Saturday, January 14, 2012

Much Ado About Not Very Much

Newt Gingrich, blasting Mitt Romney, early this week stated "you have to ask the question, is capitalism really about the ability of a handful of rich people to manipulate the lives of thousands of people and then walk off with the money?      "Although "nobody objects to Bill Gates being extraordinarily rich, they provide a service," he explains, objectionable is when an investor receives "six-to-one returns, and the company goes bankrupt," at which time "you have to ask the question, is capitalism really about the ability of a handful of rich people to manipulate the lives of thousands of people and then walk off with the money?"      The next day, he noted "if someone who is very wealthy comes in and takes over your company and takes out all the cash and leaves behind the unemployment? I think that’s not a model we want to advocate..."

Reaction from the left was muted, although Benjy Sarlin at Talking Points Memo argued "The former Speaker is making the case that, in contrast to good old fashioned businesses who make stuff, Romney and his ilk have instead gamed the system to create a soulless machine that profits from the misery of others."   And Lawrence O'Donnell somewhat naively praised Gingrich for "forcing Republicans to think about something they don't like to think about, the difference between the right to do something and doing the right thing."

Conservatives predictably were critical, with the Chamber of Commerce, Jim DeMint, and Rush Limbaugh, who claimed "you could have read this in an Occupy Wall Street flier," being among those who objected.        And the oddest knock came from Jon Huntsman, taking a break from slamming Mitt Romney for- well, for everything- curiously maintaining "I think it’s more instructive to look at Governor Romney’s record as governor.     You can’t be on both sides of this issue. If you’re going to stand for breaking up the banks, then you can’t criticize Bain Capital for doing some of what it did."      Whatever that means.

There was no reason for Republicans to be so exorcised (although they do appear to need an exorcist) about the comments of one candidate questioning the rapacious capitalism of corporate raiders.        Newt since has somewhat backed off his comments, and they were merely sound and fury signifying nothing, anyway.          As usual, Robert Reich understood immediately:

Where has Newt been for the last thirty years? Leveraged buyouts became part of traditional capitalism in the 1980s when enterprising financiers began borrowing piles of money, often at high interest rates, to buy up the stock of ongoing companies they believe undervalued. They’d back the loans with the company assets, then typically sell off divisions and slim payrolls, and resell the company to the public at a higher share price – pocketing the gains.

It’s a good deal for the financiers (the $25 billion buyout of RJR-Nabisco in 1988 netted the partners of Kohlberg, Kravis, and Roberts around $70 million each – and most of Mitt Romney’s estimated $200 million fortune comes from the same maneuvers), but not always for the company or its workers.

Some workers lose their jobs when the company downsizes. Others, when the company, now laden with debt, can’t meet its payments to creditors and has to go into bankruptcy. According to the Wall Street Journal, of 77 companies Bain invested in during Romney’s tenure there, 22 percent either filed for bankruptcy or closed their doors by end of eighth year after Bain’s investment.

But, hey, this is American capitalism – at least as it’s been practiced for the past three decades. Is Newt proposing to ban leveraged buyouts? Or limit the amount of debt a company can take on? Or prevent financiers – or even CEOs and management teams – from taking a public company private and then reselling it to the public at a higher price?

None of the above.

Rick Perry criticizes Romney and Bain pushing the quest for profits too far. “There is nothing wrong with being successful and making money,” says Perry. “But getting rich off failure and sticking someone else with the bill is indefensible.”

Yet getting rich off failure and sticking someone else with the bill is what Wall Street financiers try to do every day. It’s called speculation – and at least since the demise of the Glass-Steagall Act, investment bankers have been allowed to gamble with commercial bank deposits, other people’s money.

So is Perry proposing to resurrect Glass-Steagall? Not a chance.

Gingrich, Perry, and others are putting particular focus on the people who lost their jobs as a result of Romney’s Bain Capital. Gingrich’s Super PAC will be running $3.5 million of ads featuring emotional interviews with some of them.

But what, exactly, are Romney’s opponents proposing to do about layoffs that harm so many people? Millions of Americans have lost their jobs over the last four years – and as a result have often lost their health insurance, their homes, and their savings.

Are Gingrich, Perry, and others proposing to expand health insurance coverage for jobless Americans and their families? All I hear from the Republicans is their determination to repeal the law that President Obama championed – which still leaves millions of Americans uninsured. Do Romney’s opponents have plans to keep people in their homes even when they’ve lost their jobs and can’t pay their mortgages? No. Do they propose expanding unemployment insurance? If memory serves, most of them were opposed to the last extension.

Soon, Newt Gingrich will be back to calling President Obama a socialist, South Carolina will customarily vote for the GOP's next-in-line candidate, and all will be right with the world.

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