Romney Avoids The Issue

Andrew Sullivan —  Jan 13 2012 @ 12:35pm

He needs to do better than this on the Bain question:

I've been reading the new book by Boston Globe reporters Michael Kranish and Scott Helman, "The Real Romney." Its chapter on Bain is very helpful. Romney was originally an old-school management consultant at Bain and Company, using his prodigious mastery of data and Harvard Business School talent to advise companies. But then the founder of Bain, Bill Bain, asked his star analyst to do something else: start a venture capital company that would invest using exactly those skills. Romney was assured that if it didn't work out, he'd get his old job back, plus any raises he might have missed, and a cover-story that he was desperately needed back at Bain and Company. It was a reputation risk-free assignment by a wealthy man for his favored son. It sure wasn't risky small business entrepreneurialism.

Here's the description of a classic success in Romney's business record:

In 1996, Bain invested $27 million as part of a deal with other firms to acquire Dade International, a medical diagnostics equipment firm, from its parent company, Baxter International. Bain ultimately made ten times its money, getting back $230 million. But Dade wound up laying off more than 1600 people and filed for bankruptcy protection in 2002, amid crushing debt and rising interest rates. The company, with Bain in charge, had borrowed heavily to do acquisitions, accumulating $1.6 billion in debt by 2000. The company cut benefits for some workers at the acquired firms and laid off others. When it merged with Behring Diagnostics, a German company, Dade shut down three US plants. At the same time, Dade paid out $421 million to Bain Capital's investors and investing partners.

Remember: for Bain and Romney, this was a huge investment triumph. But when you break it down, you see the core issue. This was not just about restructuring or remaking or rebuilding companies. It was about making more money than God by leveraging debts, selling companies, and gutting workforces. Notice that Bain's dividends are the first things these collapsing firms pay off. Even Romney has admitted it can get ugly to the NYT in 2007 (again from Kranish and Helman):

"It is one thing that if I had a chance to go back I would be more sensitive to. It is always a balance. Great care has got to be taken not to take a dividend or a distributuion from a company that puts the company at risk," he said, adding that taking a big payment from a company that later failed "would make me sick at heart."

This is a lot of heartsickness. As the New York Post reported,

Romney's Bain invested 22 percent of the money it raised from 1987-95 in five businesses – Stage Stores, American Pad & Paper (AMPAD), GS Industries, and Details – making a $578 million profit.

Every one of them went bankrupt, with the loss of many, many jobs. The question Romney has to answer is: how is it "capitalism" to make so much money from companies that went bankrupt? It's one thing to be a businessman and make money by building an enterprise. But Romney never managed a business, apart from Bain. He just made a large part of $250 million by investing in companies that went belly-up.

Wouldn't you like to make money that way? Do you know anyone who does?