“The Man Without a Past”: Mitt Romney, A Barbarian At The Gate?
Mitt Romney has an identity problem. He is running for president by making promises about America’s future, but as a man who is largely without a past. Not only has Romney renounced many of his previous positions — on abortion, immigration, gun control, climate change, and the individual mandate he once championed as Massachusetts governor. He also refuses to divulge many details about what even he has said is his main qualification for the White House in a faltering economy: his successful career in “private equity” from 1984 to 1999 (or thereabouts).
What is it about the private equity world that Romney doesn’t appear eager to bring up? As I explain in an article in the current issue of National Journal, “Mystery Man,” Romney was basically what used to be known as a “barbarian at the gate.” The term “private equity” sounds respectable, but it is a euphemism for the old leveraged buyout deals we remember from the 1980s, the era of corporate raiders like T. Boone Pickens and Henry Kravis. After junk-bond king Michael Milken, who funded a lot of those takeovers, went to jail, the industry decided to rename itself in order to remove the taint.
This is Mitt Romney’s true world. As the founder of Bain Capital, Romney became a brilliant LBO buccaneer who specialized in buying up firms by taking on a lot of debt, using the target firm as collateral, and then trying to make the firm profitable — often by breaking it up or slashing jobs — to the point where Bain and its investors could load up the firm with even more debt, which Bain would then use to pay itself off. That would ensure a profit for Bain investors whether or not the companies themselves succeeded in the long run. Often, burdened by all that debt, these bought-out companies did not succeed, costing thousands of jobs as they were downsized, sold off and shuttered. Other times they did phenomenally well, as in the case of Sports Authority and Domino’s Pizza.
But job creation is irrelevant to Bain’s business model, which is all about paying back investors. Nor does the long-term fate of the companies that private-equity firms buy up matter crucially to Bain’s bottom line (though of course success is better). The only real risk for Bain is that these companies fail to make enough initial profit in order to permit Bain to pile on more debt and extract a payout, so that it can make back its investment quickly.
Though he started off dabbling in less profitable “venture capital,” Romney quickly saw the high-return, low-risk potential of LBOs in the mid-1980s and ultimately was involved in about 100 such deals, which made him a true Wall Street tycoon. He then maximized his take further by socking away his gains in offshore shelters from Bermuda to the Caymans and using capital gains tax breaks and loopholes to reduce the rate of his 2010 tax return (the only one he’s released) to 13.9 percent, a far lower rate than the one paid by middle-class Americans. Many of Wall Street’s big dealmakers do the same with their profits, employing whole teams of international tax accountants.
But none of these dealmakers has ever run for president. This is perhaps the main reason for Romney’s reticence: It’s not just that being honest about Bain’s real business pulls back the veil from the ugly heart of financial capitalism. It’s also that this may be the hardest year since 1932 for a Wall Street big-shot to make a bid for the White House: The former Masters of the Universe remain unpopular because of the historic recession they did so much to create. So it’s hardly a surprise that Romney won’t dwell on practices that his onetime GOP primary opponent, Texas Gov. Rick Perry, labeled “vulture” capitalism.
None of this is necessarily disqualifying for a presidential candidate; on the contrary. Americans have always admired business success, no matter what package it comes in. It is part of the nation’s lore going back to the rags-to-riches tales of Horatio Alger and F. Scott Fitzgerald, and the storied careers of Andrew Carnegie and J.P. Morgan. Romney is undoubtedly one of the most successful capitalists ever to run for president. Based on his record at Bain, as governor, and at the Olympics, there is little doubt that he is a numbers whiz who is handy with a budget, and America has serious budget problems. “At the end of the day, people are going to know Mitt Romney was a super-successful businessman, and they’re going to factor that in,” says Vin Weber, a senior Romney adviser. “And most people will find that attractive and not negative.”
Maybe so. But as the Obama attacks persist, even some in the Romney camp fret that they are watching a Democratic version of the attacks that permanently defined Michael Dukakis as weak in 1988 and “Swift-boated” an unresponsive John Kerry in 2004. “That worries me a little bit,” Weber admits.
The Obama attacks also may be resonating because they compound an image of aloofness, of detachment from the lives of ordinary Americans, which has dogged Romney for many years. He is hardly the first rich man to run for president, yet he lacks the populist touch of previous successful candidates. Franklin Delano Roosevelt also came from a wealthy patrician family, but by the time he ran for president as a polio victim who had suffered among the people in Warm Springs, Ga., FDR had reputation for transcending that background. So did John F. Kennedy, whose father’s vast but somewhat shady Wall Street fortune financed a rich-kid bid for Congress, the Senate, and then the presidency. But JFK’s charisma and war-hero reputation, and his ability to connect with people — for example, by famously telling a hushed crowd of mothers who had lost sons in World War II that “I think I know how you mothers feel, because my mother is a Gold Star mother too” — made him a popular figure.
Not so Romney. His record contains few such man-of-the-people moments (ironically, his best argument may be his successful health-care law in Massachusetts, another thing he doesn’t want to talk about). And his uncommon Mormon religion, about which he is also reticent, further contributes to the image of a Man Hard to Know. This is the same Romney who declared during the hard-knocking primaries that the $350,000 he earned in speaking fees wasn’t a lot of money, who said that his wife drives a “couple of Cadillacs,” who grinningly bet Rick Perry $10,000 on a whim, and who boasted that even wealthy Ted Kennedy had to “take a mortgage out” to beat him. And those are moments when Romney was trying to be one of the guys. What has become clear is that he is part of a world of super-elites who live in a universe apart from most Americans.
Romney may well make a very good president. But we should know who we’re getting.
BY: Michael Hirsh, The Atlantic, July 21, 2012
“Preserving Political Viability”: Learning “How To Be An American” Capitalist, Non-Sununu Style
The first indicators came during the Republican primaries, when former House Speaker Newt Gingrich and Texas Gov. Rick Perry attacked Bain Capital-style capitalism. Perry even branded onetime Bain CEO Mitt Romney a vulture capitalist. The season has moved on — in fact, Perry campaigned for Romney last week in Elk City, Nev. – and the rhetoric has subsided.
But the reality is turning out to be quite problematic for Romney. Some kinds of free enterprise – such as a small family business – are perfect resume entries for a political candidate. But certain kinds of high-flying capitalism come across as cold-blooded and indecipherable, and they’re vulnerable to attack. Anything that involves the phrase “creative destruction,” for instance, would be risky.
What Romney is going through now is an experience neither major party may want to repeat. So if you are interested in running for president, here’s how to preserve your future viability:
1. Get rich the old-fashioned way. Create a product or service or business. Write a best-seller, like President Obama did. Run a successful company, like Herman Cain did. Jump on a trend early, like Virginia Sen. Mark Warner, who saw the potential of cell phones.
2. When you file your tax returns, imagine they will be on the homepages of every website in the world. Be prepared to defend your low tax rate and explain how you’ve used your untaxed money to create jobs. Alternatively, say you’d like to change the tax code so people like you pay more.
3. Related: Keep your money in the United States. Do not shelter income in Switzerland, Bermuda, the Cayman Islands or anywhere else. Repeat: keep the money at home.
4. If you have a lot of money, give away a lot of money. Think Bill Gates and Warren Buffett. If you have enough excess cash, you might be able to help eradicate AIDS or revolutionize inner city education. Tithing to your church and creating trusts for your kids don’t count.
5. When you leave a position, leave the position. Make a clean break. If you don’t, you will have a hard time arguing you are not responsible for what happened after you kinda-sorta departed, but were still CEO and sole owner. Sure, you may not be able to claim credit for good things that happen after you’re gone. But you won’t be on the hook for developments that are politically unpalatable, and possibly a serious threat to your presidential hopes.
By: Jill Lawrence, The National Journal, July 16, 2012
“Magic Word Gaffes”: So What If A Few Facts Get Bent Or Invented Along The Way
Reading a lot of conservative posts last night and this morning (unfortunately, just part of the gig here), I was mystified at the conviction of so many people that the mangled clips of the president’s “you didn’t build that” quote from Roanoke provided a gigantic, “aha” moment in the campaign that would drive Obama from the White House like a whipped Kenyan dog. The money quote that most of them are tossing around comes from the deep thinker Pat Sajak:
It’s as if President Obama climbed into a tank, put on his helmet, talked about how his foray into Cambodia was seared in his memory, looked at his watch, misspelled “potato” and pardoned Richard Nixon all in the same day.
Really? I mean, even if you buy the twisted, mendacious version of the Obama quote that the Romney campaign is retailing, are Americans really so protective of the tender sensibilities of business owners that they are shocked anyone would suggest that each and every one of them built their businesses strictly on their own? (Aside from from roads and bridges and inheritances, how’s about employees as a significant factor in business success?).
But then Dave Weigel explained it to me:
Call it a magic word gaffe—a statement that reveals not what a politician believes, but what you already feared, in your bone marrow, that a politician believes. Democrats still can’t understand why Obama’s speech is supposed to offend anyone. Republicans know that he’s a closet socialist, and that this sentiment only comes out when his energy is flagging….
A normal gaffe is usually discovered by the “mainstream” press, or by a rival campaign, in real time. Think about the Obama campaign hounding John McCain on his “the fundamentals of the economy are sound” as Lehman collapsed. Think about “the private sector is doing fine” becoming proof, for Romney, that Obama saw no problems in the private sector. The magic word gaffe takes more digging, because the media that mostly covers campaigns aren’t primed to hear what partisans hear.
Barack Obama’s presidency has been full of these moments. If you watched Glenn Beck during his Fox News years, you got endless exposure (more than 100 episodes of it, according to Lexis-Nexis) to an Oct. 30, 2008 quote from an Obama rally in Columbia, Mo. “We are five days away from fundamentally transforming the United States of America,” said the candidate.
Bingo. The “magic word gaffe” is sort of the inverse of the “dog whistle” whereby pols use banal language that has a special meaning to ideologues (“constitutional conservative” being one notable example; “respect for life” being another). For our right-wing brothers and sisters, progressive (itself a magic word—maybe even a secret handshake—connoting Marxist convictions) discourse is full of these signifiers. “Equality.” “Fairness.” “Giving something back.” “Shared sacrifice.” Constant vigilance for these magic words is how conservatives have convinced themselves that the blandly pragmatic center-left politician Barack Obama pursuing leftover moderate Republican policies is a villain-figure straight out of Atlas Shrugged or (for the godly) Left Behind, hating success and righteousness.
The problem with this stuff, of course, is that the low-information swing voters who will decide the present election will require an awful lot of education to understand the magic word gaffes. They haven’t marinated their brains with Beckian revisionist history and don’t run around pasting “Breitbart Is Here!” posters on telephone poles. Many of them, in fact, probably don’t own businesses and don’t much think of their own bosses—much less the Mitt Romneys of the world—as heroic figures. So the nastiness aimed at Obama will inevitably get a lot coarser than what we are hearing today. So what if a few facts get bent or invented along the way? America must be protected!
By: Ed Kilgore, Contributing Writer, Washington Monthly Political Animal, July 20, 2012
“Romney’s Cliff Notes Version Of The Ryan Plan”: Your Guide To “Ending Medicare As We Know It”
It’ll be the next argument in the campaign, so it’s a good time to brush up.
Yesterday, President Obama went to Florida and told seniors that Mitt Romney wants to end Medicare as we know it, and it appears that this argument (and some related ones) will be a central feature of the Obama campaign’s message in the coming days. It’s entirely possible, as Jonathan Chait has suggested, that all the Obama campaign’s attacks on Romney’s finances and record at Bain Capital are the first stage of a two-stage strategy that culminates with an attack on the Ryan budget. Since we’ll be talking about this a lot soon, I thought it might be worthwhile to refresh our memories on what this is all about, particularly with regard to Medicare, and how it relates to the current campaign.
First: Is it fair to tar Mitt Romney with the Ryan plan? No question. While Romney’s own policy proposals are quite a bit more vague than the Ryan plan is, they follow the same contours, and when Romney is asked about the Ryan plan he never hesitates to praise it. When asked about it last month, Romney’s chief strategist Eric Fehrstrom said of his boss, “He’s for the Ryan plan.” Or in Romney’s own words, “I’m very supportive of the Ryan budget plan. It’s a bold and exciting effort on his part and on the part of the Republicans and it’s very much consistent with what I put out earlier.” Enough said.
Next: Does the Ryan plan actually “end Medicare as we know it”? This is the phrase that Democrats have used in the past to describe it, and that Obama will continue to use. Republicans claim the phrase is unfair and demagogic. But while it would be inaccurate to simply say the Ryan plan “ends Medicare,” because if the plan were enacted there would still be a program going by the name of “Medicare,” it is fair to say that Medicare would be a drastically different program, and some of the critical things that make it so successful would no longer exist.
Today’s Medicare is an insurance program. If you’re a senior, you go to your doctor, and your doctor gets paid by Medicare. It is a single-payer program that covers every senior, and though it doesn’t pay for every conceivable procedure, because of Medicare’s universality there are essentially no uninsured seniors in America, no seniors who are subject to the tender mercies of the notoriously unmerciful insurance companies, no seniors who need to worry about their pre-existing conditions or their lifetime limits or any of the other ways those companies find to screw their customers, and almost no seniors who find it impossible to pay their insurance premiums (seniors do contribute premiums to Medicare, but they are quite modest).
The Ryan plan in its initial incarnation eliminated Medicare as an insurance program, and replaced it with “premium support.” There’s an argument about whether premium support can be described accurately as a “voucher,” but that’s nothing more than a silly disagreement about semantics; premium support in practice is no different from any voucher. Under this plan, seniors would have to get their insurance from private companies, and the government would pay part of the cost. If those private premiums go up, then seniors will have to pay more out of their own pockets; indeed, this is a feature, not a bug, of the Ryan plan. The whole point is to limit government spending on Medicare by limiting how much seniors get in their vouchers/premium support.
And those limits could be vicious. The Ryan plan caps the growth of Medicare at GDP growth plus 0.5 percent. If health costs rise faster than that, seniors will have to pick up more and more of the tab. That means that if the Ryan plan were enacted, there would likely be many seniors who couldn’t afford private premiums and would have no health coverage. This feature of the plan eliminates one of the fundamental pillars of Medicare: that it is an entitlement, meaning that if you qualify, you’re entitled to the benefit. If this year’s costs are higher than we’d like, we can make changes to the program for next year, but nobody goes without coverage. Under the Ryan plan, that would no longer be true.
But here’s an important thing to keep in mind: After Ryan released the first version of his plan in 2011 and caught a whole bunch of flak for basically destroying Medicare, he came back with a revised plan earlier this year that has one critical difference: it allows seniors, if they so choose, to stay on traditional Medicare. Mitt Romney’s Medicare plan does the same thing (Romney’s plan, such as it is, is basically a Cliff Notes version of the Ryan plan). In other words, under political pressure they embraced a public option. But since the plan still caps overall spending at GDP+.05, seniors would likely have to pay more and more out of their own pockets, likely thousands of dollars.
At this point, it’s good to remind ourselves that Medicare does a far better job of controlling costs than private insurance does, partly because of the negotiating power it has and partly because it spends just a fraction of what private companies do on overhead (around 98 percent of Medicare’s costs go to paying for care, while private companies often spend 20 percent or more of their costs on administration, marketing, underwriting, and so on). Yet Republican philosophy tells us that no matter what the facts say, this is just impossible. A government program can’t possibly be cheaper and more efficient (and deliver service that its customers love, by the way) than a private sector alternative. So if we introduce private competition, then costs will of course come down.
But there isn’t much reason to believe they will, which means seniors will be left holding the bag, and most importantly, lose the security they have now. Anyhow, to return to the question we started with: Is it fair for the Obama campaign to charge that Mitt Romney wants to end Medicare as we know it? If you define “Medicare as we know it” as an insurance program that provides affordable, efficient, and most importantly secure health coverage for every American senior, then the answer is clearly yes.
By: Paul Waldman, Contributing Editor, The American Prospect, July 20, 2012
“At The Altar Of International Finance”: Romney “Goes For The Gold” In London’s Libor Village
In fairness to Mitt Romney, he did not schedule his $75,000-a-plate money grab at the altar of international finance when he heard that—via the Libor bank-rate scandal—Londoners were practicing his kind of crony capitalism.
Even before the Bain capitalist knew that bankers in London were lying to regulators and fixing interest rates in order to run up their profits—engaging in activities that the governor of the Bank of England said “meet my definition of fraud”—Romney was excited about getting a piece of the London bankster action.
But Romney campaign has has gone to Olympian lengths to make their candidate’s British sojourn seem to be about something other than the looting of London.
The Republican presidential contender’s international fundraising operation—and, yes, he does have an international fundraising operation—scheduled two major events to coincide with the opening of the Olympic Games. As a candidate who is having trouble touting his business experience (Bain Vulture Capital) and his governing experience (RomneyCare), the presumptive Republican presidential nominee calculated that it might be a good idea to take a trip across the pond to highlight his (somewhat less controversial) management of the 2002 Winter Olympics in Salt Lake City.
The Olympics are being held this year in east London, just beyond the fabled “City” precincts which are, along with New York’s Wall Street, the nerve center of global banking and financial dealmaking. And Romney is using his London sojourn to skim off some cash—make that a lot of cash—for his campaign accounts.
Or, as London’s Independent headlines the story: “Romney Goes for the Gold in London.”
Romney Victory Inc., the incredibly complex fundraising structure the candidate has developed to funnel money into his many campaign operations, has scheduled two London events for July 26:
1. A meet-and-greet where the price of admission is $2,500 per person.
2. A dinner where the places at the tables go for as much as $75,000 per person.
Both the Romney and Obama campaigns have raised money overseas from American expatriates (who, along with Green Card holders, are allowed to donate to US campaigns even if they do not reside in the United States or work for US-based banks or corporations). Obama’s had the upper hand in the global fundraising race by a $3.1 million to $1.4 million margin. But that will change after Romney collects his London haul.
Why? Because Romney is getting together with with The City’s wealthiest, and most scandal-plagued, banksters.
Or, at least, most of them.
Bob Diamond, the former Barclay’s banking empire chief executive who was forced to resign after it was revealed that his bank manipulated the Libor (London InterBank Offered Rate) with false reports about interest rates, was supposed to be at the head of the table. But with his busy schedule of testimony before parliamentary committees and investigators of the biggest banking scandal in recent years, the American expatriate has been forced to absent himself from the festivities.
“Mr. Diamond decided to step aside as a co-host for the upcoming London reception to focus all his attention on Barclays,” the Romney camp announced. “We respect his decision.”
Why shouldn’t they? One of Diamond’s closest lieutenants at Barclays—which just paid $453 million in fines stemming from the Libor scandal—is still co-chairing Romney’s big-ticket event in London.
Barclay’s lobbyist Patrick Durkin’s name is right there at the top of the invite to “a private dinner with Governor Mitt Romney at a central London location.”
Also on the list of forty-seven co-chairs of Romney’s London fundraisers are the names of top players in other banks that have been targets of the interest-rate manipulation scandal, including:
* Bank of Credit Suisse chief executive Eric Varvel (Varvel has already donated $100,000 to Romney’s “Restore Our Future” Super PAC.)
* Deutsche Bank managing director Raj Bhattacharyya
* HSBC managing director Whitfield Hines
Executives from Goldman Sachs, Blackstone and Wells Fargo Securities—and, of course, Bain Capital Europe—are also on the list.
Why would these Americans associated with international banks be giving maximum money to this particular presidential candidate? Gee, could it have anything to do with the fact that there are calls for criminal prosecution of the bankers who were involved in interest rate manipulations that effectively rigged the rates that helped to determine who consumers in the United States and other countries obtained mortgages and paid on credit cards?
“Much more needs to be done,” Senators Carl Levin (D-MI) and Jack Reed( D-RI) and ten of their colleagues wrote in a mid-July letter to financial regulators and Attorney General Eric Holder. “Banks and their employees found to have broken the law should face appropriate criminal prosecution and civil action.”
Electing a friendly president, who might put the brakes on those prosecutions, just became a very high priority for the men who pull the financial strings not just on Wall Street but in London.
Approached by Britain’s Telegraph, one invitee hailed Romney’s “American understanding of capitalism. A prominent lawyer who will be attending one of Romney’s London bashes explained that the Republican candidate understands “very important things [that] people here in the UK also understand.”
That sort of “understanding” is worth a lot to embattled bankers. Certainly, the $75,000 it will cost for what the Independent describes as a “chance to whisper some of their own policy preferences into the ear of the man who may—or may not—be US president.”
By: John Nichols, The Nation, July 20, 2012
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