Political Nutz

Observations on the pathetic state of American politics

Romney Could Just Tell the Truth about Bain

Mitt Romney could easily diffuse the firestorm about his years at Bain Capital LLC.  Instead of trying to create a myth about how his private equity firm created thousands of jobs and saved American free enterprise he could just offer a simple explanation of how private equity investments work.  His monologue might go something like this:

We looked for underperforming companies we thought we could turn around.  We invested in them, trimmed the fat, used tax credits and government-backed loans to shore them up, gave ourselves big dividends, and sold them, usually at a profit.  Some of them went bust.  End of story.

Liberals could argue that the private equity system has nothing to do with entrepreneurship and is fundamentally a way for rich guys to leverage other people’s’ money —often taxpayers’ money— to eliminate investment risk and make piles of money for themselves.  But there’s nothing illegal or maybe even unethical about it.  However, Romney’s suggestions that he created hundreds of thousands of jobs and was some kind of cutting edge entrepreneur is simply ridiculous.

Mr. Romney might have a harder time defending his incessant critique of government involvement in big business given the degree to which Bain relied on tax breaks, subsidies and federally backed loans to make huge profits.

The June 12 Diane Rehm Show has an excellent discussion of how private equity investment works and the pros and cons.

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