Network - We're In A Lot Of Trouble!

Network - Mad as Hell Scene

Heads Bain Wins TailsYou Lose

I promised myself when the GOP convention was complete I would focus the same scrutiny upon the upcoming Democratic Convention in Charlotte.

The RNC is far better organized making criticism easier from my point of view. The Democrats are so disorganized it's difficult to find a core to be critical.

I caught a sound bite this morning on a cable news show reporting Bain Capital were nothing more than corporate raiders. When you see Cable, News and Show in a single sentence, I always advise one to be wary.

The charge is Bain and other Private Equity firms pirated the Stock Exchange in true Gordon Gekko style. Hostile takeovers of companies who had solid balance sheets but for various reason were not making good returns for stock holders. The stock drops and in steps Private Equity henchmen in the takeover.

Private Equity invest with 10 million of their own money, borrows $200 million from large banks secured on the assets of the host corporation. Once they have seized control on the Board of Directors the task of piracy begins. Private Equity immediately makes huge manpower layoffs to improve profits. The heartbeat of Research and Development is ended. Then wages and benefit packages of the employees are systematically starved. Employee Retirement accounts are raided and then eliminated. This is a story of corporate cannibalism and the prey is the middle class worker and jobs, jobs, jobs.

New loans are acquired in the cost savings provided by it's workers. The company is now burdened with huge debts and excessive management fees from the parasite Private Equity. $20 million dollar salaries are common and obscene bonuses are normal. The once profitable company is now on a fast track to bankruptcy. Investors at Bain will make average returns. The top management at Bain will make outrageous fortunes, all from the sweat of the American worker.

The profits of the host corporation are not central to the deal. The focus on the takeover is making profits from only the takeover process. Private Equity never losses a dime and the profits of the host corporation are mostly ignored in collateral damage. The host corporation's survival depends upon it's sole output from workers. The Private Equity initial investment yield returns of $200 million over 3 or 4 years.

Certainly not the story recounted by Mitt Romney on the campaign trail. Mitt's story is not a story of making fortunes raiding the middle class corporations. Mitt seems to focus on jobs that were saved and profits returned. Mitt completely glosses over the fact that the employees wage reduction, layoffs and benefit packages financed the entire story. Not upper management gurus keen sense of business.

This was not a surprise for me, the practice has gone on for many years. The Harley Davidson story was one I was most familiar. Legendary nameplates on tough times skids on the stock market and are then caught in the focus of Private Equity raiders.

The story of Bain on the campaign trail is much different than the story I read in Rolling Stones dated August 29, 2012 written by Matt Taibbi. I think everyone should read this article who intends to vote in November.

The Rolling Stone article reports on several victim corporations. American Pad and Paper, Marion, Indiana and KB Toys, Pittsfield, Massachusetts are both far removed from Wall Street in New York but, not out of reach from the pirate henchmen on the seas of high finance.

This is not intended to be a referendum on the election, Republican or Democrat. The Stone article goes on to point out this activity is first within the law. Second it points to the tax code that allows Private Equity to deduct interest payments from tax obligations. Third, Private Equity is entitled to reduced taxes 13.9% on investments versus income, also found in the tax code. The tax code is the largest weapon in the Private Equity arsenal.

Both Democrats and Republicans have had opportunities to change the tax code and stop the piracy in the Stock Markets. Obama is the accomplice to the crimes committed by Romney and the looser is We The People.

The Democratic National Convention