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Sure default Republican presidential candidate Mitt Romney lined his pockets to the tune of a quarter-billion-dollars or more as chief of Bain Capital. But in the process he innovated and created jobs and generally behaved as the sort of model capitalist that any American could be proud of, right?
GOP spin-meisters notwithstanding, Rolling Stone political reporter Matt Taibbi followed the money and did the math, and came to a somewhat different conclusion:
Last May, in a much-touted speech in Iowa, Romney used language that was literally inflammatory to describe America’s federal borrowing. “A prairie fire of debt is sweeping across Iowa and our nation,” he declared. “Every day we fail to act, that fire gets closer to the homes and children we love.” Our collective debt is no ordinary problem: According to Mitt, it’s going to burn our children alive.
And this is where we get to the hypocrisy at the heart of Mitt Romney. Everyone knows that he is fantastically rich, having scored great success, the legend goes, as a “turnaround specialist,” a shrewd financial operator who revived moribund companies as a high-priced consultant for a storied Wall Street private equity firm. But what most voters don’t know is the way Mitt Romney actually made his fortune: by borrowing vast sums of money that other people were forced to pay back. This is the plain, stark reality that has somehow eluded America’s top political journalists for two consecutive presidential campaigns: Mitt Romney is one of the greatest and most irresponsible debt creators of all time. In the past few decades, in fact, Romney has piled more debt onto more unsuspecting companies, written more gigantic checks that other people have to cover, than perhaps all but a handful of people on planet Earth.
See, Mitt’s strategy at Bain Capital was to pick a target company that was pulling in money but struggling to stay profitable. Mitt/Bain would put up a wee down payment and get their buddies at places like Goldman Sachs to lend them the rest – sometimes hundreds of millions of dollars.
Then, Bain would use the money it just borrowed to buy up a controlling interest in the target company. Then, Tabbai reported, Bain would transfer responsibility for the loan from Goldman or whomever to the target company itself. And then, Bain would advise the now-debt-riddled target company on how to reduce expenses, i.e. who to lay off. Finally, Bain would charge millions in “management” fees for this swell advice.
However, it turns out the Mitt Strategy wouldn’t have been nearly so profitable if not for a fine loophole in the U.S. government’s tax code. Reports Tabbai:
The entire business of leveraged buyouts wouldn’t be possible without a provision in the federal code that allows companies like Bain to deduct the interest on the debt they use to acquire and loot their targets. This is the same universally beloved tax deduction you can use to write off your mortgage interest payments, so tampering with it is considered political suicide – it’s been called the “third rail of tax reform.” So the Romney who routinely rails against the national debt as some kind of child-killing “mortgage” is the same man who spent decades exploiting a tax deduction specifically designed for mortgage holders in order to bilk every dollar he could out of U.S. businesses before burning them to the ground.
Feeling chilly this afternoon? Blood not boiling enough today? Read the rest of this report (and there is a lot) and fire yourself up.
