American Parasite: Romney's Bain Represents Capitalism's Worst

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Illustration by Dan Andreasen.


James Sanderson had encountered a rare moment of industrial harmony.

It was the early 1990s, and the 750 men and women at Georgetown Steel were pumping out wire rods at peak performance. They had an abiding trust in management's ability to run a smart company. That allegiance was rewarded with fat profit-sharing checks. In the basement-wage economy of Georgetown, S.C., Sanderson and his co-workers were blue-collar aristocracy.

David Foster says that Bain Capital prioritized its own interests above customers’ interests or long-term stability.
Jayme Halbritter
David Foster says that Bain Capital prioritized its own interests above customers’ interests or long-term stability.
Josh Kosman, author of The Buyout of America, considers Mitt Romney “a parasitic capitalist.”
Lyric Cabral
Josh Kosman, author of The Buyout of America, considers Mitt Romney “a parasitic capitalist.”

"We were doing very good," says Sanderson, president of Steelworkers Local 7898. "The plant was making money and we had good profit-sharing checks, and everything was going well."

What he didn't know was that it was about to end. Hundreds of miles to the north in Boston, a future presidential candidate was sizing up Georgetown's books.

At the time, Mitt Romney had been running Bain Capital since 1984, minting a reputation as a prince of private investment. A future prospectus by Deutsche Bank would reveal that by the time he left in 1999, Bain had averaged a shimmering 88 percent annual return on investment. Romney would use that success to launch his political career.

His specialty was flipping companies — or what he often calls "creative destruction." It's the age-old theory that the new must constantly attack the old to bring efficiency to the economy, even if some are destroyed along the way. In other words, people like Romney are the wolves, culling the herd of the weak and infirm.

His formula was simple: Bain would purchase a firm with little money down, then begin extracting huge management fees and paying Romney and his investors enormous dividends.

The result was that previously profitable companies were now burdened with debt. But much like the Enron boys, Romney's battery of MBAs fancied themselves the smartest guys in the room. It didn't matter if a company manufactured bicycles or contact lenses; they were certain they could run it better than anyone else.

Bain would slash costs, jettison workers, reposition product lines and merge its new companies with other firms. With luck, they'd be able to dump the firm in a few years for millions more than they'd paid for it.

But the beauty of Romney's thesis was that it really didn't matter if the company succeeded. Since he was yanking out cash early and often, he would profit even if his targets collapsed.

Which was precisely the fate awaiting Georgetown Steel.

When Bain purchased the mill, Sanderson says, change was immediate. Equipment upgrades stopped. Maintenance became an afterthought. Managers were replaced by people who knew nothing of steel. The union's profit-sharing plan was sliced twice in the first year — then whacked altogether.

"When Bain Capital took over, it seemed like everything was being neglected in our plant," says Sanderson. "Nothing was being invested in our plant. We didn't have the necessary time to maintain our equipment. They had people here that didn't know what they were doing. It was like they were taking money from us and putting it somewhere else."

History would prove him correct. While Georgetown was beginning its descent to bankruptcy, Romney was helping himself to the company's treasury.


The Working Man's Villain

He should have known better. The year before Romney purchased Georgetown, he mounted his career in politics, setting his sights on the biggest target in Massachusetts: the U.S. Senate seat held by Ted Kennedy.

There were early signs that he might topple the Kennedy dynasty. Much like today, Romney was pitching himself as a commander of the economy, a man with the mastery to create jobs. Yet he suffered an affliction common to those atop the financial food chain: He assumed that what was good for him was good for all. Call it trickle-down blindness.

In the midst of that 1994 campaign, one of Romney's companies, American Pad & Paper, bought a plant in Marion, Ind. At the time, it was prosperous enough to be running three shifts.

Bain's first move was to fire all 258 workers, then invite them to reapply for their jobs at lower wages and a 50 percent cut in health care benefits.

"They came in and said, 'You're all fired,'" employee Randy Johnson told the Los Angeles Times. "'If you want to work for us, here's an application.' We had insurance until the end of the week. That was it. It was brutal."

But instead of reapplying, the workers went on strike. They also decided the good people of Massachusetts should know what kind of man wanted to be their senator. Suddenly, Indiana accents were showing up in Kennedy TV ads, offering tales of Romney's villainy. He was sketched as a corporate Lucifer, one who wouldn't blink at crushing little people if it meant prettying his portfolio.

Needless to say, this wasn't a proper leading man's role for a labor state like Massachusetts. Romney was pounded in the election, taking just 41 percent of the vote. Meanwhile, the Marion plant closed just six months after Bain's purchase. The jobs were shipped to Mexico.

Yet Romney didn't learn his lesson. He seemed incapable of noticing that his brand of "creative destruction" left a lot of human wreckage in its wake. Or that voters might see him as more scumbag than saint.

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43 comments
CeceliaHolland
CeceliaHolland

romney is like jaime dimon, the jpmorgan guy: they both seem to think they know more than they actually do. this is very alarming given that mitt has a fair chance to be president.

BethAnn3
BethAnn3

Reading the quotes from university professors, I'm struck that the American academic system, at least the fields of business and economics, are completely embedded with the notion of Darwinistic capitalism and the pursuit of profits for shareholders in the stock market and private equity. There's a pervasive bias against labor (and I'm not talking about union labor) and everyday consumers, who are the people who do the actual work and create the demand for products that make profits possible. Even state university academics are corrupted by such notions, and the patina of their academic positions, with their ready quotes defending the status quo, entrenches the values of crony capitalism and the enrichment of the top tier.

living the lie
living the lie

Romney is just another republican scum bag. Why don't parasites understand that when enough people tire of them they are exterminated? I'm figuring it will only take another 10 years or maybe less, for humanity to tire of this and start the extermination. Lobbyists or Republicans, who knows which will be first to go!!!!

Leifur Thor
Leifur Thor

Thanks for posting this article. An educated public this year may just be one pissed off public. Ron Paul or bust~2012:)

Scarecrow
Scarecrow

So America its time to choose...

Goldman Sachs War Party Candidate A: Obama -or-Goldman Sachs War Party Candidate B: Romney -or The Peoples Candidate: Dr. Ron Paul** California Residents MUST be Registered GOP by May 21st to Vote for Dr Paul in June 5th Primary! **

FascistNation
FascistNation

This is really an idiotic article devoid of understanding of how things work in reality.

How does one purchase a successful company for next to nothing? How does one transfer that company's wealth to one's bank account, ultimately putting that company and the investment to ruin? Without losing more money than was gained in the process and suffering the anger and criminal wrath of the investors who purchased the company? It logically can't happen. You cannot take something profitable for next to nothing, strip it of its profit and then skip off to repeat the same. It never happened.

Flipping companies is buying large conglomerates that are in trouble with debt, separating the profitable and spinning or selling them off, then holding a fire sale on the remainder while it is still worth something to someone else who can use it. The fact that union workers had negotiated lucrative contracts to perform work is fine. The fact that they were horribly over the market price for that labor led to their undoing and someone else is now doing the labor. A dinosaur dies. It bellows its death rattle on the pages of SF.

Now if you want to talk about massive regulations, subsidies and tax incentives designed by lobbyists and passed by CONgress and state legiscritters to kill off US companies and help move them overseas that would be an article. Romney is the enemy, but he is no different than Obama, or Bush or Clinton, or Bush .... Still voting, suckers?

FrankWK
FrankWK

Your "idiotic" initial premiss that these companies are bought for "next to nothing" completely nullifies the rest of your "idiotic" comment. Duh!

Scarecrow
Scarecrow

So America its time to choose...

Goldman Sachs War Party Candidate A: Obama -or-Goldman Sachs War Party Candidate B: Romney -or The Peoples Candidate: Dr. Ron Paul** California Residents MUST be Registered GOP by May 21st to Vote for Dr Paul in June 5th Primary! **

Starchild
Starchild

This is an absolutely devastating piece that should be read by everyone who has yet to vote in the Republican primaries.

Ron Paul is still in the race, and there's still time to get him enough delegates to deny the parasite Romney the nomination without an unpredictable brokered convention.

Stevan Madrigal
Stevan Madrigal

Accurate title...Romney is in it for Romney. The Hell with everyone else.

Brooke King
Brooke King

Italy, Spain, and Greece all have laws that regulate larger firms more stringently. Is there any question why they have a higher percentage of small, vulnerable businesses than more successful European economies? Maybe the nebulous Dodd-Frank and the overreactive Sarbanes-Oxley should simply be repealed instead of mitigated for smaller firms.

Brooke King
Brooke King

People who know my economics know that I'm in favor of free markets and understand the creative destruction therein. This article is rather anti-Romney, but it does include some statements supportive of Mr. Romney and Bain Capital. I regard as at least a tortious lack of fiduciary responsibility and maybe criminal acts such as looting companies and selling credit-default swaps (a type of insurance) without provisions for losses (as AIG did).

To be equally critical of President Obama as this article is of Mr. Romney, I was revolted by the consensus of candidates Obama and McCain at the table with President Bush and others in support of TARP that was used to bail out AIG and its well-to-do claimants against their credit-default swaps.

In fairness to Mr. Romney, he might be right that GM and Chrysler should have been allowed to go through bankruptcy without government bailouts. After all, that's where they ended up even with bailouts. Even Mr. Romney can be right sometimes when his own self interest is not involved.

Johnny Bocchetti
Johnny Bocchetti

Great article, goes to the issue of intent. He might expouse religous principles, "you cannot serve two masters," However Bain, meg whitman, and their running dogs are no friend of humanity. Step up to the judgement bar Mitt and explain this one!

<< Work at home, $60/h, link
<< Work at home, $60/h, link

When a resolute young fellow steps up to the great bully, the world, and takes him boldly by the beard, he is often surprised to find it comes off in his hand, and that it was only tied on to scare away the timid adventurers.

TruthWFree
TruthWFree

I will check this out, but after what I've seen of Obama and his $5.0 trillion debt increase, his overreaching power grabs through executive orders and thrashing of the Constitution, it would take a real vile person to outdo Obama in vile unforgiveable actions. I will vote for Romney. ABO, ABO. I also hope to see a conservative majority in both houses to control who ever is in the White House and i hope to God that it is not Obama.

pacocornholio
pacocornholio

Not to mention the hundreds of millions he made by organizing the SLC Olympics and serving as governor of Massachusetts.

Or maybe the guy isn't a pure parasite...

FreeRangeRadical
FreeRangeRadical

Romney has too many skeletons in his closet. He won't discuss the firms that Bain bought or invested in on his watch. He won't release his tax returns from those years. There's the impinging Mormon lifestyle; he's almost certainly lying about not acquiescing to the Mormon church on issues. He's flip-flopped so many times that his moral compass has surely been fatally compromised. He's fatuous, but still manages to be an egomaniac. He's an elitist if there ever has been one (OK OK, The Donald wins this round, but Romney is a close second).

I don't trust him. I think he'd sell his kid's kidney if he could make a buck on it and not get caught. He's made so many gaffes about his wealth that I've come to the conclusion that they're not gaffes; he's telegraphing his intent to the 1%: Vote for me and together we'll put the hoi polloi back in its place!

GlenW
GlenW

Ah, got to love the liberal media. Thank you for showing Romney's true colors. Also a great example of how the Republican party and the 1% think and their M.O.

Gaspar_Ramsey
Gaspar_Ramsey

And now we have the Republican "Jobs Bill," a windfall for "small" business owners (up to 500 workers). There's a job killer if there ever was one. Say a company has 550 employees. Laying off 50 of them saves 20% on taxes. "Security! Escort these bums out!" Say a company has 475 employees, but could expand. Who is going to hire on more workers and lose out on that 20%? Just another shell game...

obbop
obbop

OBEY!!!!!!!!!!!!!!

Obey your elite-class and corporate masters you commoner scum.

You exist to serve the ruling class.

Love it or leave it.

You DO support the troops, don't you/

It's for the children.

If you were not a left, liberal, lazy bum you would be a multi-millionaure yourself.

Unions are destroying the USA.

You non-wealthy are merely lazy bums wanting hand-outs.

OBEY!!!!!!!!!!!!!!!!!!!!!!!!

The USA is number ONE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

OBEY you commoner scum citizen-sheep.

Bleat your satisfaction with the way "things" are for that is how your superiors, your betters, have decided what is best for the USA.

OBEY!!!!!!!!!!!!!!!!!!!!!!!!

Love it or leave it.

Or are you a socialist/communist/welfare case/whatever?

Ma Antar Rishu
Ma Antar Rishu

Interesting, but are people still falling for the msm and their depraved and unconstitutional propaganda to even find the need to dig up more proof against Romney? Romney is continuity of big bailouts and the era of Global military industrial one world nation and forfeiture of human rights and dignities. The end of the Rainforest, our precious Oceans and all aquatic life, in short life exchanged for profit. Have you heard of Dr. Ron Paul?

GlenW
GlenW

Ron Paul? Give me a freaking break. His ideals would accelerate the downward spiral.

Joep
Joep

Wow. Kotz, you have always been an amazing writer, and this proves you are still. I'm sending this around to friends who need to know. Thanks.

Peachboy77
Peachboy77

Why is this sort of thing even legal? It certainly seems fraudulent on the face of it.

Elizabethfrantes
Elizabethfrantes

Too young to remember when this got started with Reagan era deregulation? Plenty of folks, including me,

Wmaceo
Wmaceo

And is any middle income worker's, let lone the really poor, interests alligne with Romney's. I sincerely doubt this. He'll raid our government and not think twice, just like he's raided the many companies while at Bain. If he's intending to eliminate HUD, which houses millions, our homeless situation will overwhelm any other problem we may have. Crime will definitely increase, more people will lose jobs, because you need an address to hold a job. Education would be slashed. No real educated workforce, more outsourcing of jobs to "educated" countries. More jobless, homeless people in America. Poverty will soar. This country will rot. Sounds like the apocalyspe. God, please save us.

Eric
Eric

Der Sturmer's calling. They want their headline back.

Federale
Federale

Parasite. Love that Nazi imagery. But then you Stalinists allied with Hitler for a while, Hitler-Stalin Pact and all. Nothing between socialists. Oh, and I like your sudden concern for blue collar whites who cling to their God and guns. Ooopssss, is Obama even less concerned about those rednecks? Its not like Bill Clinton was at the time giving China Most Favored Nation status so they could really undercut wages, which they did, hitting the...steel industry...hard. Kinda interfers with the Marxist rhetoric. But then selling out to the Chicoms is what the Demoncrats do.

And I might note that Apple produces nothing in the United States. What, no article on how Apple dumped American workers for Chinese at a $1 a day?

Vilest of hypocrites.

Elizabethfrantes
Elizabethfrantes

Are you on drugs? Should you be? Try and deal with the fact that stalin's been dead a long time . .. and it's time to realize that those who made stalin et al into "The Enemy" only did so in order to frighten idiots into stampeding like sheep on crack . ..as you've just done.

PB10
PB10

Do your homework, Senor Federale. Apple didn't ship jobs to China-- it and all tech companies like Apple which rely on a bevy of high tech components, have simply followed the manufacturing jobs that have left our soil. And that competition isn't your silly $1 a day claim, it's the competition from foreign governments that see value in manufacturing, so which offer huge tax and construction incentives for US companies to relocate there. Our government doesn't do that, and when it does, even successfully as in the bailout of GM, people like Romney start crying about intervening with free enterprise. All the while stealing from you and playing patriot.If you are a wage earner and can see past your nose, you know that--because US manufacturing is still at least 5 or 10 times more efficient than most foreign workers and manufacturers--which negates the wage disparity. As long as you believe people who sell you that line they are "stealing our jobs" you will just be an ignoramus. Get angry about the people behind the job loss--but you won't do that because they also sell you all the cheap lines in your post. And without those lines, who are you?

Wmaceo
Wmaceo

No one's speaking of Obama. This article is about how Romney operates. If you're ok with it, then great. I think it helps people know who Romney really is. Why result in name calling. I sincerely don't think that capitalism is creating a bankrupt company where none existed. Exploding a balance sheet with debt, just to pay yourselves. That's not capitalism.

Georga Grivois
Georga Grivois

I sincerely hope the GOP voters will really think twice before casting their votes! If Romney wins..99% of Americans will lose! Especially women , the elderly and the poorest among us.

community2008
community2008

What about Bain's control of conservative talk radio? Limbaugh, Hannity, Glenn Beck, Michael Savage are all connected to Romney and Bain since 2007:

http://endoftheamericandream.c...

GlenW
GlenW

Exactly, even Santorum called out FoxNews for their coverage of Romney.

Fivestars
Fivestars

Clearly someone has been paying attention, Mr. Romney is definitely worthy of your commendable and Righteous Anger. This article rates 5-STARS

 
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