Last week Christian radio host Frank Pastore tried to defend the mass firings by Mitt Romney on 99.9, KKLA.FM, even going as far to say that “Bain is very good at creating jobs.”
Pastore failed to mention the corporate welfare that Bain has received, instead Pastore plugged the myth that Bain’s money was all from private investors. Even a former executive from Bain doesn’t agree with Pastore’s rosy description.
Pastore said:”What a venture capital firm is and private equity firm is, is real simple to understand. They get money from investors in order to go buy companies that are undervalued. And they fell as though they can make some changes and make that company profitable. That’s the idea of being a private venture firm. The private equity is that there are private investors in this.
“They go look for companies that undervalued and make changes. Now unfortunately, or rather fortunately, some of those changes mean you gotta let people go. Your salaries are too much. Your payroll is too high. You’ve got 9 people, but you could function with 6 if they knew their job responsibilities. So, of course, sometimes people are let go and the company becomes more profitable.”
Pastore then said, “This is an opportunity for Mitt Romney, and the Republicans and the conservatives to make the case for capitalism, for creating jobs, for creating wealth.. that’s exactly what Bain has done, very good at creating jobs.”
Pastore’s analysis is beyond simplistic and in some cases, dead wrong.
Michael Kranish and Scott Helman write in The Real Romney, Bain Capital did not prioritize job creation in selecting investment opportunities as Pastore claims. Instead, “It’s the opposite, what jobs we can cut,” Marc Wolpow, a former Bain partner who worked with Romney on many deals said, “because you had to document how you were going to create value.”
Romney founded Bain, a private equity firm, in 1984 and was its first CEO. Since that time, Bain made billions by, as the Los Angeles Times writes, “firing workers, seeking government subsidies, and flipping companies quickly for large profits.” In all, Bain bankrupted nearly one-quarter of the companies it invested in, often causing “substantial job losses,” according to a new Wall Street Journal report.
According to the Wall Street Journal, 22 percent of the companies in which Bain invested wound up either in bankruptcy or shutting their doors entirely, while Bain itself has made billions of dollars for its investors:
The Wall Street Journal, aiming for a comprehensive assessment, examined 77 businesses Bain invested in while Mr. Romney led the firm from its 1984 start until early 1999, to see how they fared during Bain’s involvement and shortly afterward.
Among the findings: 22% either filed for bankruptcy reorganization or closed their doors by the end of the eighth year after Bain first invested, sometimes with substantial job losses. An additional 8% ran into so much trouble that all of the money Bain invested was lost.
The Journal analysis shows that in total, Bain produced about $2.5 billion in gains for its investors in the 77 deals, on about $1.1 billion invested. Overall, Bain recorded roughly 50% to 80% annual gains in this period, which experts said was among the best track records for buyout firms in that era.
Adding insult to injury, Bain would hide its profits in tax havens, not even paying the rate it was supposed to on the profits it made laying off workers.
Romney has tried to spin his firm’s record of destruction as simply the way “free enterprise” works, claiming that Bain, overall, created 100,000 jobs. However, the campaign recently admitted that the 100,000 statistic is bogus, cherry-picked from a few successful ventures. One of Romney’s former partners at Bain has even said, “I never thought of what I do for a living as job creation…The primary goal of private equity is to create wealth for your investors.
In 1994, Bain invested $18.2 million in Steel Dynamics, becoming the largest domestic equity holder in the company. Five years later, it sold its stake for $104 million, walking away with $85 million profit. In the intervening years, the state of Indiana and DeKalb County pledged $37 million in subsidies and grants for a new Steel Dynamics mill. As the Los Angeles Times reports:
The county promised $23.4 million in property tax abatements and tax increment finance bonds, as well as a new income tax to generate economic development funds. The latter was required by the state, which shelled out another $13.6 million in tax credits, energy grants, workforce training and funds for roads.
A new quarter-percent tax on DeKalb County residents financed infrastructure improvements such as roads and railroad exchanges that benefited Steel Dynamics.
Even the Washington Post could not find those 100,000 jobs that Mitt Romney has claimed to create.