Snap Fact #298
President Obama Was Not a Businessman – Mitt Romney Was – How Has That Prepared Them to Be President?
– Part 2 – The Real Bain Story!
President Obama Was Not a Businessman – Mitt Romney Was – How Has That Prepared Them to Be President?
– Part 2 – The Real Bain Story!
In another major “MISSION ACCOMPLISHED” MOMENT” Romney has also bragged that he was solely responsible for turning around Bain & Company from near fatal bankruptcy in just one year. He's telling everyone that he's a more qualified candidate because of that experience. However, Romney didn't “build it” on his own – not even close.
Yesterday we examined how he used a huge government handout to make it look like he turned around the 2002 Olympic games. By the time he got to the Olympics he had a successful history of obtaining and using federal funding to save a failing endeavor.
Mitt claims that he pulled Bain & Company from the brink of collapse but he doesn’t tell us about the role of the FDIC and the banks to whom Romney turned for financial structuring to forgive almost all the Bain & Company's debts. In 1991, the FDIC also took over a bank that Bain & Company owned Bain owed FDIC $30.6 million, making the FDIC a major Bain creditor.
Romney only ended up paying 1/3 to the FDIC and the banks that restructured Bain's debt – or $10 million of the $30. So effectively Romney used and abused US taxpayers twice. Claiming that he was solely responsible for the Bain and the Olympic successes, successes that would not have been possible without government financial assistance, is not only disingenuous and blatantly false, it is hypocritical, and speaks to Romney's own manipulations and duplicity that would make a voter think again before hiring him to be our nation’s CFO.
If you think this language is too strong or partisan, consider the facts; Mitt Romney accomplished his restructuring goals by threatening that he would give out fat bonuses to Bain Execs from cash that had been looted and returned to the company by the company's founders – and then put the company bankrupt. Read on and the sordid derails will reveal the lack of fiscal responsibility and the Trumpesque greed that drove the ambitious Mitt. Romney has built an empire based, to a large part, on demolition and ravenousness, accomplished at the expense of American taxpayers. Does that sound like it jibes with his “We Built It” theme song?
The fact is that he blackmailed the FDC and banks handling Bain & Company's debt restructuring, eventually reducing what Bain had to pay back, essentially creating the Government forgiveness of Bain debt into a clearly identifiable Federal bailout, and putting the US taxpayer on the hook.
Now let's get to the story of how Romney stiffed the US taxpayer when he claims to have turned Bain & Company around, taking essentially another Federal government handout, all the while threatening the FDC and the banks that held Bain & Company’s debt they would get nothing from the failed and drained company.
The story was first discovered by Rolling Stone Magazine when it made a Freedom of Information request to the FDIC forcing the agency to release 500 pages of documents. Prior to releasing the documents, the FDIC had allowed Bain & Company to scour and redact the records. Even with much of the text blacked out, Rolling Stone was able to discover the full truth. Newsweek has also reported on this, detailing how the troubled firm even paid Romney a $4 million consulting fee for his efforts to save Bain & Company from economic collapse.
In 1984 Bain & Company decided to spin off a related company which they called Bain Capital that would do leveraged buyouts. Founder Bill Bain installed his protégé’ Mitt Romney at the helm. Bain and his partners cashed out much of their stock in the consulting firm – leaving Bain saddled with about $200 million in debt. It soon became apparent after Bain & Company's partners sold off their assets that business had fallen off.
Two factors for the business decline. The first was a scandal that came to light involved a Bain consultant who become became a key figure in an illegal stock manipulation scheme in London. The scandal hurt Bain & Company's "brand" and the firm ended up firing 10% of its consulting force.
Then when the 1989 recession began, Bain & Company found itself going broke fast. Cash flows weren't enough to service the debt imposed by the founders, and the firm could barely make payroll. Bill Bain, asked Mitt Romney to take the reins. So when Romney took over, Bain & Company lacked both a profit and was bleeding money.
According to Rolling Stone Magazine, Romney's early efforts appeared promising. He persuaded the founders to return $25 million of the cash they had raided from Bain & Company and forgive $75 million in debt, in return for protection from most future liabilities. Romney then, in 1991, consolidated Bain's massive debts into a single binding loan agreement with four banks which received liens on Bain's assets and agreed to delay repayments on the firm's debts for two years.
The federal government also signed off on the deal, since the FDIC had recently taken control of a bank that was owed $30.6 million by Bain. Romney assured creditors that the restructuring would enable Bain to "operate normally, compensate its professionals competitively" and, ultimately, pay off its debts.
Almost as soon as the FDIC agreed to the loan restructuring, Romney's rescue plan began to fall apart because the company was finding itself unable to bring in revenue while at the same time manage its debt structure. Finding his rescue plan a bust, Romney had to negotiate a new round of debt relief with the banks and FDIC. However, there was one catch. Although Bain & Company appeared on paper being deeply in debt and on the precipice of collapse, the firm actually was flush with cash, because the looted money Bill Bain and other partners had returned to the firm. To make matters worse, Romney had inserted a "Poison Pill" clause into Bain & Company's loan agreement with the banks and the FDIC; instead of being required to use returned cash to pay back the firm's creditors, the money could be pocketed as fat bonuses by Bain executive officers– starting with the company’s VPs making $200,000 and up.
In March 1992, Romney used the "Bonus" loophole as leverage, or, what one might be tempted to call blackmail, against the FDIC and the banks. If the FDIC and the banks didn't agree to his terms and forgive most of Bain's debts, Romney would raid Bain & Company's coffers dispensing out large bonuses, and pushing Bain & Company into the very bankruptcy that the original loan agreement was designed to avert.
Romney demanded that Bain be allowed to pay off its debt at a discount of just 35 cents on the dollar, or otherwise the firm's excess cash would be available to distribute to Bain’s executives, leaving the company flat broke with no chance of recuperation by its creditors. The banks and the FDIC call his bluff and balked at Romney's terms.
Then, in April 1992, Romney decided to prove he wasn't bluffing, and began the distribution of executive officer's bonuses, but not doling out all of Bain's cash at once. In May 1992, he left some cash aside to turn the screws, for one last squeeze on Bain's creditors. Romney now demanded in a second blackmail attempt that the banks and the government agree to a deal that was even less favorable than the last – to retire Bain's debts "at a price up to but not exceeding 30 cents on the dollar."
Romney's claim that he returned to Bain Capital in 1992 is proven false by documents Rolling Stone uncovered which reveal that he remained involved in bailout negotiations for Bain & Company till the very end. In a March 23, 1993 letter Romney reassured creditors that his latest scheme would return Bain & Company to "long-term financial stability." That same month, Romney once again threatened the FDIC and the banks that he would "pay out maximum bonus distributions" to top executives unless more of Bain's debt was erased.
According to Rolling Stone, Romney's decision to favor executive compensation over fiscal responsibility left Bain with so little money that FDIC analysts reported that Bain would go bankrupt by 1995, a catastrophe that would have hurt both Bain employees and American consumers. Eventually, the US government surrendered to Romney's blackmail, with the FDIC agreeing to accept nearly $5 million in cash to retire $15 million in Bain's debt – an immediate government bailout of $10 million. All told, the FDIC estimated it would recoup just $14 million of the $30 million that Romney's firm owed the government. It was a bad deal for the taxpayers, but Romney's continued threats to loot his own firm left the FDIC with no other choice; The alternative was that the FDIC could only recoup $3.56 million if Bain went totally bankrupt.
The question that comes to mind is how did Romney secure such a favorable deal at the FDIC's expense? It didn't hurt that Romney has close ties to the FDIC - the kind of "crony capitalism" he now decries. A month before Romney closed the 1991 loan agreement, Romney promoted a former FDIC bank examiner to become a senior executive at Bain & Company. Romney also had a personal close connection with FDIC chairman Bill Seidman, who had served as finance chair for Romney's father when he ran for president in 1968.
Romney's campaign theme of "We Built It" is only correct in what Romney actually built for himself and his investors; and he should get credit for that. Romney built a financial empire based on greed that squeezed every last penny out of companies Bain Capital bought leaving them holding a pile huge bag of debt with which to pay Bain Capital back. Romney built an empire that focused on destruction, shuttered businesses, that outsourced jobs and laid off workers, that salted away his millions gained at the expense of others in the Cayman Islands, in Bermuda, and to Swiss Banks.
What Mitt Romney has built is a way of living that makes exceptions for the privileged few like himself. Now he wants to use those unprincipled guiding doctrines that he has learned as a businessman running Bain, to govern America. The only thing Romney built that he ought to take credit for building and won't talk about is the passage of healthcare reform while he was governor of Massachusetts, but alas candidate Romney wants to overturn health care for the other 49 states in the union.
So what becomes eminently clear is this; if a corporate executive can't manage incoming revenue and manage debt in his own firm on his own, how could Romney then think he can manage an economy as massive as that of the US without any outside economic assistance? What if the need arose that America had to borrow once again from the Chinese, what would he do? If you know the answer to this for sure you need to think again.
What would Mitt Romney do in a crisis situation, or possibly even in a war with Iran? A President who makes threats and demands concessions of other nations like Romney did with Bain against the FDC and the banks, might find that his anti-China rhetoric has closed down the door of financial assistance in America's hour of need. A President who makes threats and demands concessions like Romney did with Bain against the FDIC and banks, might find America isolated once again, as it was during the Bush Administration.
President Obama has reiterated over and over again the need for a fiscally responsible Federal Budget, a Budget that both cuts the Deficit and brings in additional revenue that balances out the cuts. Its called a Budget that's "Revenue Neutral." That's why Obama has emphasized the need for tax fairness, by eliminating the Bush era tax cuts, and raising taxes on incomes over $250,000. Romney's tax plan would make the ill-conceived Bush tax cuts permanent, and move another $25 billion to the wealthy.
This would be a huge fiscally irresponsible government giveaway to the wealthy that is no different than giving fat bonuses to corporate executives who haven't earned it. It would risk the fiscal health of America. Independent Economic Analysis has stated that not only would Romney's tax plan increase the Deficit; Romney and Ryan's Budget would never find a balance for the next 40 years.
Romney's tax plan would, in all likelihood, put a disproportionate burden on the middle class and the poor. It would increase taxes on 98% of Americans, who would also see entitlements such as Social Security, Medicare, Medicaid on the chopping block. Our roads and bridges and schools would still be in disrepair and our educational system would be in peril.
Romney's cronyism in running the 2002 Olympics could also give Americans pause, in light of mega-donor campaign donations Romney has received. Donors like casino owner Sheldon Adelson who is under investigation by the SEC, the FBI and the Dept. of Justice, or oil industry magnates Koch Brothers who would like to see OSHA and environmental regulations weakened or even completely eliminated. Corporations other members of the elite super-rich could all stand to benefit from a Romney Administration. A President who owes favors to his benefactors, makes decisions that benefit those who elected him, at the expense of the rest of Americans. That is not a way to govern. It smacks of ineptitude and incompetence.
The Governor has done plenty of arm-chair-quarterbacking during the President’s term in office. It’s just that his armchair advice is only consistent with the moment rather than any core philosophy. Romney's rhetoric that government intervention by means of a Stimulus is bad is not only contradicted by his previous activities; in a January 2009 interview the GOP nominee had with CNN's Wolf Blitzer has Mitt himself praising government intervention and stimulus which saved his backside in the two biggest events of his business life.
During the interview, Mitt Romney said he supported the Obama $750 billion economic stimulus package, stating that: "I think there is need for economic stimulus. Americans have lost about $11 trillion in net worth. That translates into about $400 billion a year less spending that they'll be doing, and that's net of additional government programs like Medicaid and unemployment insurance. And government can help make that up in a very difficult time. And that's one of the reasons why I think a stimulus program is needed." That is just 3 years ago; how fast and how far does the Etch-A-Sketch candidate change his mind?
Perhaps Mitt Romney picked the perfect kindred soul as a running mate. VP candidate Ryan continues to blast the Obama stimulus as a failure calling it ‘wasteful spending spree’ that ‘misses the mark on all counts." Yet Paul Ryan voted for the Stim. In 2009 Ryan wrote to Energy Secretary Steven Chu and Labor Secretary Hilda Solis asking for stimulus money to cover costs on two energy conservation projects in his home state of Wisconsin. In the letters, Ryan said the funds would help create jobs and reduce “energy consumption” in the state. At least one of the companies received the requested cash. So much for adhering to what one believes. So much for moral compass and philosophical consistency. More than anything, so much for “We Built It”!!!