You could either read this as Mitt Romney being defined as a soulless corporate raider early enough for him to have trouble reversing it, or the set of stories on Romney’s early career at Bain Capital coming out too early to be a factor in the Presidential race because nobody’s tuning in at this stage. But for whatever reason, we’ve been treated to a spate of articles on Bain in the last few days.
First there was the Tom Hamburger story in WaPo showing that Bain specialized in investing in companies that shipped away American jobs. The Romney campaign tried to play that off by saying that those companies engaged in “offshoring” and not “outsourcing,” as if that was supposed to make anyone feel better.
Then, the New York Times weighed in with this story, which accurately represents the Bain business model, and how the relative health of the companies in which it invested didn’t matter to their bottom line:
Cambridge Industries, an automotive plastics supplier whose losses had been building for three consecutive years, finally filed for bankruptcy in May 2000 under a mountain of debt that had ballooned to more than $300 million.
Yet Bain Capital, the private equity firm that controlled the Michigan-based company, continued to religiously collect its $950,000-a-year “advisory fee” in quarterly installments, even to the very end, according to court documents.
In all, Bain garnered more than $10 million in fees from Cambridge over five years, including a $2.25 million payment just for buying the company, according to bankruptcy records and filings with the Securities and Exchange Commission. Meanwhile, Bain’s investors saw their $16 million investment in Cambridge wiped out.
That Bain was able to reap revenue from Cambridge, even as it foundered, was hardly unusual.
Adding to this portrait, of Romney presiding over a firm that made profits off of bankruptcies and practically invented the technique of shipping out US jobs, you have this even more damaging story about a business relationship with junk-bond king Michael Milken:
It was at the height of the 1980s buyout boom when Mitt Romney went in search of $300 million to finance one of the most lucrative deals he would ever manage. The man who would help provide the money was none other than the famed junk-bond king Michael Milken.
What transpired would become not just one of the most profitable leveraged buyouts of the era, but also one of the most revealing stories of Romney’s Bain Capital career. It showed how he pivoted from being a relatively cautious investor to risking his reputation for a big payoff. It is one that Romney has rarely, if ever, mentioned in his two bids for the presidency, perhaps because the Houston-based department store chain that Bain assembled later went into bankruptcy.
But what distinguishes this deal from the nearly 100 others that Romney did over a 15-year period was his close work with Milken’s firm, Drexel Burnham Lambert Inc. At the time of the deal, it was widely known that Milken and his company were under federal investigation, yet Romney decided to go ahead with the deal because Drexel had a unique ability to sell high-risk, high-yield debt instruments, known as “junk bonds.”
I don’t know if the name “Milken” resonates anymore, but he was synonymous with the attitude of Wall Street to extract profit at all costs, the individual workers affected by the maneuvers be damned. And this article connects the dots between Milken and Romney, effectively transferring that attitude to Romney himself. In fact, Romney kept the deal going with Milken even as the latter was being investigated by the SEC for securities law violations.
It seems the traditional media has begun tuning in to these image problems for Romney at Bain. There does become a point at which these perceptions get difficult to reverse. And the image of a corporate executive making money off of other people’s suffering isn’t exactly popular.