Bain Capital is a product of the Great Deformation by David Stockman
Bain’s billions of profits were not rewards for capitalist creation; they were mainly windfalls collected from gambling in markets that were rigged to rise.
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Except Mitt Romney was not a businessman; he was a master financial speculator who bought, sold, flipped, and stripped businesses. He did not build enterprises the old-fashioned way—out of inspiration, perspiration, and a long slog in the free market fostering a new product, service, or process of production. Instead, he spent his 15 years raising debt in prodigious amounts on Wall Street so that Bain could purchase the pots and pans and castoffs of corporate America, leverage them to the hilt, gussy them up as reborn “roll-ups,” and then deliver them back to Wall Street for resale—the faster the better.
That is the modus operandi of the leveraged-buyout business, and in an honest free-market economy, there wouldn’t be much scope for it because it creates little of economic value. But we have a rigged system—a regime of crony capitalism—where the tax code heavily favors debt and capital gains, and the central bank purposefully enables rampant speculation by propping up the price of financial assets and battering down the cost of leveraged finance.
So the vast outpouring of LBOs in recent decades has been the consequence of bad policy, not the product of capitalist enterprise.
I abhor the subsidies provided to those that saddle corporations (that build up value through decades of hard work by employees) with huge debt. The actions of leveraged by out firms are atrocious. They seek to pretend that business is once again the land of the amoral behavior, as the robber barron’s sought to convince society of long ago. Those that saddle corporations (that have an obligation to those that built them up) with huge debt are despicable.
Those same despicable people then take huge amounts of cash (for themselves) from the debt they saddled the corporation with.
Quite a few smart people have figured out how to pay congress to allow those smart people to take huge profits out of businesses. By being smart enough to have congress create laws to allow their behavior they can say it was just doing what the law allowed. When you conspire with the authorities to create a system to drain cash from legitimate businesses into your pocket you can claim you are acting legally (if you do so by having them change the law, instead of having them just ignore the existing laws). But what is being done (for decades by both parties) by those we continue to elect to allow this behavior shows just how corrupt the system is.
It is sad we allow those politicians who payoff those that give them large amount of cash, at the expense of our society, to remain in office. But we don’t even discuss the issues in any significant sense. Those using this cronyism and corruption know they are continuing to be given the open door to continue their very destructive ways. These are smart people. They know how to use public apathy and rhetoric to keep from discussing the important issues. It is going to take us to stop the corrupting cronyism that has taken over our political parties.
Related: Too Much Leverage Killed Mervyns – Failed Executives Use Leverage to Increase Their Pay, Let Others Bailouts Later – Executives Treating Corporate Treasuries as Their Money, A Sad State of Affairs – CEOs Plundering Corporate Coffers – Leverage, Complex Deals and Mania – Looting: Bankruptcy for Profit
