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ETpro's avatar

Is Bain Capital a Venture Capitalist or a Vulture Capitalist firm?

Asked by ETpro (34550points) January 12th, 2012

I don’t know enough about Mitt Romney’s Bain Capital to know whether Rick Perry’s ad and Newt Gingrich with these two out takes of his 28 minute documentary, When Mitt Romney Came to Town are on target or just doing a political hack job.

That said, I do know that, if someone has millions at their disposal and the only “good” they recognize is quick, massive profits, they can legally wreck companies and people’s lives, stripping the cash from corporate carcasses just like a vulture strips the flesh from dead bodies. This is all possible because Wall Street and its corporate raiders have helped (bribed) Congress in crafting laws making it easy to do if you have the capital needed to start the snowball rolling down hill.

For instance, if you find a corporation that is not rapidly growing, a corporation with cash and valuable assets, and with a decent pension fund; you can legally use that company’s own asset sheet, including the cash in the employee pension fund, as collateral for a highly leveraged loan to buy the corporation. With that debt load now on the corporate books, the raiders fire much of the workforce, off-shore the jobs to low labor countries or just live off of existing inventory, and sell off any remaining valuable assets. This makes the corporation suddenly “appear” to be highly profitable. The stock prices soar. At this point, before the debt load $hit hits the fan, the raiders sell their interest in the corporation. They have put next to none of their own money into the deal, they have “created nothing of value”: http://www.nationalreview.com/corner/287707/battle-bain-capital-michael-walsh to the company or the country, yet they pocket tens or even hundreds of millions of dollars.

Since the four firms analyzed in Gingrich’s film clearly fall into the Vulture Capitalism model, and everything the film states is true; Bain Capital is at least partly a Vulture Capital firm. What of Bain’s successes? Did they intentionally create real-world value in some companies they acquired, or did an aggressive management manage to pull the fat back out of the fire and reorganize the company after Bain extracted their millions and moved on? I don’t know. But before we buy Romney’s claim that he knows how to create jobs, don’t you think we ought to find out the truth regarding Bain’s job destruction vs. creation record?

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8 Answers

gearedtolaugh's avatar

Bain Capital Ventures is the Boston-based venture capital affiliate of Bain Capital.

Judi's avatar

I didn’t know any of the stuff you just pointed out, but I bet we will all be experts by November!

ETpro's avatar

@gearedtolaugh Interesting information, but it doesn’t answer the question.

@Judi, If Mitt Romney is the Republican nominee you can count on that.

LostInParadise's avatar

I love the term vulture capitalism. Perry is not smart enough to have come up with it. It must have been one of his speech writers. The term has legs and is going to haunt Romney. All the Republican conservatives, including Gingrich changing his mind, have come to Romney’s defense. It will not do any good. Vulture capitalism captures the essence of what Bain did in raiding and gutting small companies. The term is going to play very well into the anti-Wall Street mood of the country.

wundayatta's avatar

It’s legal. Who cares what you call it?

LostInParadise's avatar

Legal is not the same as ethical.

ETpro's avatar

@LostInParadise Republicans great and small are in a dither to shut down any discussion of Vulture Capitalism. The reason is clear as crystal. The vulture capitalists are the party works for. For about 30 years, Republicans have been pushing changes to the tax code and regulatory changes that broaden the ways the wealthy can carry out extraction capitalism. Extraction capitalism is the business of trading money, moving money, producing profits—often with enormous return on investment—and producing those profits without producing anything of value to the society where the transactions happen.

A successful entrepreneur who develops some new gadget everybody wants can make a fortune in their own lifetime. But their profit margin is generally just a few percent. Making a return on investment of as much as 5% is considered wildly successful in the world of making and selling real things. But hedge funds, derivatives traders, corporate raiders like Bain Capital can make 25%, 50% and sometimes even 80% profit on their investment.

If we could all play these games, we’d all be rich beyond our wildest dreams. But extraction capitalism is like a high-stakes poker game. You have to have hundreds of millions just to get a seat at the table.

Because it is so profitable, more and more of America’s total Gross Domestic Product is coming from money motion where nothing of value is produced save for the enormous profit the player pockets.

The billionaires that increase their fortunes through extraction capitalism pay politicians that protect and enhance their money motion games very, very well. They also pay to run advertising campaigns meant to destroy any politician who suggests changing the rules to make things more like they were in the post WWII boom, when many fortunes were made, but always by making actual things that people wanted. Those money men, the real Con Men behind the conservative curtain, are probably boiling over with anger at Newt Gingrich. I predict they will do everything in their power to discredit his criticism of Romney

Gingrich’s message must be demonized and destroyed. If it is allowed to stand, the extraction capitalists fear we will change the laws, regulations and tax codes in ways that might prevent them from continuing to feasting on what’s left of our once powerful and large middle class. Any talk of their being a difference between what Henry Ford did to get rich, and what Carl Icahn does must be stopped dead in its tracks. If the public catches on to what’s happening, there will be a backlash that may outstrip what the Patriot Act was really meant to protect against.

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