Taibbi Does Mitt

[Thailandnotes]

Re: Taibbi Does Mitt

"To give but one example, there is a Bermuda-based entity called Sankaty High Yield Asset Investors Ltd., which has been described in securities filings as “a Bermuda corporation wholly owned by W. Mitt Romney.” It could be that Sankaty is an old vehicle with little importance, but Romney appears to have treated it rather carefully. He set it up in 1997, then transferred it to his wife’s newly created blind trust on January 1, 2003, the day before he was inaugurated as Massachusetts’s governor. The director and president of this entity is R. Bradford Malt, the trustee of the blind trust and Romney’s personal lawyer. Romney failed to list this entity on several financial disclosures, even though such a closely held entity would not qualify as an “excepted investment fund” that would not need to be on his disclosure forms. He finally included it on his 2010 tax return. Even after examining that return, we have no idea what is in this company, but it could be valuable, meaning that it is possible Romney’s wealth is even greater than previous estimates. While the Romneys’ spokespeople insist that the couple has paid all the taxes required by law, investments in tax havens such as Bermuda raise many questions, because they are in “jurisdictions where there is virtually no tax and virtually no compliance,” as one Miami-based offshore lawyer put it."

http://www.vanityfair.com/politics/2...shore-accounts

I would appreciate a good link to an article on off shoring.

It's one thing to "hide" money off shore, breaking US tax law and not paying anything on interest.

Obviously, Romney is not doing that. What is he doing?

[flintlock]

Re: Taibbi Does Mitt

"To give but one example, there is a Bermuda-based entity called Sankaty High Yield Asset Investors Ltd., which has been described in securities filings as “a Bermuda corporation wholly owned by W. Mitt Romney.” It could be that Sankaty is an old vehicle with little importance, but Romney appears to have treated it rather carefully. He set it up in 1997, then transferred it to his wife’s newly created blind trust on January 1, 2003, the day before he was inaugurated as Massachusetts’s governor. The director and president of this entity is R. Bradford Malt, the trustee of the blind trust and Romney’s personal lawyer. Romney failed to list this entity on several financial disclosures, even though such a closely held entity would not qualify as an “excepted investment fund” that would not need to be on his disclosure forms. He finally included it on his 2010 tax return. Even after examining that return, we have no idea what is in this company, but it could be valuable, meaning that it is possible Romney’s wealth is even greater than previous estimates. While the Romneys’ spokespeople insist that the couple has paid all the taxes required by law, investments in tax havens such as Bermuda raise many questions, because they are in “jurisdictions where there is virtually no tax and virtually no compliance,” as one Miami-based offshore lawyer put it."

http://www.vanityfair.com/politics/2...shore-accounts

I would appreciate a good link to an article on off shoring.

It's one thing to "hide" money off shore, breaking US tax law and not paying anything on interest.

Obviously, Romney is not doing that. What is he doing?

\

I would like to know also. If he is breaking any laws, which I doubt, he is not fit to serve as President. What I tire of is the implication by some media that he is breaking laws, with no proof. Even Obama has plenty of shady deals in his past, just not for as much money. I think I recall something about his personal residence? Like I've said, pretty much all these guys would not make the cut for sainthood. There are no poor politicians on the national level, and I'm not sure why wealth is seen as a problem. Generally speaking, your hardest working, smartest, and most ethical wealthy are not interested in selling their soul to be a politician. They are too smart for that. Its mostly those who need constant attention, affection, and seek to manipulate others who are attracted to politics. Only occasionally are truly qualified people tempted by their ego to run for office. And most decide very quickly its not worth it. I've never bought the idea that national level politicians are serving anyone but themselves.

[vt]

Re: Taibbi Does Mitt

I remember Nixon to China.

Look first for a reduction of the mortgage deduction to to be limited to $500K down from $1.1 million, and no deduction for other than primary residence. Later this will be reduced more and even eliminated. Look for rules that reduce the influence of the big banks and brokers, and the opening of new competition such as Wal Mart banking.

If elected Mitt will be running a nation, not Wall Street.

Don't underestimate the choice of Ryan as a message that the Midwest economy will be revitalized; Republican governors are already doing that. See Wisconsin vs. Illinois.

[flintlock]

Re: Taibbi Does Mitt

The closer you get to the top, the more regressive the US tax burden becomes. Basically, all salary gets converted to capital gains. Romney claims he paid 13.9 percent in 2010 (while the average middle class wage earner is paying about double that). Romney defends it as being legal, but never addresses whether it’s right. I suspect he’s not releasing his tax returns because there are years where he paid single digit rates.

Everything boils down to regulatory capture by a stronger and stronger Oligarchy. Where this is going is anybody’s guess, but average Americans should be aggressively hoarding money, cutting expenses, and researching retirement alternatives.

That's very true. I think the wealthy for the most part pay their share already, but taxing capital gains differently has never made sense to me. Another reason all the silly election year talk about tax rates is meaningless. The truly well off don't earn most of their income like Joe the plumber. And Obama knows this. He knows he can "raise taxes on the rich" and still not offend any of his wealthy donors. Any business person with a lick of sense hires a good accountant and structures his own pay to take income at the lowest rate possible. So anything other than taxing income the same for all types is always going to end up not reflecting the rates portrayed by the politicians and media.

[astonas]

Re: Taibbi Does Mitt

What I tire of is the implication by some media that he is breaking laws, with no proof.

I don't see the implication as being related to legality at all. The implication is that he acts immorally and/or unethically, not illegally. Since this is a stance you seem to agree with, your apparent exasperation confuses me.

Unless, of course you are simply tiring of the election process in general: an unprincipled slog in which each side tries to manufacture the appearance of difference by pointing out all the immoral/unethical stances of the other, real or fictitious.

If this is your view, I wholeheartedly agree!

[Chomsky]

Re: Taibbi Does Mitt

I remember Nixon to China.

Look first for a reduction of the mortgage deduction to to be limited to $500K down from $1.1 million, and no deduction for other than primary residence. Later this will be reduced more and even eliminated. Look for rules that reduce the influence of the big banks and brokers, and the opening of new competition such as Wal Mart banking.

If elected Mitt will be running a nation, not Wall Street.

Don't underestimate the choice of Ryan as a message that the Midwest economy will be revitalized; Republican governors are already doing that. See Wisconsin vs. Illinois.

I guess Hopium is a bipartisan drug.

[dcarrigg]

Re: Taibbi Does Mitt

I remember Nixon to China.

Look first for a reduction of the mortgage deduction to to be limited to $500K down from $1.1 million, and no deduction for other than primary residence. Later this will be reduced more and even eliminated. Look for rules that reduce the influence of the big banks and brokers, and the opening of new competition such as Wal Mart banking.

If elected Mitt will be running a nation, not Wall Street.

Don't underestimate the choice of Ryan as a message that the Midwest economy will be revitalized; Republican governors are already doing that. See Wisconsin vs. Illinois.

Romney has been a FIRE guy his whole life. FIRE is bankrolling his campaign. His top contributors in order are 1) Goldman Sachs, 2) JP Morgan, 3) Morgan Stanley, 4) BofA, 5) Credit Suisse, 6) Barclays, 7) Wells Fargo...

Now I'm supposed to believe he'll bite the hand that has feed him so well all these years?

Nixon didn't grow up with a silver spoon. And he wasn't President during an era of an economic and political culture captive to financial interests. I'm not so sure it pays to draw parallels between them.

[dcarrigg]

Re: Taibbi Does Mitt

I guess Hopium is a bipartisan drug.

That's fair. I was on it in 2008. I was off by 2010. Silly me.

[Raz]

Re: Taibbi Does Mitt

If elected I believe Romney-Ryan will unwind FIRE and promote TECI.

Obama has done nothing to do either. Instead he has promoted the Government/Union/Education complex. Under a second Obama term entrepreneurs will become an endangered species.

I don't need a reason not to vote for Obama. The man is a liar, an over-rated empty suit and a hard-leftist idealogue. He has solved nothing and he won't.
But I don't see ANY evidence whatsoever that Romney is going to deal with the banks and the Wall Streeters. None.

Promoting TECI might be better than what we'll get from Obummer, but without breaking up the big banks and bringing back Glass-Steagall (or a very close cousin)
there isn't going to be a pie to divide. And Romney's "plan" to increase defence spending means (a) he's very much beholden to the likes of Lockheed and the rest of the MICPLX that Eisenhower warned against, or (b) he's utterly clueless and probably won't deal with any of our other structural problems either.

[DSpencer]

Re: Taibbi Does Mitt

Promoting TECI

As something that EJ mentions, this idea is talked about frequently on itulip. Can someone explain, specifically, what is actually meant by this? Is it giving money to solar energy companies and promoting projects like the Volt? Doesn't Obama already do this and with comically disastrous and predictable results? Should we be giving tax breaks to Apple and Google? Funding more subway projects? Aren't there several threads on itulip right now detailing what an awful job they are doing with the existing infrastructure projects?

Isn't the whole idea just promoting a new version of corporatocracy with different beneficiaries?

I can't help but feel like when people think about their vision of TECI they are imagining a fantasy land of high speed trains and solar energy that our government has no hope of actually creating.

Maybe what people mean is to do the same things...only actually have them work this time. But, if Mitt Romney can't run a toy store and Barack Obama can't run a vending machine, how could they possibly know how to create a new economy with a high tech focus?

I also want a return to productivity at the center of the economy. I think it will do fine without promotion as long as other industries aren't actively promoted ahead of it.

[DSpencer]

Re: Taibbi Does Mitt

As someone who hasn't done any corporate raiding...I have a question: How does the debt from the loan money used to complete the takeover get assigned to the target company?

[goodrich4bk]

Re: Taibbi Does Mitt

I don't see the implication as being related to legality at all. The implication is that he acts immorally and/or unethically, not illegally. Since this is a stance you seem to agree with, your apparent exasperation confuses me.

Unless, of course you are simply tiring of the election process in general: an unprincipled slog in which each side tries to manufacture the appearance of difference by pointing out all the immoral/unethical stances of the other, real or fictitious.

If this is your view, I wholeheartedly agree!

Let me provide the "proof" of illegality that flintlock requires: Mitt's $30 million IRA account. There is no legal way that he could have created such a large IRA balance with $2,000 a year contribution limits, even if he began when IRA's were first created 40 years ago. The only way would be to grossly and fraudulently undervalue select Bain assets and then cause Bain to sell these grossly undervalued assets to his IRA for $2,000 when they were really worth millions.

This kind of transaction is absolutely illegal in two ways. One, if he knew or should have known that these assets were worth more than $2,000, he overcontributed to his IRA and owes penalties for doing so. Second, selling your own assets to your IRA that is expressly prohibited by law. I don't think he could legally get around this requirement by causing Bain to sell its assets to his IRA for less than fair value, at it would be a fraud on Bain's shareholders.

[don]

Re: Taibbi Does Mitt

Taibbi a day later . . .

So our new magazine piece, Greed and Debt, about Mitt Romney's past with Bain and the use of debt to finance takeovers, is online, and already I'm getting some questions that I am anxious to answer. There's a subtle point about the private equity business that I may not have made clear enough in the piece.

One emailer writes: "You've completely misunderstood what private equity does and ignored the many success stories in the industry. There is a reason why many of PE's biggest investors are unions and pension funds . . . who have benefitted more than once from private equity deals."

This is a valid point. It is true, many of the biggest investors in private equity deals are pension funds and workers' unions. I think this is unfortunate, and I know for a fact that many union leaders discourage unions from investing in private equity takeovers. But it's an undeniable fact that unions and pension funds do sometimes make money on private equity deals.

But what people need to understand about private equity firms like Bain is that they are not in the business of turning around companies and creating jobs. The unions and pension funds that invested in those deals did not do so to rescue companies.

If you invest in a Bain or a Carlyle or a KKR takeover deal, you’re not betting on the future success of whatever company they took over. You're betting on the ability of those firms to make money on the deal, which may – or, just as importantly, may not – involve turning the target company around.

If you borrow billions to buy Dunkin' Donuts and the firm flourishes post-takeover, that's one way for investors to get paid. But another way is getting Dunkin' to take out a $1.25 billion bank loan to hand its investors $500 million in tribute.

It's hard to imagine anything that's dumber, from the standpoint of trying to grow a business, than taking out a billion-dollar loan to pay a dividend – one buddy of mine on Wall Street used the word "retarded" – but for a private equity firm and its investors, that might very well be a smart way to get your investors paid.

This is really the point of the piece. The interests of PE firms and their investors do not coincide with the companies that have been taken over, not in the way that Romney and his adherents would have you believe. In fact, they're often at cross-purposes. You invest in a PE deal to make money – not to grow businesses. And not to create jobs.

Again, that's not to say leveraged buyout deals don't work for investors. They frequently do. But such deals are designed for the benefit of the investor – not for the takeover target. It's two different sets of interests that have been mistakenly portrayed, in the press, as being aligned.

http://www.rollingstone.com/politics...#ixzz2539lWSaM

[dcarrigg]

Re: Taibbi Does Mitt

As someone who hasn't done any corporate raiding...I have a question: How does the debt from the loan money used to complete the takeover get assigned to the target company?

That's the whole premise on which the debt is issued. The acquiring entity uses the cash-flow of the target entity as collateral for the initial loan. So the debt is assigned to the target entity by default. This typically destroys the credit of the target entity, and bangs any corporate bondholders by default, unless they have change-of-control provisions in corporate bond issuance.

It functions not too dissimilarly from leveraged recapitalization, except in this case there is a third party momentarily before the purchase is made. But once the purchase is made, it's the same thing.

I just read that and it's not too clear.

Let me try to put it another way.

Imagine you own a house outright with $100,000 equity. Somebody comes along and gets a mortgage and buys that house off of you for $100,000. Now there's no equity in the house. The same as if you took a $100,000 home equity loan. The house is left with no equity.

Now, let's go one step further. Imagine you own a store with assets valued at $1M and $100,000 in annual pre-tax revenue. Someone comes along and offers to buy the store for $1M. So they put $100,000 down and get a $900,000 'mortgage'. There's only $100,000 of equity in the company now. Now let's say the mortgage payments are $70,000 per year. Now the pre-tax revenue is down to $30,000 (don't worry about the revenue paid to debt, it's not taxable). Let's say that's $20,000 free and clear. So in 5 years, the new purchaser begins to make a return on the $100,000 investment. If the purchaser bought the company for $1M outright, it would take 15 years to make a return on the $1M investment ($1M/$66,666 after-tax revenue). Once you have a return, in 5 years, you can sell the store for whatever you can get for it. It doesn't matter. You already made money. The debt stays with the store because it was borrowed against the store's revenue, and goes to the next purchaser. Which makes some sense, when you think about it this way.

This is a very over-simple example of how leveraged buyouts work.

But hopefully that answers your question.

[Raz]

Re: Taibbi Does Mitt

As something that EJ mentions, this idea is talked about frequently on itulip. Can someone explain, specifically, what is actually meant by this? Is it giving money to solar energy companies and promoting projects like the Volt? Doesn't Obama already do this and with comically disastrous and predictable results? Should we be giving tax breaks to Apple and Google? Funding more subway projects? Aren't there several threads on itulip right now detailing what an awful job they are doing with the existing infrastructure projects?

Isn't the whole idea just promoting a new version of corporatocracy with different beneficiaries?

I can't help but feel like when people think about their vision of TECI they are imagining a fantasy land of high speed trains and solar energy that our government has no hope of actually creating.

Maybe what people mean is to do the same things...only actually have them work this time. But, if Mitt Romney can't run a toy store and Barack Obama can't run a vending machine, how could they possibly know how to create a new economy with a high tech focus?

I also want a return to productivity at the center of the economy. I think it will do fine without promotion as long as other industries aren't actively promoted ahead of it.

My understanding of TECI (Transportation, Energy, Communication Infastructure) isn't the best but I think it involves at least two points: (a) strip away tax incentives for non-productive investment (McMansions, shopping malls, etc.) and apply/increase them for productive investment (TECI), and (b) initiate public/private partnerships in TECI - not the rat-hole of union payoffs by Obama or the oligarch sleaze of congressional RepubliCrats.

EJ will give the best explanation of and the reasons for promoting this.