When the Obama campaign started raising questions about the way Bain Capital operated when Romney was the CEO, some Democrats who are close to Wall Street immediately starting complaining. We shouldn't be attacking "capitalism," they said, or the financial industry. But those Democrats are looking pretty foolish after the stories that have come out over the past few days. It has never been capitalism or even the financial industry being attacked when Bain's style of operating is the subject: it is the worst kind of vampire capitalism that the Obama campaign is going after.
The idea of questioning Bain has always been essential to this campaign, because Romney has made clear that his main qualification to be President is the work he did at Bain. As the New York Times put it in their story Saturday, "Companies' Ills Did Not Harm Romney's Firm":
Mr. Romney's experience at Bain is at the heart of his case for the presidency. He has repeatedly promoted his years working in the "real economy," arguing that his success turning around troubled companies and helping to start new ones, producing jobs in the process, has prepared him to revive the country's economy. He has fended off attacks about job losses at companies Bain owned, saying, "Sometimes investments don't work and you're not successful." But an examination of what happened when companies Bain controlled wound up in bankruptcy highlights just how different Bain and other private equity firms are from typical denizens of the real economy, from mom-and-pop stores to bootstrapping entrepreneurial ventures.
But now, with this major new NYT story, plus the Washington Post pioneer-in-outsourcing story, it is becoming increasingly obvious to everyone why the Obama campaign and people like me have been making a big deal about Bain for a long time. All capitalism is not the same, and Bain is right up there with companies like Goldman Sachs in the sleaziness with which they make their money.
What Bain did in buying these companies was to create a structure where they made money no matter what. As the saying goes, it's nice work if you can get it -- but you can't get it unless you are willing to be absolutely brutal in pursuing your own profits at the expense of everyone else. What Bain did wasn't just capitalism, but the worst sort of capitalism. As the NYT and other media sources have so explicitly laid it out, at least seven Bain-owned companies went bankrupt, but "Bain structured deals so that it was difficult for the firm and its executives to ever really lose, even if practically everyone else involved with the company that Bain owned did, including its employees, creditors and even, at times, investors in Bain's funds."
Bain loaded these companies with debt, in part so they could pay Bain millions (sometimes tens of millions) of dollars in fees. They then wrote off the debt on their taxes. In some cases (at least 4 times according the NYT story) Bain amassed huge short term profits before the companies, weighed down with the debt Bain forced on them, sunk under the weight of that debt.
Some of the companies Bain bought did better than that. Of course, some of those that did were out-sourcing and off-shoring pioneers. And others did better in great part by laying off huge numbers of workers and/or slashing the wages and benefits of many others. This is the track record that is "at the heart of [Romney's] case for the presidency"?
The debate over Bain-onomics is exactly the kind of debate this country should be having. We are at a make or break moment for the American middle class. What should our path forward be? Will it be the path of Bain and the biggest banks on Wall Street, which put profits over everything else, making millions because other people went broke and lost their jobs? Or will it be a path that invests in the health of our economy and the business sector from the bottom up? This is the fundamental choice for Americans: do we help and promote the kind of businesses that make and sell products and services here in America? Do we help the economy by investing in our people, giving them good education, college loans, and decent wages so they can buy goods from the small businesses in their community? Do we help our small businesses with start-up capital and giving them a fighting chance to compete with the big dogs? Or is our government going to be 100% geared toward the big incumbents who already have big money and market share and well-connected lobbyists who can get them sweetheart deals and tax breaks?
I think the Obama team has been absolutely right to engage all-out in this debate over Bain, and to frame this race as to who will fight for the middle class in their moment of need. This new ad shows they get it: