In the end, the government surrendered. At the time, The Boston Globe cited bankers dismissing the bailout as “relatively routine” – but the federal documents reveal it was anything but. The FDIC agreed 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.
I think Romney’s kind of a d-bag, but… let’s recall that this particular *bailout* by the FDIC is really a bailout by… the banking industry itself, as it’s the banks that pay a portion of their profits (based on total deposits) to the FDIC to capitalize the insurance fund. So, while I agree that Romney’s maneuverings here are sleazy… I’m curious as to why folks care about how the 1% go about screwing each other – here Romney simply outfoxed his Banksters, and the industry as a whole plugged the hole.
This applies to the money lost in Bain’s failed LBOs as well – it’s the banks and other creditors that took the hits, not taxpayers. Again, who cares how the 1% goes about screwing each other?
The job destroyer/job creator issue is much more complicated. Personally, I think that net/net most LBOs are destroyers of jobs, but… it’s probably not as insidious as it appears on the surface.
Take the KB Toys example. Yeah, they screwed that up bigtime. Lots of jobs lost… at KB Toys. But I’m pretty sure all of the toys no longer sold by KB were sold by someone else, so jobs were created at those other companies. And some of the folks who lost their KB Toys job were probably happier in their new jobs and/or started small businesses themselves. Again, net/net jobs were almost certainly lost and in many cases the new job sucked worse than the KB Toys job – I’m not an apologist for the LBO industry. But… the industry’s not quite as evil as it’s portrayed although clearly the “value added” is questionable, at best. Generally, piling debt onto a company simply because you can – or think you can – is a dubious business strategy. But it has certainly served the 1% well!![/quote]
And the profits of those banks are, for the most part, paid for by consumers. If bank executives had their compensation slashed in order to pay these costs, it would be one thing, but I sincerely doubt that’s what happened here (could do some more research on this, and will try if I find the time). Romney screwed the banks, and the banks likely screwed their customers (or other employees) in order to make up for the losses.
I don’t distinguish between “taxpayers” and “consumers.” Taxpayers are simply consumers of government services. Whether or not we are being ripped off is all that matters, not whether or not those ripping us off are wearing a “private sector” hat or a “government” hat.[/quote]
True, but you’re only looking at one side of this issue. Just as consumers subsidize losses so are they subsidized by other consumers’ profitability. For example, the 80/20 rule typically applies for most banks, especially the largest ones. So, the largest 20% of a bank’s customers – almost all corporate customers – are the really profitable customers and subsidize the vast majority of the others. (On average, 2/3 of bank customers are not profitable or barely so. Voluminous regulations make it very difficult to get rid of them.) So, yes, customers theoretically pay some portion of the losses generated by corporate customers that generate those losses (as they are passed on). But most customers also benefit from the subsidy of the largest (corporate) customers that actually make the bank profitable. I don’t see anyone defending these corporate customers for this subsidy. Instead, most folks just focus on the corporations that cause the losses and end the analysis there.
Likewise, yes, Bain Capital has no doubt done some unsavory things in its pursuit of profits. Things that have not benefitted the middle class. However, many of Bain’s largest investors have been public pension funds (I saw a list recently – it included SDCERA) who have reaped huge gains by investing with Bain. Those gains go toward paying the pensions of mostly middle-class folks. My point is that all of these issues are much much more complicated and far less black-and-white than most in the media would have us believe.
