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    Bringing up Romney’s Bain problem is not “socialist”

    Bringing up Romney’s Bain problem is not “socialist”

    Charles Krauthammer said Newt Gingrich was speaking like a “socialist” because Newt, responding to Mitt Romney’s demand that Newt give back the consulting money he earned from Freddie Mac, said that he’d consider it if Romney gave back the money he earned from bankrupting companies and laying off workers.

    George Will calls it a “capital crime,” and an attack on capitalism.  Wrong.

    While Gingrich’s comments were ill-advised on a number of levels, it was not an attack on capitalism or socialist to criticize certain types of predatory takeover practices which were epidemic in the 1980s and 1990s.

    What we saw then, in a number of cases, were not true turn-around situations, but  stripping companies of assets both explicitly and through extraordinary management fees, leaving a shell of a company and unemployed workers. It may not have been illegal, but it certainly was not something to praise.

    I don’t know if Bain under Mitt Romney’s tutelage engaged in such practices.  Certainly many people have made the case that it did, and it was used to great effect against Romney in his loss to Ted Kennedy.

    A Boston Glove article in 2007, reprinted here, made the case regarding the takeover of Ampad:

    In 1992, Bain Capital acquired American Pad & Paper, or Ampad, from Mead Corp., embarking on a ”roll-up strategy” in which a firm buys up similar companies in the same industry in order to expand revenues and cut costs.

    Through Ampad, Bain bought several other office supply makers, borrowing heavily each time. By 1999, Ampad’s debt reached nearly $400 million, up from $11 million in 1993, according to government filings.

    Sales grew, too – for a while. But by the late 1990s, foreign competition and increased buying power by superstores like Bain-funded Staples sliced Ampad’s revenues.

    The result: Ampad couldn’t pay its debts and plunged into bankruptcy. Workers lost jobs and stockholders were left with worthless shares.

    Bain Capital, however, made money – and lots of it. The firm put just $5 million into the deal, but realized big returns in short order. In 1995, several months after shuttering a plant in Indiana and firing roughly 200 workers, Bain Capital borrowed more money to have Ampad buy yet another company, and pay Bain and its investors more than $60 million – in addition to fees for arranging the deal.

    Bain Capital took millions more out of Ampad by charging it $2 million a year in management fees, plus additional fees for each Ampad acquisition. In 1995 alone, Ampad paid Bain at least $7 million. The next year, when Ampad began selling shares on public stock exchanges, Bain Capital grabbed another $2 million fee for arranging the initial public offering – on top of the $45 million to $50 million Bain reaped by selling some of its shares.

    Bain Capital didn’t escape Ampad’s eventual bankruptcy unscathed. It held about one-third of Ampad’s shares, which became worthless. But while as many as 185 workers near Buffalo lost jobs in a 1999 plant closing, Bain Capital and its investors ultimately made more than $100 million on the deal.

    Again, nothing illegal, but certainly fair game in evaluating Romney’s claim to business acumen and ability to turn around the economy and create jobs.  And bringing it up was no worse than Romney demanding that Gingrich return money he lawfully earned for consulting Freddie.

    Don’t think shutting Republican candidates up about it is going to make the problem go away.  You can be sure that Obama researchers have spent months if not years digging into old Bain deals and digging up similar instances:

    Romney’s opponents in both parties have already begun preparing files on his Bain years, raising the prospect that a drip-drip of opposition research could  sap Romney over the course of a long campaign.

    “The Romney people are going  to have to say he helped the economy and Bain Capital invested in startups and  created jobs. He’s going to want to talk about Staples,” said former Mike  Huckabee campaign manager Chip Saltsman. “His opponents are going to want to  talk about the ones where he came in and bought everything and sold everything.”

    Romney is going to have to deal with his Bain history.  Criticizing any predatory practices — if they took place — is not talking like a socialist.

    How bad the Bain problem will be if Romney is the nominee against Obama remains to be seen.  It is another of Romney’s “known unknowns.”  Better we find out now.

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    Astroman | December 14, 2011 at 2:27 pm

    I’m sorry, this was a total loser for Newt any way you slice it. Even if we suppose that Bain was predatory in nature, it still can’t compare to the Freddie/Fannie fiasco.

    Moving beyond the substance, Newt’s answer did sound like something from a OWSer.

    This is why Newt won’t win the primary – there will be plenty more of these “mouth moments” to come.


     
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    eaglewingz08 | December 14, 2011 at 2:39 pm

    I don’t see anything wrong with the comment. If you are saying you know how to create jobs, but your job was to fire masses of employees and strip the companies of its capital in the name of capitalism, that is a fair criticism. It may be that after the 1990s Ted Kennedy loss, Romney modified Bain’s practices to insulate himself from further attack on this level, as he is wont to do.

    How is Newt going to defend his FDR fetish?

    I think by looking at his comments as coming from the academic historian’s perspective, rather than from personal values or political beliefs. Consider Santorum’s comments at the last debate, in which he credited Gingrich as his mentor for political conservatism.

    It would be difficult to dispute that FDR was a masterful politician, that he successfully moved his agendas, that he established an enduring legacy, that he considered the U.S. to be a great country, and that he changed the direction of the federal government. Recognizing these personal and political abilities and achievements does not, I think, mean an endorsement of his policies in the retrospection of 20-20 hindsight. One could also call Mao Zedong the greatest 20th century leader of China, while still detesting communism and the misery wrought by many of his policies.

      I understand what you’re saying. But Newt talks long and often. There are tons of such clips. Here’s one in which Newt talks about FDR and Wilson:

      http://youtu.be/T76lD4zV1bo

      In it Newt says: “The Four Freedoms [of FDR] still work.”

      FDR’s Four Freedoms include the freedom from want and the freedom from fear. These freedoms are the foundation of the American welfare state.

      My point is Newt has a lot of ‘splaining to do to conservative voters. How long will it be before Newt’s explanations of his apparent infidelities begin to sound as improbable as Herman Cain’s?


         
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        janitor in reply to Sherman Broder. | December 14, 2011 at 6:23 pm

        The Four Freedoms are:

        1.Freedom of speech and expression
        2.Freedom of worship
        3.Freedom from want
        4.Freedom from fear

        I understand that you might disagree strongly, as might I, with liberals about how to achieve these goals and what would best accomplish them (not big brother government). But would you say that “freedom from want” (“want” meaning the misery of hunger, poverty and the like — not “desire”) is a bad thing? It is what best would be provided, e.g. by a booming economy and opportunity. It does not have to mean that we also buy the means that we get there with a welfare state.

        Similarly, a strong military, representative government, and the rule of law gives us freedom from tyranny as well as worry that any day, regime change means the government can take our property — or our lives (examples of real fears faced by those in other countries and very much on people’s minds in WWII regarding Europe).

          Well, I like your interpretation. However, freedom from want is almost universally understood as the responsibility of government, and freedom from fear as world disarmament.

          FDR’s actions in office and his general philosophy of government give credence to such an understanding. Why try to paper over the obvious?


     
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    Midwest Rhino | December 14, 2011 at 4:36 pm

    Newt needs to explain it all .. and give us a “contract with conservatives” on what he will stand for as president.

    Put specifics in writing Newt … be as wordy as you need to be … web pages are cheap. (Same for you Mitt)


     
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    Henry Hawkins | December 14, 2011 at 4:48 pm

    In that he’s approaching the 50% benchmark in the polls, I’d say Gingrich doesn’t have to his FDR remarks. Most of his GOP opposition is entrenched, will refuse any explanation, and simply move on to some other complaint about Gingrich. This is pure Politics 101 – keep your opponent always on the defensive. It’s the same gambit used against outsiders Palin and Cain.


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