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
July 22, 2012
Posted by raemd95 |
Election 2012 | Bain Capital, Jobs, Middle Class, Mitt Romney, Offshore Accounts, Politics, Tax Loopholes, Tax Returns, Wall Street |
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Mitt Romney wanted to have his cake and eat it, too. He wanted to make himself fabulously rich, be the captain of the financial universe, and become senator, governor and, now, president.
He wanted to do it all, without making public his financial dealings, his tax returns, his web of foreign tax shelters. That was his business, not the public’s. He should have chosen one path or the other—in his case, they don’t mix.
Mitt Romney was too cute by half. He was guaranteed payouts at Bain no matter how many bankruptcies, lost jobs, destroyed pensions. He thought parking money in off-shore Bermuda corporations, Swiss and Cayman accounts, and using fancy accounting gimmicks to create tax avoidance schemes could be either kept secret or explained away.
Now Republicans are calling for him to come clean, to release his tax returns, to untangle the web of financial dealings. But he can’t because he was up to his eyeballs in Bain when he said he wasn’t, as he continues to reap huge amounts of money from his years there.
So why all this back and forth on whether he “retired” from Bain in 1999? Simple. Ted Kennedy caught him in the Senate race in 1994 by exposing Bain and what it did to workers and companies.
When Romney saw a big opening with the takeover of the Olympics in February of 1999, he grabbed it and by 2001 he knew he had a shot at being governor of Massachusetts and maybe a great deal more.
But he also knew that Bain was a liability in another race in Massachusetts and decided that his “leave of absence” better become a “retirement.” After all, he was disengaged from the day-to-day operation of the company, even though reaping a six figure salary as an officer and many millions more because of his association as “president, CEO and sole stockholder.”
The last thing Mitt Romney wanted to do as he was planning his political future was have that Bain albatross around his neck again—no, the Olympics was his ticket.
But, now he has this very big problem—he can’t release his income taxes back 12 years as his father, George Romney, did when he ran for president. He can’t provide 23 years of tax returns as he did to the McCain campaign when he was angling for vice president and being vetted.
Tax returns will show his continued financial windfall from Bain and it will show all his off-shore shenanigans. And it will show that this is someone who was not paying his fair share of taxes according to almost anyone’s definition. That is my guess.
When Kevin Madden, his spokesman, read a statement that Romney did not put his money in foreign bank accounts and trusts to avoid taxes he was not asked the very simple question: Why did he do it, if not to avoid taxes? What was the reason for all these off-shore accounts? What was he trying to hide?
And now, Romney is in real trouble. If he is transparent about his financial dealings and taxes, he knows it would be devastating to his campaign. If he tries to stonewall, he has three and a half months of a long campaign, not three and a half weeks. That is a long time to keep trying to change the subject.
So the question for Romney is: Can he have his cake and eat it, too? Can he simply deny further requests for information and hope he can keep it secret?
While he is telling the middle class to “eat cake,” maybe he has to be careful he won’t be eating crow.
By: Peter Fenn, U. S. News and World Report, July 16, 2012
July 17, 2012
Posted by raemd95 |
Election 2012 | Bain Capital, Jobs, Middle Class, Mitt Romney, Offshore Accounts, Outsourcing, Politics, Republicans, Tax Returns |
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“Too much money” sounds like an oxymoron, especially when applied to American politics. But in the last week, Republicans are beginning to learn that lots of money can have its downside. Thursday’s story that Romney may have actively directed Bain Capital three years longer than he claimed – a period in which Bain Capital-managed companies experienced bankruptcies and layoffs – caps what must be the worst weekly news cycle of any modern American presidential candidate. From images of corporate raiding, to luxury speedboats, to offshore accounts in the Cayman Islands, to mega-mansions in the Hamptons, this week’s stories suggest that the candidacy of Mitt Romney – poster-boy for the symbiotic relationship between big money and the modern Republican party – is in serious trouble.
Last weekend’s photos of the Romney clan on a luxury speedboat cruising around a lake in New Hampshire, where their multimillion-dollar compound sits, were startling in their tone-deafness. And just to make sure the sentiment wasn’t lost on anyone, at a campaign event the same week, Obama recounted childhood memories of touring the US with his grandmother by Greyhound bus, even the thrill of staying at a Howard Johnson motel. In a smart political calculation, the Obamas chose to forgo their annual summer vacation in Cape Cod (a nice upper-middle class vacation spot, mind you, but nowhere near the same league as the Romney estate). Instead, Obama was photographed visiting a senior citizens’ home in the battleground state of Ohio.
And the hits kept coming. Next, Vanity Fair published an article listing the Romneys’ various offshore investment accounts worth potentially hundreds of millions of dollars in the secretive tax havens of Cayman Islands and Bermuda, as well as a since-closed Swiss bank account. Democrats stoked the predictable outrage from the revelations. On the Sunday ABC news program “This Week”, Maryland Governor Martin O’Malley thundered:
“Mitt Romney bets against America. He bet against America when he put his money in Swiss bank accounts and tax havens and shelters.”
On the same program, Bobbie Jindal, Republican governor of Louisiana, could only lamely respond:
“In terms of Governor Romney’s financial success, I’m happy that he’s a successful businessman.”
While there is no evidence that the Romneys illegally evaded taxes through their various offshore accounts (their secretiveness making it impossible to tell), the reek of entitlement became overwhelming when it was revealed that the Romneys had accumulated somewhere between $20m and $101m in an “IRA”, a tax-advantaged retirement account designed for middle-class savers, limited to a few thousand dollars a year contribution. As one commenter parried, “I may be stupid, but I ain’t no fool.” In other words, we might be too stupid to understand how Romney was able to obtain all these tax breaks legally, but we aren’t fooled about unfairness of it all.
Well, at this point, you might think that the next sighting of Romney would be of him clothed in ash-cloth ladling out soup at an inner-city soup kitchen. But no. Next, we were regaled with the New York Times story of a lavish fundraiser in the Hamptons hosted by the infamous David Koch, the billionaire benefactor of conservative causes. The optics were worse than bad, as the Times recounted how one woman in a Range Rover, idling in a 30-deep line of cars waiting for entry, yelled to a Romney aide, “Is there a VIP entrance? We are VIP.”
Romney was expected to haul in several million dollars from his trip to wine and dine with the billionaires of the Hamptons. But why risk confirming the very message that Democrats have been hammering upon: that Romney is a super-wealthy elitist whose objective is to further the interests of the 0.01%?
Certainly, billionaires for Romney would have given him those millions without the face-time and the photo-ops, the chance to dress up and be seen. And to be heckled by Occupy Wall Street protesters and parodied by reporters. What is so very puzzling about the whole episode is the sheer in-your-face-ness of it.
Yet, perhaps that is the point. As a very perceptive article in the New York Magazine, Lisa Miller describes how new psychological research indicates that wealth erodes empathy with others. In the “Money-Empathy Gap”, Miller cites one researcher who says that:
“The rich are way more likely to prioritize their own self-interests above the interests of other people. It makes them more likely to exhibit characteristics that we would stereotypically associate with, say, assholes.”
Researchers found a consistent correlation between higher income, management responsibility and disagreeableness. One researcher interpreted her findings to imply that money makes people disinterested in the welfare of others. “It’s not a bad analogy to think of them as a little autistic” says Kathleen Vos, a professor at the University of Minnesota.
If this research is accurate (as it seems to be, replicated in various ways by several researches), the synergies between it, the increasing concentration of wealth and the Citizens United ruling, have striking implications for the future of the Republican party. As Newt Gingrich, the uber-southern politician, plaintively explained how he lost the Republican primary: “Romney had 16 billionaires. I had only one.” The domination by the super-wealthy means that Republicans not only have no interest in the welfare of the rest of the 99.9%, they have no understanding of why this is a problem. The noblesse oblige days of the old money, such as the Bushes, the Kennedys and the Roosevelts are long gone, replaced by the new mega-money of hedge funds, corporate raiders and global industrialists.
How else can one explain the allegiance of the Republican party to the profoundly unpopular Ryan tax plan, which would eviscerate Medicare and Medicaid while delivering more tax cuts to the rich? What is the future of a party in a democracy when the powers-that-be can no longer even understand, much less address, the welfare of the vast majority of its citizens?
Taking the hint, the Obama administration is finally positioning itself firmly on the side of progressives, attacking income inequality and holding Republicans accountable for their assaults on the middle and working classes. How ironic it would be if, after all, the other side’s big money is the answer to the Democrats’ prayers.
By: Robin Wells, The Guardian, July 12, 2012
July 15, 2012
Posted by raemd95 |
Election 2012 | Bain Capital, Conservatives, GOP, Middle Class, Mitt Romney, Offshore Accounts, Politics, Republicans, Tax Returns |
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If you’re planning on running for president, here are a few quick things you should probably do:
- Make sure your tax returns and finances are in order
- Make sure you’re not blatantly lying about some major portion of your biography.
Mitt Romney seems to have decided to do neither, I guess because he thought no one would check? Maybe Romney should have taken his fortune out of the various offshore tax havens where he stores it before he decided to run for president, because the thing is every presidential candidate is going to be prodded to release his tax returns and financial information. If you don’t want to be criticized for a Swiss bank account and a mysterious $102 million IRA, either don’t run for president or don’t have those things!
But much, much more important than not looking like a shady tax-dodger is “not telling a fairly easily disprovable lie.” Like “I quit Bain Capital in 1999,” a thing Mitt Romney says all the time when he wants to respond to criticism of various awful things Bain Capital has done since 1999. Except the Boston Globe (and Mother Jones and TPM) have now reported that Romney continued to be Bain Capital’s “sole stockholder, chairman of the board, chief executive officer, and president” until a couple years after 1999. Romney was drawing at least $100,000 a year from Bain Capital and was still listed as the guy in charge on SEC documents and financial disclosures through 2002.
What’s worse is that his resigned in February 1999 line was even apparently contradicted by multiple contemporary news accounts, with two from August of 2001 saying Romney had just or was about to quit Bain. The New Yorker’s Andrew Prokop says, “It seems clear there was a period 1999-2001 where Romney was retaining the CEO job because he thought he might return to it after Olympics,” which flatly contradicts Romney and Bain’s statements. Romney’s best defense, as Andrew Sullivan points out, is that he was drawing a massive salary for doing nothing — like a “no-show” at a mob front.
The only reason Romney wanted everyone to think he quit Bain completely in 1999 to begin with was in order to avoid being accused of being responsible for “outsourcing.” Now, I am 100 percent positive that Romney, as a rich conservative former financial professional, does not consider outsourcing a bad thing. He almost definitely considers it a net positive for the American (and world) economy. The fact is, most elected Democrats support policies that encourage outsourcing — on this there is basically universal consensus among the political and economic elite. Romney — and plenty of others! — believe that companies like Bain Capital perform a public good, even though to some it just looks like parasitic capitalism at its worst. But: Outsourcing and closing down factories and slashing wages and busting unions and laying people off are all things Mitt Romney supports on a philosophical level, and I’m sure it’s galling to him that he has now been caught in a lie designed to cover up actions he feels were totally right and beneficial for the nation as a whole.
How much will it hurt him, that everyone now knows he is a liar? I am guessing “Swiss bank account” actually “hurts” him more, because the Romney campaign was smart enough to call Obama a liar at the exact same time as the national media was getting ready to call him a liar, and for your average person, that just sounds like two politicians saying mean things about each other.
By: Alex Pareene, Salon, July 12, 2012
July 13, 2012
Posted by raemd95 |
Election 2012 | Bain Capital, Conservatives, IRA's, Mitt Romney, Offshore Accounts, Outsourcing, Politics, Republicans, Tax Returns |
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Mitt Romney has been very reluctant to release his tax returns. In all his previous campaigns he refused to release any of them. This time, under pressure, he has given us only the last two years.
But he must disclose more. If you want to know why, read Nicholas Shaxson’s piece in the new issue of Vanity Fair. In it, Shaxson raises important questions about some strange aspects of Romney’s financial history:
§ What is in Romney’s offshore accounts? He has sheltered much of his wealth in tax havens such as Bermuda, but he has not disclosed anything about those investments. For instance, Shaxson writes, “There is a Bermuda-based entity called Sankaty High Yield Asset Investors Ltd., which has been described in securities filings as ‘a Bermuda corporation wholly owned by W. Mitt Romney.’ He set it up in 1997, then transferred it to his wife’s newly created blind trust on January 1, 2003, the day before he was inaugurated as Massachusetts’s governor…. Romney failed to list this entity on several financial disclosures, even though such a closely held entity would not qualify as an ‘excepted investment fund’ that would not need to be on his disclosure forms. He finally included it on his 2010 tax return. Even after examining that return, we have no idea what is in this company, but it could be valuable, meaning that it is possible Romney’s wealth is even greater than previous estimates.”
§ Why is Romney still being paid by Bain Capital? He left the firm more than ten years ago. Given its varied investments, could the fact that he is still being paid by them create a conflict of interest in office? Shaxson writes, “Though he left the firm in 1999, Romney has continued to receive large payments from it—in early June he revealed more than $2 million in new Bain income. The firm today has at least 138 funds organized in the Cayman Islands, and Romney himself has personal interests in at least 12, worth as much as $30 million, hidden behind controversial confidentiality disclaimers.”
§ Why has Romney opened foreign bank accounts, such as a Swiss account with $3 million that appeared on his 2010 returns but not his 2011 returns? How much has he kept in offshore accounts in the past? Was he betting against the strength of the US dollar? How might such financial interests affect his policies as president?
§ Are Romney’s blind trusts really blind? Their trustee is Bradford Malt, his personal lawyer. Malt invested $10 million of Romney’s money in the Solamere Founders Fund, co-founded by his son Tagg and Spencer Zwick, a Romney campaign fundraiser. Malt’s and Romney’s claims that this is coincidental and Romney knew nothing of it strains credulity. If Romney knows what his blind trusts invest in, how might his investments influence his political decisions?
§ How much has Romney invested with Elliot Associates? Shaxson reports, “Elliott buys up cheap debt, often at cents on the dollar, from lenders to deeply troubled nations such as Congo-Brazzaville, then attacks the debtor states with lawsuits to squeeze maximum repayment. Elliott is run by the secretive hedge-fund billionaire and G.O.P. super-donor Paul Singer, whom Fortune recently dubbed Mitt Romney’s ‘Hedge Fund Kingmaker.’ (Singer has given $1 million to Romney’s super-pac Restore Our Future.) It is hard to know the size of these investments. Romney’s financial disclosure form lists 25 of them in an open-ended category, ‘Over $1 million,’ including Solamere and Elliott, and they are not broken down further.”
§ How did Romney build a $102 million Individual Retirement Account (IRA)? Did he avoid paying taxes in doing so? During Romney’s fifteen years at Bain Capital taxpayers were allowed to put only $2,000 annually into IRAs and $30,000 into another fund. Romney won’t say how his account generated such astronomical returns. The only explanation anyone has come up with, offered by Wall Street Journal reporter Mark Maremont, is that Romney stuffed his account with deliberately undervalued shares of Bain stock. Incidentally, Bain is still contributing to Romney’s and his wife’s IRAs.
§ Did Bain serve as a tax haven for foreign criminals? As Shaxson explains, “Private equity is one channel for this secrecy-shrouded foreign money to enter the United States, and a filing for Mitt Romney’s first $37 million Bain Capital Fund, of 1984, provides a rare window into this. One foreign investor, of $2 million, was the newspaper tycoon, tax evader, and fraudster Robert Maxwell, who fell from his yacht, and drowned, off of the Canary Islands in 1991 in strange circumstances, after looting his company’s pension fund. The Bain filing also names Eduardo Poma, a member of one of the ‘14 families’ oligarchy that has controlled most of El Salvador’s wealth for decades; oddly, Poma is listed as sharing a Miami address with two anonymous companies that invested $1.5 million between them. The filings also show a Geneva-based trustee overseeing a trust that invested $2.5 million, a Bahamas corporation that put in $3 million, and three corporations in the tax haven of Panama, historically a favored destination for Latin-American dirty money—’one of the filthiest money-laundering sinks in the world,’ as a US Customs official once put it.”
Shaxson does not allege that Romney or Bain has ever broken the law. But the public has a right to know about the ethics and probity, not mere legality, of Romney’s personal and professional financial history. Romney has made business experience the central pitch of his candidacy, so how can he claim that how he manages his money is irrelevant?
By: Ben Adler, The Nation, July 3, 2012
July 4, 2012
Posted by raemd95 |
Election 2012 | Bain Capital, Bermuda, Elliott Associates, Mitt Romney, Nicholas Shaxson, Offshore Accounts, Paul Singer, Politics, Swiss Bank Accounts |
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