Texas Gov. Rick Perry caused a stir within the Republican Party by denouncing former Massachusetts Gov. Mitt Romney as a “vulture capitalist.” The outrage within the Republican establishment was so strong that Gov. Perry stopped using the phrase ( he dropped out of the race on Jan. 19). He has not yet tendered an apology. Fairness demands that he do so. He should apologize to vultures.
Unlike former Gov. Romney, vultures never kill their prey. They eat only carrion and serve a useful purpose in consuming and effectively recycling road kill. In our economic system a vulture capitalist would be the wholesaler who shows up at a liquidation sale, buys the bankrupt merchant’s inventory and then resells that inventory at a profit. He creates a few jobs and helps the bankrupt merchant pay some of his debts.
Mitt Romney and his fellow investors had a hand in the death of quite a few companies. According to the Wall Street Journal, 22 percent of the companies Mitt Romney acquired through Bain Capital in the 15 years he ran that leveraged buyout firm were either bankrupt or out of business within eight years of Bain Capital’s acquisition.
A typical leveraged buyout began with a relatively small investment of money from Bain Capital, “leveraged” with lots of borrowed money to meet the purchase price, and a sale a few years later of the same company, now burdened by the debt that Bain Capital left it with. That 22 percent of these companies were “road kill” within eight years of Mitt Romney helping to acquire them does not make him a vulture. He and his cohorts at Bain Capital were more like a pack of wolves.
A pack of wolves find their prey, feast off it, and leave it for the vultures to finish consuming. In the natural world, a pack of wolves serve a gruesome purpose. In the corporate world, this wolf-like behavior of leveraged buyout specialists creates no new product and, too often, kills both the acquired company and the thousands of jobs it had provided to hard-working Americans.
For just $5 million of his company’s own money, Mitt Romney and the rest of his pack bought American Pad and Paper Company, made about $100 million for Bain Capital and its investors in “management fees” and profits, and then sold the company a few years later. American Pad and Paper Company went bankrupt due to its inability to carry the debt left to it by Bain Capital and every worker it employed lost his or her job.
One can still read online the Boston Globe’s analysis of this grisly feat of job killing.
Another sad story of the roadkill left by the wolves of Bain Capital is Worldwide Grinding Systems. According to Reuters, Romney and his fellow pack members made millions, the debt-laden company ultimately went under, and the federal government was forced to bail out the pension fund that the dead company could no longer finance. The wolves had their feast and the government had to clean up the mess.
There is a picture of Mitt Romney and his cohorts at Bain Capital that is being widely circulated on the Internet. It shows them dressed to the nines, smiling with almost frenzied grins, and showing off the cash they have “earned.” Set side-by-side with a picture of a pack of wolves looking up from its feast of a fallen caribou, this picture may become iconic.
Mitt Romney is now comparing his role in helping to kill 22 percent of the companies in which his company invested to President Obama’s role in saving General Motors and Chrysler. Let us not forget that Mitt Romney said that both companies should simply go straight to bankruptcy with no assistance from the government.
President Obama insisted that the government should help find a way to reorganize both companies, get rid of much of the debt they had accumulated, and preserve as many jobs of hard-working Americans as possible. Both companies are now producing cars Americans want to buy, hiring more workers to meet that growing demand, and boasting that, for the first time in a generation, the share of American companies of domestic auto sales is increasing.
We should not let Mitt Romney convince us that he is a job creator. Let us recognize a wolf in sheep’s clothing.
Arthur J. Greif is a lawyer who has an office in Bangor and lives in Bar Harbor.