The vulture capitalist Willard ‘Mittens’ Romney and his ‘businessman’ myth

Posted by AzBlueMeanie:

An important long post from David Waldman at Daily Kos, Mitt Romney is a 'businessman' like the Hamburglar is a rancher (excerpts):

So I've been thinking about revisiting the topic of just how Romney managed to keep making so much money from companies that, in many cases, ended up failing. But so has everyone else, so now I have some video support that does the job for me, in just three minutes.

See video from former Clinton Labor Secretary Robert Reich explaining how private equity partnerships (vulture capitalists) like Bain Capital make their money. (Video below the fold).

Romney borrows money to buy a majority stake in a company, takes over its board of directors, and uses that position to vote Bain a fat management contract, and take out the biggest loans possible from the company's bank. That money goes to pay back the people who put up the money for the purchase, as well as giant bonuses for Bain managers. But now the company has a huge debt to the bank (the interest on which is, of course, tax deductible), which the Bain managers sorta-kinda attempt to pay back by cutting payroll, benefits, investments in equipment, etc. Basically anything they can find to transfer the pain to anyone other than themselves.

Thanks, Secretary Reich! Beautiful job!

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What that means is that not only is Romney not a "job creator," he's not a even really a "businessman," either. He's a financier, but he knows that's always been kind of a dirty word. So it's "businessman," or "entrepreneur," or… "job creator."

To a financier like Romney, what a business does, and who does it, doesn't matter. He's in it for the money. Specifically, taking money from other people.

And as the video now makes clear, the "business" theory of "businessman" Romney is first and foremost that all businesses are the same. You'll notice that Secretary Reich never even has to mention what's being made. What a company makes is of no concern to Romney, except insofar as the infrastructure built up by the original owners around the process of making it can now be used as collateral for loans Romney never really needs to worry about repaying. The company, to Romney, is nothing more than a vessel full of money to be moved and extracted. That it might make something or provide some service—and employ thousands of people who make a living from doing it—is merely incidental.

A real "businessman," as we're traditionally meant to understand it, wants to make a good product for it own sake, and take profit from other people's appreciation for its quality and value. But that's not and never has been what Romney's "business" has been.

The business experience Romney has is finding ways to make the work of others pay for him. That's not the kind of experience in building for a nation and a people that we're looking for in a president. And it puts a frightening new spin on the old Republican saw about running a government like a business. Running a government like a business, to Romney, would mean finding ways to make the work Americans do worth more money to its president. And that has nothing at all to do with the concept of America that most people have. (It used to be that I would have felt more confident saying nobody thought of America that way, but things have changed.)

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But forget running government like a business. Romney doesn't even really know how to run a business like a business. He knows how to run a business like an investment, but that's a very different thing. Anyone who's ever worked for a company that was doing fine, if not exactly going gangbusters, but went sour once bought out by venture capital can tell you the difference in how they run. It's an all too familiar story these days. It's familiar because it happens a lot, and it happens a lot because it's worth a lot of money.

Not only did Romney run businesses only as investments, they were short term ones. He didn't actually have to try to extract value from profit, because buying a majority stake in the company and putting his people on the board of directors meant he could extract his profit right away, from the company's credit. Profits weren't necessary.

And when there was no more credit to be exploited, Romney extracted value from the company's assets. Either from the workforce, whose payroll and benefits he cut, or from deferring equipment upgrades, closing plants, etc. Profit-making for the companies never really had to be a concern. But if you could show one on paper by imposing what amounted to company-wide austerity programs for the workers (even as Bain executives took huge, credit-financed bonuses), then the option of flipping the company rather than just bleeding it dry remained viable. Which is always nice.

What it comes down to is that Romney didn't really run businesses. Running a lemonade stand is running a business. Buying one and telling them to eliminate the lemons and send you a check for the difference is not. He wasn't running businesses so much as taxing them privately, by forcing those he bought to pay Bain "management fees" for the privilege of being told how to do their jobs by MBAs who did not, themselves, have any idea how to do it. And the fees were payable even if they were being run into the ground. But, no, he didn't really run them. That's just a part of the image of the "businessman" label he's hoping to cash in on.

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Or another way of putting it, to finally get around to justifying the title of this post, is that Romney was a businessman like the Hamburglar is a rancher. All the guy does is steal the burgers, gobble them up, and throw the wrappers on the ground. But here he is campaigning for president on the notion that his gluttony means he has experience in the beef business. Here he's been scarfing down burgers as fast as he can, and you're meant to think he's been painstakingly raising prize cattle.

Not only is it misleading to say he was a "job creator," he actually did everything he could to make it impossible to create any. Remember, Romney extracted his profit by draining the credit lines of the companies he bought. Credit lines are supposed to be how a company accesses the capital it needs to expand and create jobs, and here he was draining and pocketing them! The Romney/Bain model was pretty much what people used to call "eating the seed corn." Only now, it's what our our MBA-indoctrinated business class celebrates as "maximizing shareholder value." The profit comes from eliminating jobs, not creating them.

Romney, in other words, is hard-wired to do the exact opposite of what the country actually needs. In fact, he's ideologically opposed to it, because in his mind, the benefits of a booming economy belong to the investors in that economy, and he means the cash investors. If all you're doing is earning a paycheck, you're nothing but a drag on Mitt Romney's version of the economy. There's nothing he can do for you, nor is there anything he thinks he should do for you. He's incapable of helping people who don't bring cash to the table as investors. Sweat equity is not in his vocabulary. Romney simply doesn't believe in non-cash stakeholders. He rejects the concept. So if your investment in building something is actually, you know, building it, there are no future dividends for you. It's a cash transaction. You get the day labor rate, and that's that. All future benefits belong to the people who put in cash.

And in job-killer Mittens' America, there may not even be a day-labor job for you. Previously: Job-killer Willard "Mittens" Romney and the 1% Economy.