait. Because the Washington Post also has this story running on page 1 this morning about how Romney did, in fact, outsource jobs to China and Mexico during his time at Bain Capital. And it directly contradicts Mr. Pinnochio-Giver Kessler:
Until Romney left Bain Capital in 1999, he ran it with a proprietor’s zeal and attention to detail, earning a reputation for smart, hands-on management.
Bain’s foray into outsourcing began in 1993 when the private equity firm took a stake in Corporate Software Inc., or CSI, after helping to finance a $93 million buyout of the firm. CSI, which catered to technology companies like Microsoft, provided a range of services including outsourcing of customer support. Initially, CSI employed U.S. workers to provide these services but by the mid-1990s was setting up call centers outside the country.
Two years after Bain invested in the firm, CSI merged with another enterprise to form a new company called Stream International Inc. Stream immediately became active in the growing field of overseas calls centers. Bain was initially a minority shareholder in Stream and was active in running the company, providing “general executive and management services,” according to SEC filings.
By 1997, Stream was running three tech-support call centers in Europe and was part of a call center joint venture in Japan, an SEC filing shows. “The Company believes that the trend toward outsourcing technical support occurring in the U.S. is also occurring in international markets,” the SEC filing said.
Stream continued to expand its overseas call centers. And Bain’s role also grew with time. It ultimately became the majority shareholder in Stream in 1999 several months after Romney left Bain to run the Salt Lake City Olympics.
Bain sold its stake in Stream in 2001, after the company further expanded its call center operations across Europe and Asia.
Oh, and there is more. Much, much more. Mr. Glenn Kessler should have to retract his judgment, though I'm certain he will follow in Politifact's footsteps and find a way to dig in harder. He will do this despite hard, factual evidence that Bain Capital not only invested in companies specializing in outsourcing services, but also invested in companies that moved operations overseas, just like the OFA ad claims.
Mitt Romney's time at Bain Capital is one of the few quantifiable ways voters can see how he intends to approach employment issues and corporations, and the Obama campaign has done a terrific job of pointing out the "vulture capitalist" Romney so desperately tries to hide. In fact, they launched a new website this week highlighting the swath of devastation Romney left behind. It gives details about the different companies they stripped of all assets in order to maximize profit to investors.
Also this week, Joe Biden gave a speech where he was on fire -- as on fire as I've ever heard him -- about the differences between the middle class and the 1 percent and why Romney's Bain Capital profit model was guaranteed to benefit only the rich while further destroying the middle class and leaving them farther behind. It was a speech for the ages. It also had Republicans on the run, scurrying to counter the message in the Wall Street Journal and wherever else they could spread the word.
So this morning on Meet the Press Mayor Cory Booker just managed to undo all of that work with a few measured sentences. Start at about 5:31 of the video clip embedded above and watch until you hear Booker tell the panel that he's "uncomfortable" with the attacks on private equity. Via TPM:
Appearing on NBC’s “Meet The Press” on Sunday, Newark Mayor and Obama bundler Cory Booker said he was “uncomfortable” with the Obama campaign’s attacks on Mitt Romney’s career with Bain Capital.
“It’s a distraction from the real issues,” Booker said, of both attacks on Bain and Rev. Jeremiah Wright. “It’s either gonna be a small campaign about this crap, or it’s gonna be a big campaign about the issues the American public cares about.”
“I’m not about to sit here and indict private equity,” Booker added. “If you look at the totality of Bain Capital’s record, they’ve done a lot to support businesses — to grow businesses. And this to me, I’m very uncomfortable.”
Well, Mayor Booker. Thank you so much for that false equivalence. The Bain Capital issues strike right at the heart of what this campaign is about. Are we a country of financialists or a country of opportunity and growth for the middle class? Is the goal to maximize profit at the expense of workers or is the goal to simply strip the value from companies in order to reward the private equity investors.
To be clear, there is absolutely no equivalence between the bogus Reverend Wright revival and Romney's actions while at Bain Capital.
If Romney can't be criticized for his vulture capitalism and we can't "indict" private equity then what does he think this campaign should be about? The deficit? Some abstract notions of "jobs" and "the economy" without any reference to the fact that it was the financial sector and "private equity" that caused this situation in the first place? Sounds perfect. For Wall Street.
Sadly, this is exactly the kind of concern trolling that will make the Village declare that the Democrats are hitting below the belt by criticizing Bain Capital and the Dems will fall in line. Indeed, the fact that it's Cory Booker who's saying it today indicates that it's the Democrats themselves saying "stop us before we hurt the Masters of the Universe's feelings again."
Yes, this. Exactly this. Already the RNC has popped out with their version of "even Democrats agree with us" on this issue, thanks to the careless remarks of Mayor Booker, and even though he attempted a halfhearted walkback via Twitter, he did a terrific job of stepping on the success of last week's campaign messaging.
Please, politicians. Stop being so darn polite on these shows. Stop assuming that people like David Gregory will actually try to insert facts into factless discussions. Bain Capital and Romney's conduct while there is absolutely relevant to this election and no one should think otherwise.
Back in July, I wrote a post about Romney and Bain, and how he will never tell the truth. In that post, I mentioned his connection to Latin American oligarchs and how they funded a substantial chunk of his initial Bain ventures.
Now the Huffington Post has picked up that thread and run with it. What they've uncovered is ugly and violent. It layers on another layer of taint to Bain Capital's founding, Romney's offshore accounts, and his equally unsavory offshore associations.
In The Real Romney, the author mentions Romney's trip to Latin America to raise money for the initial Bain Capital funding rounds. Romney and his partners had been encountering difficulties raising funds for that initial round and had agreed not to approach existing Bain investors. So Romney reached out to his Latin American friends for help. The family mentioned in the book is the Poma family, but the Huffington Post article has much more.
"I owe a great deal to Americans of Latin American descent," he said at a dinner in Miami in 2007. "When I was starting my business, I came to Miami to find partners that would believe in me and that would finance my enterprise. My partners were Ricardo Poma, Miguel Dueñas, Pancho Soler, Frank Kardonski, and Diego Ribadeneira."
Romney could also have thanked investors from two other wealthy and powerful Central American clans -- the de Sola and Salaverria families, who the Los Angeles Times and Boston Globe have reported were founding investors in Bain Capital.
While they were on the lookout for investments in the United States, members of some of these prominent families -- including the Salaverria, Poma, de Sola and Dueñas clans -- were also at the time financing, either directly or through political parties, death squads in El Salvador. The ruling classes were deploying the death squads to beat back left-wing guerrillas and reformers during El Salvador's civil war.
Great pains were taken to make sure The Real Romney readers understood that Romney and Bain vetted these investors to make sure they were not becoming an investment vehicle for illegal drug money or other ventures which might not look so great.