“Blind Trust Ruse”: Romney Does Not Dispute He Profited From Foreclosures In Florida
ThinkProgress reported Wednesday that former Massachusetts Gov. Mitt Romney (R) has profited from thousands of Florida foreclosures through a Goldman Sachs investment fund. Former House Speaker Newt Gingrich (R) blasted Romney on the trail today for those investments, and re-upped those attacks in tonight’s CNN debate.
Romney attempted to explain away the investments, saying he didn’t control them because they were part of a blind trust:
GINGRICH: Governor Romney has investments in Goldman Sachs, which is today foreclosing on Floridians. So maybe Governor Romney, in the spirit of openness, should tell us how much money he’s made off of how many households that have been foreclosed by his investments.
ROMNEY: First of all, my investments are not made by me. My investments for the last 10 years have been in a blind trust, managed by a trustee. Secondly, the investments they’ve made, we’ve learned about this as we made our financial disclosure, have been made in mutual funds and bonds. I don’t own stock in either Fannie Mae or Freddie Mac. There are bonds the investor has held through mutual funds. And Mr. Speaker, I know that sounds like an enormous revelation, but have you checked your own investments? You also have investments through mutual funds that also invest in Fannie Mae and Freddie Mac.
Watch it: http://youtu.be/A8Dg4wpZNRo
Notably, Romney never denied the charge that he made money off of foreclosures. Later in the debate, Romney was asked about the $3 million he kept in a Swiss bank account before it was closed in 2010. Again, Romney attempted to brush aside the question, saying, “I have a trustee” who manages a blind trust.
Romney’s reliance on blind trusts is interesting, considering it was he who called them “a ruse” when running against former Sen. Ted Kennedy (D) in 1994. And as ABC News noted, the trusts are “not so blind,” since they have been noted on his financial disclosure forms. The trusts are also maintained by Romney’s personal lawyer and don’t meet federal standards for elected officials. Romney’s original investments into Fannie Mae and Freddie Mac, meanwhile, were never in a blind trust.
By: Travis Waldron, Think Progress, January 26, 2012
Mitt Romney, “Hero of Finance”
Romney’s backers say he did the tough work needed to restructure the economy. Actually, he seized opportunities that the tax, securities, and bankruptcy laws should never have given him.
“Creative destruction” is Mitt Romney’s best defense for his career in private equity and the trail of displaced workers some of his ventures left behind. The idea comes from the economist Joseph Schumpeter, who argued that capitalism generates economic growth through “gales of creative destruction” that sweep away obsolete technologies and products. As Romney’s advocates have it, that’s what his firm, Bain Capital, has advanced—painful economic changes that are essential to a rising standard of living.
If Romney made his fortune that way, he deserves the praise that some conservatives have lavished on him for contributing to American competitiveness. But that isn’t the whole story. Much of the work of Bain and other private—equity firms has little to do with the kind of wrenching Schumpeterian change that contributes to growth, still less to the job creation for which Romney claims credit.
Technological innovation was at the heart of Schumpeter’s vision, and no one today objects to the role of venture capital in financing tech start-ups or to the re-engineering of businesses to take advantage of new technology. Reorganizing firms to exploit special provisions in tax, securities, and bankruptcy laws is a different proposition. That kind of restructuring can be immensely profitable, transferring wealth to investors while making no positive contribution to growth and employment.
The standard operating procedure for private equity has been to buy firms, take them private, and load them up with debt. By taking them private, the new owners escape from the securities laws, which apply only to publicly traded companies. By loading them with debt, they cut the companies’ taxes because the interest is fully deductible from profits, and they use those tax savings to pay themselves generous fees and dividends. If an overleveraged enterprise then fails, they take it into bankruptcy, firing workers and stiffing creditors even though their own firm has already pocketed large gains. And because private-equity partners can receive those gains as “carried interest” (taxed only at 15 percent), they benefit from special legal advantages in yet one more way.
This kind of restructuring doesn’t just siphon off wealth; it can also interfere with genuine innovation because debt-burdened companies are sometimes starved for capital to invest in new technologies and products. Private equity has generally sought a high return with a quick exit instead of providing patient capital for long-term gains. That’s great for those who are in on the deal, but not for the national economy.
Private equity has also contributed to a broader change related to rising economic inequality. Instead of corporations serving a complex of interests—owners, workers, and communities—they have increasingly become wholly dedicated to maximizing returns to owners. This “shareholder-value revolution” has helped to drive the overexpansion of the financial sector and to funnel the gains from economic growth into fewer hands—Romney’s, for example.
That Romney served investors well at Bain, no one doubts. That’s not a credential, however, for solving the nation’s problems. We ought to be reducing the incentives for the maneuvers that enriched Romney—for example, by cutting the deductibility of interest on debt incurred in acquiring companies and raising taxes on “carried interest” so that financiers pay no lower a tax rate than the rest of us. Good luck with that in a Romney presidency.
There is a larger point about Romney’s career and good public policy. The turmoil in the private economy, whether generated by creative destruction or financial manipulation, is a reason we need progressive government. Individual firms cannot be counted on to retrain workers for new jobs or to provide them with long-term security; the very instability of private employment is why workers need to be able to count on government when they get displaced to help them obtain the education and skills to adapt. The best “national innovation systems” minimize the harms to workers while advancing technological progress.
Schumpeter’s 1942 classic, Capitalism, Socialism and Democracy, was a dour book. A true believer in capitalism, Schumpeter nonetheless thought it was doomed because people wouldn’t put up with creative destruction, and businessmen lacked the heroic qualities to become effective political leaders. He was wrong on both counts. Instead of resisting innovation, we welcome it, and some business leaders, like Steve Jobs, have become popular heroes.
But Romney is no Jobs, and even his most successful investments—Domino’s Pizza, Staples, and Sports Authority—don’t quite make him a Schumpeterian hero. There is one good thing about his candidacy, though. It highlights the inequities that have helped make people like Romney so wealthy and powerful.
Mitt Romney’s Mormon And Evangelical Divide
In the Republican nomination contest, where evangelicals represent a broader segment of the voting population than the general election, it’s widely accepted that Mitt Romney’s Mormon faith could cost him. Romney’s tax returns brought his faith back into the limelight when it was revealed that he does in fact tithe around 10 percent of his earnings to the Church of Jesus Christ of Latter-day Saints, as dictated by church rules.
Yet, in the weeks preceding the Iowa caucuses, I didn’t run across a single Republican who had ruled out Romney on the basis of his religion—or at least no voters willing to admit as such to a reporter. The worst I would get from the Iowans was concern that other people in the general election would be hesitant to cast their ballot for a Mormon, though they themselves were of course not influenced by that factor.
I arrived in Florida this week to cover the last few days of the Sunshine State’s primary, and at the very first event I attended, one voter made no qualms about why she wouldn’t be supporting Romney. “Mitt Romney is a Mormon, and therefore I have some issues with that,” said Peggy Bennett, a nurse from Cocoa. We were speaking in a crowded ballroom before Newt Gingrich’s big speech on space policy. When I asked her what specifically concerned her about the Mormon faith, Bennett said, “anything that adds to or takes away from what the bible says is not of God.” She said she was torn between Gingrich and Rick Santorum in the primary, but did clarify that she would support Romney in the general election if he wins the nomination.
I don’t want to extrapolate too much from one random voter, but many voters in the room noted that Gingrich’s tone matched evangelical interests. “From his moral standards, he pretty much thinks in the Christian and the evangelical side of things,” said Pete Bell. The central Florida corridor that might decide next Tuesday’s election is dotted with mega-churches featuring congregations with thousands of members who all share common convictions. In fact, the overflow parking for the Gingrich event was across the street from a small evangelical church.
This is the land of exurbs and subdivisions; despite high statewide unemployment and foreclosures there are still plenty of gaudy displays of wealth. When Romney campaigns in central Florida perhaps he can finally let loose among his fellow rich Americans. But while few voters may be as direct as Bennett on classifying their exact reason to oppose Romney, he’ll need to assure many that being a Mormon doesn’t threaten their evangelical faith.
By: Patrick Caldwell, The American Prospect, January 26, 2012
Romney Failed To Disclose Swiss Bank Account Income
Mitt Romney‘s campaign is amending the financial disclosure forms he filed in 2007 and 2011 to acknowledge that a Romney trust held a Swiss bank account, a detail that had been missing from both reports.
“An amendment is being filed to address this minor discrepancy,” a campaign official told ABC News in an email Thursday in response to questions about the apparent omission.
The discovery that the Romneys had $3 million in an account with the Swiss bank UBS came only after the Republican presidential candidate released his tax returns for 2010 on Tuesday. The campaign had maintained that it was not necessary to disclose the Swiss account because Romney’s money manager, Brad Malt, had shuttered it in early 2010.
Several Republican election lawyers told ABC News Thursday that the account still needed to be disclosed because a Romney trust earned about $1,700 in income on the account during 2010. The campaign’s decision to amend the forms was first reported by the Los Angeles Times.
At the same time, questions from ABC News about undisclosed income that appeared on Newt Gingrich‘s tax return have led Gingrich to announce that he, too, will be amending his financial disclosure report. Gingrich’s returns showed he received $252,500 in wages from Gingrich Holdings Inc. in 2010, but those wages do not appear anywhere on his presidential disclosure report.
“An internal account review found the need to amend the reporting,” said a Gingrich campaign official. “It was done immediately.”
Romney also decided to amend the report from his 2007 run for president, a decision first reported by the New York Times. Those who track the finances of presidential candidates said they found the failures to disclose these key financial details distressing. Bill Allison, editorial director of the non-profit watchdog group the Sunlight Foundation, said the whole purpose of the disclosure reports is for candidates to provide an honest look at their finances to voters.
“Obviously, if you don’t give them the information before the vote, it defeats the whole purpose of disclosure,” Allison said.
Melanie Sloan, executive director of the non-partisan group Citizens for Responsibility and Ethics in Washington said she, too, was dismayed — noting that while in Congress, Gingrich had been called out for failing to include information on his disclosure reports.
“You’d think someone once sanctioned by the House of Representatives … would be a little more careful with his financial disclosure forms,” she said.
The discovery that Romney’s vast holdings included an account in Switzerland, a country long notorious for helping the very wealthy hide their assets, came during his release of his tax return earlier this week. Malt, who oversees Romney’s blind trusts, acknowledged during a conference call with reporters that he decided to shut down the Swiss account because he worried it could create a headache for Romney’s campaign. “It might or might not be consistent with Governor Romney’s political views,” he said. “The taxes were all fully paid … it just wasn’t worth it. And I closed the account.”
That suggests, Allison said, that the campaign had a motivation to exclude any evidence of the Swiss account from the candidate’s forms. The Romney campaign called the omission an oversight.
Allison noted that there is generally no penalty for a candidate who leaves something off a disclosure report, and then goes back to amend the report if the missing information is discovered.
“Nobody is going to get into trouble for this,” he said. “That is the problem with the disclosure system.”
By: Matthew Mosk and Brian Ross, The Blotter, ABC News, January 26, 2012
GOP: Incoherent Party, Incoherent Candidates
Republicans are clearly not too enthused about Mitt Romney. Nor are they wild for any of the alternatives. This week Ross Douthat wrote a column arguing that it’s no surprise the current crop of Republican presidential candidates is no great shakes since, well, great presidential candidates are pretty rare animals. He then wrote a blog post arguing that the whole problem could have been avoided if the better Republican candidates, particularly Mitch Daniels, hadn’t decided not to run this year. Daniel Larison ridicules this notion; the fantasy candidates, he says, look strong because they haven’t been subjected to the withering attacks real candidates have to face. The ones Mr Douthat touts “don’t have the qualifications that Romney has, they all have their own weaknesses with conservatives and/or with the general electorate, and all of them decided for various reasons to save themselves the trouble, toil, and humiliation that a presidential bid would have entailed.”
Jonathan Bernstein takes Mr Larison’s point a step further and imagines what it would have taken to give Republicans a candidate they could get enthusiastic about.
What Republicans could have used both this cycle and last is a candidate who raised no suspicion from any important party faction and also had conventional credentials. Rick Perry, Tim Pawlenty, and perhaps Fred Thompson all came close, but none of them really achieved that. Given the GOP’s wild pivots on so many issues over the last decade, perhaps no one can, and someone like Romney — who holds orthodox views on all issues right now, but hasn’t for long enough to build long-term trust — is the best they can do.
This is an extremely important point to keep in mind. Mitt Romney looks like a weak phony in this election campaign because he has to pretend to believe with all his heart in orthodox tea-party conservative positions that he transparently doesn’t really believe in. We know this because in the past, Mr Romney supported health-care reform including an individual mandate along the lines of the system he instituted in Massachusetts, essentially the same system as Obamacare. And in the past, he supported a cap-and-trade system for limiting greenhouse-gas emissions to address climate change. But at the time, both of those were orthodox Republican Party positions. The fact that they are anathema today is a legacy of the reactionary fury that has driven the party for the past three years. Conservative voters responded to their epic loss in 2008 with a partisan kulturkampf that labeled every major initiative launched by the Obama administration socialism, and declared the very existence of global warming to be some kind of Communist-scientist hoax. There were very few established Republican politicians who hadn’t taken positions in the George W. Bush era (or the Newt Gingrich era!) that pose ideological problems for them in the tea-party era. Mr Gingrich himself can fleetingly outrun the problem because, like most voters, he has the long-term intellectual consistency of a goldfish. But YouTube never forgets.
Republicans’ disenchantment with their current presidential candidates is not an incidental characteristic of this crop of candidates. It’s a structural feature of a contemporary Republican Party whose pieces don’t hang together. Pro-Iraq-war neoconservative Republicans cannot actually live with Ron Paul Republicans. Wall Street-hating anti-bail-out Republicans cannot actually live with Wall Street-working bail-out-receiving Republicans. Evangelical-conservative Republicans cannot actually live with libertarian, socially liberal Republicans. Deficit-slashing Republicans cannot live with tax-slashing Republicans. Medicare-cutting Republicans cannot live with Medicare-defending Republicans. These factions have been glued together over the past three years by the intensity of their partisan hatred for Barack Obama, and all of the underlying resentments that antipathy masks. Republicans have buried their differences by assaulting everything Mr Obama supports, and because Mr Obama is a pretty middle-of-the-road politician, that includes a whole lot of things that many Republicans used to support. They are disenchanted with their candidates because their candidates are incoherent, but their candidates are incoherent because the base is incoherent. If the GOP wins this election, the party’s leaders are going to be confronted with that incoherence pretty quickly. Unfortunately, so will the rest of us.
By: M.S., Democracy in America, The Economist, January 24, 2012
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