Newt Gingrich’s comeback victory against Mitt Romney in South Carolina can be attributed to many things — Newt’s debate performances, Mitt’s tax returns, etc. But it all started when Newt Gingrich and Rick Perry tore into Mitt Romney’s involvement in Bain Capital. Romney’s main response to the Gingrich-Perry critique has been that it’s “kind of strange” to have to defend his private-sector record to Republican competitors. If Romney is to recover from his loss in the Palmetto State, however, he’s going to have to do a lot better than that. He’s going to have to defend his record as a private-equity investor specifically and substantively.
There is no better place to start than with Bain Capital’s investments in South Carolina. It was there, after all, that Romney’s opponents portrayed him as a “vulture capitalist” who “looted” working-class livelihoods in a greedy quest for profit. Indeed, two Bain Capital–owned plants in South Carolina, a steel mill in Georgetown and a photo-album factory in Gaffney, ultimately closed down, resulting in several hundred layoffs. “If you’re a victim of Bain Capital’s downsizing,” said Rick Perry last week, “it’s the ultimate insult for Mitt Romney to come to South Carolina and tell you he feels your pain, because he caused it.”
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But a review of what actually happened in South Carolina tells a different story. And that different story is quite representative of how private-equity investors helped bring global competitiveness to much of American industry.
Let’s start with Georgetown Steel, Bain’s South Carolina foray into the steel industry. The story of steel starts over a century ago. Steel production had been one of the great engines of American industrial growth in the late 19th and early 20th centuries. U.S. Steel, founded in 1901 as a consolidation of several mid-sized manufacturers, quickly became the largest producer of steel in the world, and was the first corporation in history with a market capitalization of more than $1 billion.
In the aftermath of the New Deal, however, labor unions began to flex their muscles. In 1959, the United Steelworkers of America launched a devastating nationwide strike that shut down 85 percent of all U.S. steel production for four months. As a result of the effects that the strike was having on the national economy, and even on the nation’s military capabilities, President Eisenhower invoked the Taft-Hartley Act, and forced the union to end the strike.
While Eisenhower’s move appeared to be a setback for union power, unions were able to extract significant concessions from the steel industry, such as automatic annual wage increases and new pension and health benefits. This outcome was to have long-term consequences for steel manufacturing in the United States.
Beginning in 1959, American consumers of steel, such as the automakers, resolved to become less vulnerable to future disruptions in their supply of raw materials. For the first time, they began importing steel from abroad in significant quantities. They found that steel from emerging economies like Japan and South Korea was just as good as American steel, but much cheaper.
By the 1970s, the American steel industry was hemorrhaging business to foreign competitors. Manufacturers compensated by laying off workers, but this created a new problem. Experiencing the same dynamic that federal entitlements do today, manufacturers were faced with a growing number of retirees’ bloated pension costs and benefits, which they were funding with output from a shrinking number of active workers.
The Carter administration, aiming to prop up the industry, gave $300 million in loan guarantees to five steel companies. (Ironically, the largest recipient of Carter bailout funds, Wisconsin Steel, went bankrupt soon after due to a labor strike at one of their main customers.)
Successive presidents also tried, and failed, to prop up the steel industry. Ronald Reagan imposed quotas on imported steel. Bill Clinton provided $1 billion in loan guarantees to the industry. George W. Bush enacted tariffs on foreign steel. None of it worked. Over a seven-year period in the 1990s, more than 40 U.S. steel manufacturers went belly-up. Nearly all were union shops.
In the world of politics it does not work the way you just explained in your long article. It is rather much simpler than that. Bain Capital is a financial firm that sells and buys companies and in the process many people have lost their jobs. You would say that many jobs were also created by Bain Capital... It will not matter because "the many people lost their jobs" narrative is going to be the only story and in particular when the Lord and Master of class warfare Obama is running for re-election. If Romney is the nominee, I hope not, Bain Capital will be the main issue to destroy Romney with and it will utterly destroy him. There is no way under the sun that Romney is going to survive the Bain Capital issue in the general elections. It will be so destructive to him and it is going to shock the hell out of the morons who think Romney is the most electable against Obama.
It is insanity that during this tough economic times, when a majority of voters despise Wall Street and I am not talking about the OWS lunatics here, I am just talking about regular folks, and when Obama re-election strategy is going to mainly if not only based on class warfare, some in the Republican party and in the most stupid political thinking known to man, want to nominate a rich investment banker who founded a company called Bain Capital where its main business is to sell and buy companies and in the process many people lose their jobs. Is this stupidity beyond belief or insanity beyond belief? It is both.
But relax Romney and his supporters...Romney looks presidential and his shiny hair is going to make him President...LOL...
Mitt Romney may be the best person for president but presenting him as a free-market capitalist is obscurantism--even he doesn't have the hutzpah to present himself that way. Capitalists lose money early and often. Bain partners NEVER exit a deal with less dollars then they put into it. Let that sink-in.
Are they capitalists? For sure--they deploy capital and make tons of money. But they're capitalists operating in a social welfare state where the tax structure creates risk-free opportunities if you understand the tax code and banking regulations. It's no accident that alert people in the accounting profession got together in the mid-eighties and figured this all out. The real mystery is why more people aren't doing it. You don't have to be smart or a bold risk-taker. You just need to be diligent and disciplined.
Maybe Mitt's diligence and discipline is what the country needs. What would happen if Mitt just embraced his true nature? Think about it--Newt revels in the things he's accomplished and that's infectious. Mitt looks like a deer-in-the-headlights when the subject come up regarding his own life's work. And, that's infectious in a bad way.
"Think about it--Newt revels in the things he's accomplished and that's infectious. Mitt looks like a deer-in-the-headlights when the subject come up regarding his own life's work. And, that's infectious in a bad way."
What you say is true...and yet might be the difference between having a conscience and not having one.
"Our mission at Bain Capital is to produce superior investment returns for our investors. To accomplish this, Bain Capital follows three fundamental principles that have driven the firm for more than 28 years: a high-performance culture, value-added approach to investing, and leveraging our institutional advantages. Our adherence to these principles has enabled Bain Capital to attract and retain some of the industry's most talented investment specialists, and to consistently generate industry-leading returns."
It does not qualify him in any shape or form, in fact it is going to be the main issue that would utterly destroy him in the general elections if he is the nominee. What is really shocking is that Romney and his supporters are so delusional and so detached from reality that they believe it is "not a problem" for him but rather his most important asset.
This article is a sturdy defense of what companies like Bain do. The problem is that you can already picture how Romney will struggle under the withering and sustained fire of a biased media and an OWS-pandering divider-in-chief. Romney may have the brains to become rich but he lacks the willpower and personality to defend himself forcefully, much less to take the attack to his avowed enemies. It's hard to say if this is some sort of guilt-relfex or humility on Romney's part, but either way, McCain proved that this "approach" will cause another Republican candidate to go down in flames. You can't bring a butter knife to Bastogne.
So Bain irresponsibly piled up debt upon debt on the narrow shoulders of this local steel mill causing its collapse.... and we want this sort of leadership in our next President?
The glaringly obvious thing missing from all defenses of Mitt Romney's equity vampirism while a mercenary job destroyer for Bain Capital as "capitalism" is the intellectually honest preambular statement clarifying that said Romney defender doesn't even know what knowing what he's talking about would look like.
We all know that Mitt Romney, if tasked with going over the checkbook ledgers and expenses of the people he enjoyed firing and finding a way out of losing their homes and having their cars repossessed and falling into poverty would most definitely come up with something akin to "A-HA! These children you're feeding and putting through school are unnecessary family budget items! The Welfare State can pay for that!"
Anyone employing the ludicrous and tendentious argument that Mitt Romney's Gordon Gekko-ism is "capitalism-in-action" should be invited away from the adult table to go champion Obomneycare to Tea Party gatherings.
I'll try but only because the comments are so depressing that so many supposed conservative commenters seem to look on Bain so negatively. I'm no Romney guy but disagree that his involvement in capitalism should exclude him (unless he can't explain it). Read the quoted portions, Mitt, look me in the eye, and try and say it like you mean it.
"During my experience at Bain Capital, many companies couldn't get any financing at all given their company's struggles, whether bank loans or more common forms of equity. At Bain, we invested our own funds in companies we thought had the most potential and used those funds, along with the loans our investments made possible, to grow the business. Anybody that thinks shutting down companies makes money for Bain is way off base because everybody equity investor loses money in businesses that go bankrupt, including Bain. The only exception to US bankruptcy law where equity investors are not the last to salvage some portion of their investment, in front of bondholders, that we've seen is when President Obama used the full force and power of the federal government to steal from holders of GM and Chrysler bonds, who may have been using that money to help finance their retirement, so that he could repay his Union voting bloc, equity investors whom he rewarded with additional equity, all the while stealing from the bondholders to whom US law provides with priority over equity owners."
In response to the inevitable pushback:
"While pure capitalism is not perfect, most of the problems attributed to capitalism are actually the result of CRONY capitalism, such as where the CEO of a private firm ships jobs to China while he is an economic advisor of the President. Or the crony capitalism that occurs when a major campaign donor to the President is provided with taxpayer money to fund a pie-in-the-sky pseudo-investment that can draw no private capital, such as Solyndra. Or the crony capitalism that occurs when the AARP pushes for Obamacare in order to help kill Medicare Advantage in order to reap the benefits of their own product sales. Or the crony capitalism that occurs when a former Speaker of the House has a contract as a historian with a Government Sponsored Enterprise busy over-inflating the housing market in this country and the counter party to that contract is their own executive responsible for lobbying Congress."
And, finally:
"Pure capitalism is what provides the means for successful people to tithe to their church, support charitable causes they favor such as schools, hospitable, and other non-government entitites they believe serve the public good in an effficient and efffective manner, the Salvation Army or the United Way or the Wounded Warrier Project are examples, and it is also capitalism that permits successful people to serve the public in ways such as running the Olympic Games and command a salary of $1 while doing so, as I did. I believe that successful people are blessed to have an opportunity to make a positive contribution to our country without the government having to take more from them to feed the insatiable beast that is the federal government and I have tried to live my life accordingly and make absolutely no apologies for doing so."
If he could manage to do that without stammering through it, I think he could serve something like that up in sound-bite-sized portions quite effectively.
Yes, better to let those companies go without funds from anybody and let them go bankrupt rather than Bain Capital or any other venture capital fund try and make a go of them, eh?
I doubt anyone from the 7 out of 10 companies that prospered as a result of those investments would agree. Moreover, I'd be willing to bet the other 3 appreciated the extra chance to make their business profitable, too.
That would mean the only ones against such investments may simply be political opponents, those envious of Bain's and/or Romney's (overall) success, and those generally against capitalism, none of whom were party to these voluntary transactions. None of whom, in addition, are remotely interested in exactly what a Bain Capital does.
I never attempted to explain Bain Capital to those categories of voters because I'm not sure any Republican candidate even remotely conservative will ever win their votes.
Well done, Surfcat. In the interest of fairness, I think Romney should also offer examples of how the economically abusive practice of crony capitalism has infected the Republican party as well, just to show that business as usual in DC--by either party--will no longer do, and to demonstrate that crony capitalism violates true conservative principles. In other words, pledge that his administration would distance itself entirely from crony capitalism, not just use it as a battering ram against Dems. Also, I'd add to your list of Obama's use of crony capitalism how he used government bailouts of the US auto industry as a spoils system for his Big Labor supporters. That, to me, is one of the most egregious examples because, in addition to being pure crony capitalism, it also creates a complete conflict of interest by conflating labor and management. Essentially, the United Auto Workers now negotiate with...themselves over labor issues.
surfcat - excellent response...concise and to the point. however, you will need to revise the first paragraph in regards to the GM bankruptcy. The UAW members we not equity holders that jumped in front of the bondholders. The UAW had an unsecured debt claim (primarily the unfunded retiree healthcare obligations) equal in priority to the bondholders. The issue with how this aspect of the bankruptcy was handled was that parties with claims equity in priority were handled differently. The bondholders received roughly 10 cents on the dollar in the form of equity in the new company where the UAW received approx 35 cents on their dollar in equity in the new company. Still a bastardization of well settled bankruptcy law though.
Oh my God....I can't believe I am in the same party with you people. OK, you're for Newt, we get it. But your snide, aggressive, dishonest, and rude remarks are not going to endear you - or Newt - to the 30-40% of Americans who are NOT you and who we must have to beat Obama. I don't like you, based on your comments here, and I am much closer to you than the average independent voter. You and your ilk are going to forge an irreperable rift in this party that will only serve to elect 1) Obama and 2) Dems for the next 40 years. Not because you support Newt and not Mitt, but because of the WAY you support him. You are on the cusp of winning, because Obama is so bad, but you are about to screw it up by doing what the Dems did - overreaching because you think you have the advantage. That is why Obama and Dems are where they are after 2008 - they went too far left and didn't match Obama's rhetoric. WE knew it wasn't so, but the 30-40% I spoke of didn't - they do now and they are looking for someone to solve problems and get them out of this hole, not do the same things.
But the hard right candidate hasn't even been elected yet and you are overreaching - and if Newt is our nominee, we will all vote against Obama and he will still win because most of that 30-40% will NOT vote for Newt. Why? Because of the way you are acting now, in the primaries - with your overreach - just shows those people that you will go as far right as the Dems went left if you got Newt in power with a Rep congress. You make it easy for the media and Dems to contrast themselves with you. At least the Dems TRIED to fool them into voting for them, but you are too raw to even put on an act.
Go ahead, get your thrills everytime Newt lashes the media and Obama - it FEELS good. But 4 more years of Obama and a ruined country and a ruined party (for decades to come) will not FEEL so good. And whey are you going to these lengths - being this dirty and unreasoning and hateful? Because Newt is SOOOOO much better than Mitt and Mitt is a bigger danger to our country than 4 more years of Obama?
You have forgotten everything that WFB and Ronald Reagan taught us about winning elections in this country - and governing after the fact. Certainly attacking other Republicans like this is against the 11th Commandment. Not to mention it makes you look like Dems - WE must wind, WE must have power, WE must get what we want because WE are the only ones who are right and good and those other people are EVIL. Well, guess what, that won't sell, folks.
Who, exactly, are you addressing your rant to? If anything, reading the posts on NRO, it's the Romney supporters who have been less civil. Surely you're not lumping all Gingrich supporters in the same pot? And surely you can admit that Romney, had he remained uncontested in the primary stage, would have staggered his way into a hay-maker punch from Obama. If nothing else, Newt is forcing Mitt to either up his game or exit stage left. Newt will either force Mitt to demonstrate he is indeed an able candidate or he'll reveal that Mitt doesn't have what it takes to take an aggressive campaign to Obama. We can't afford to throw another McCain/Dole into the meat-grinder.
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