Greed, Debt and Matt Taibbi

[Raz]

Greed, debt and Matt Taibbi

By Dan Primack September 4, 2012: 4:19 PM ET


What Rolling Stone got right, and wrong, about Bain Capital.FORTUNE -- Very few of my friends understand private equity, let alone care about it. But some of them wrote me this past weekend, after reading Matt Taibbi's new cover story for Rolling Stone about Mitt Romney's time with Bain Capital. For example, this was from my former college housemate Andrew:

I read the Taibbi article in Rolling Stone. Reading it you can obviously see that the guy has a fairly biased opinion on private equity and Wall Street dealings in general. What's the industry's defense of PE? I assume the truth is somewhere between Mitt's verision of Bain as a massive jobs creator and Gordon Gekko-esque corporate raiders.

Andrew has good instincts. Taibbi took out the long knives for this one, which means he sacrificed a bit of accuracy for potency.
His overall thesis is correct: There is a fundamental hypocrisy in a former leveraged buyout investor railing against America's ballooning debt. Leveraged buyouts, by definition, add debt to a company's balance sheet -- weighing it down in the short-term so that it can (hopefully) thrive in the long-term. Romney defenders point out that America is not the same as a private equity-backed company, a truism that only goes to underscore the flimsiness of using Romney's Bain Capital experience as a singular qualification for the Oval Office.

Unfortunately, Taibbi also takes a lot of wild swings at the broader private equity market that don't ring true. So many, in fact, that his valid critique of Romney's candidacy gets lost.

Here is an accounting:

Four years ago, the Mitt Romneys of the world nearly destroyed the global economy with their greed, shortsightedness and – most notably – wildly irresponsible use of debt in pursuit of personal profit.

Taibbi is using Romney here as a stand-in for Wall Street, but it's unfair. Private equity firms played virtually no role in the global financial crisis. Remember, private equity neither underwrote home mortgages nor securitized them. Private equity firms did not require federal bailouts under TARP or any other program. In fact, the one big concern about private equity's pre-crisis activities -- the so-called debt maturity wall -- has proven unfounded.

Now your troubled firm – let's say you make tricycles in Alabama – has been taken over by a bunch of slick Wall Street dudes who kicked in as little as five percent as a down payment.

While perhaps there have been certain leveraged buyouts that involve just 5% equity, the typical contribution is significantly higher. For example, S&P Leveraged Commentary & Data reports that average LBO equity contributions since 1997 have come in between 28% and 45%. Still a debt game, but not quite so severe.

So Tricycle Inc. now has two gigantic new burdens it never had before Bain Capital stepped into the picture: tens of millions in annual debt service, and millions more in "management fees." Since the initial acquisition of Tricycle Inc. was probably greased by promising the company's upper management lucrative bonuses, all that pain inevitably comes out of just one place: the benefits and payroll of the hourly workforce.

Or perhaps the company has enough cash flow to cover both in the short-term, while future growth (based on changes enacted by the PE firms) helps bump up profit. There are no hard and fast rules. Even when a PE firm does lay off portfolio company employees post-acquisition -- not an uncommon occurrence -- it isn't always for financial reasons. Sometimes it's because the new strategy is to de-emphasize or shut down a non-core part of the business, or a unit with declining growth (albeit one that is still profitable). Taibbi makes it sound like buy-then-fry is private equity's modus operandi. It is not. And, in the long-term, private equity ownership does not have a significant impact on a company's payroll.

The private equity business in the early Nineties was dominated by a handful of takeover firms, from the spooky and politically connected Carlyle Group (a favorite subject of conspiracy-theory lit, with its connections to right-wingers like Donald Rumsfeld and George H.W. Bush) to the equally spooky Democrat-leaning assholes at the Blackstone Group.

Blackstone Group co-founders Steve Schwarzman and Pete Peterson would be very surprised to be described as "Democrat-leaning," given their long-standing support for Republican candidates and causes. They probably also disagree with the "assholes" part, although at least they've heard that one before.

The only ones who profited in a big way from all the job-killing debt that Romney leveraged were Mitt and his buddies at Bain, along with Wall Street firms like Goldman and Citigroup.

Well, plus all of the limited partners in Bain Capital funds. You know, the university endowments, corporate pension funds, teachers unions, etc. Taibbi makes a case that Bain's returns weren't terribly good, but the fact is that LPs re-invested in fund after fund. Even if it was just for the sake of reducing risk via diversification, it's not fair to say that the only people making millions off of Bain Capital were those who worked for Bain Capital. Taibbi addressed this criticism in a follow-up post.

In the Bain model, the actual turnaround isn't necessary. It's just a cover story. It's nice for the private equity firm if it happens, because it makes the acquired company more attractive for resale or an IPO. But it's mostly irrelevant to the success of the takeover model, where huge cash returns are extracted whether the captured firm thrives or not.

This just isn't true. The reference here is to dividend recaps, a noxious private equity practice through which firms can actually generate profits off of investments in portfolio companies that later go bankrupt. But the reality is that, for the most part, dividend recaps alone do not generate the types of returns that bring limited partners back for follow-on funds. Moreover, too many post-recap failures and banks are unlikely to make new loans to fund a private equity firm's future deals (original LBOs or recaps). In other words, the more legitimate wins matter, so long as the private equity firm wants to stick around.

After Milken and his junk bond scheme crashed in the late Eighties, Romney and other takeover artists moved on to Wall Street's next get-rich-quick scheme: the tech-Internet stock bubble.

Huh? There simply weren't leveraged buyouts of dotcom companies in the late 1990s. These were young companies, most of which weren't generating significant cash-flow. Is this where Taibbi confuses venture capital with private equity? Or is he saying that the tech boom helped indirectly finance private equity, by swelling the paper values of endowment and pension fund coffers (many of which direct 8-10% of their assets to PE)? I'm really not sure.

The new owners of American industry are the polar opposites of the Milton Hersheys and Andrew Carnegies who built this country, commercial titans who longed to leave visible legacies of their accomplishments, erecting hospitals and schools and libraries, sometimes leaving behind thriving towns that bore their names.
"We try to hide religiously," explained Steven Feinberg, the CEO of a takeover firm called Cerberus Capital Management that recently drove one of its targets into bankruptcy after saddling it with $2.3 billion in debt. "If anyone at Cerberus has his picture in the paper and a picture of his apartment, we will do more than fire that person," Feinberg told shareholders in 2007. "We will kill him. The jail sentence will be worth it."

Steven Feinberg is the closest thing private equity has to J.D. Salinger, so it's hardly a fair representation. Steve Schwarzman has his name on the New York Public Library. Henry Kravis juast put his name on a new building at Columbia Business School. The nonprofit organization City Year has named its headquarters for Bain Capital's Josh Beckenstein. And many private equity executives appear regularly at financial conferences and on financial television networks like CNBC. If they're hiding, they're doing so in plain sight.

http://finance.fortune.cnn.com/2012/...iid=SF_F_River

[unlucky]

Re: Greed, Debt and Matt Taibbi

The only possible benefit of a PE LBO (assuming it's not just cynical vehicle to enrich managers) is that you get rid of existing shareholders. An LBO can make sense when you've got a bunch of shareholders who are blocking the progress of the business, perhaps because they're just milking cashflow for dividends.

All the talk about wonderful new owners with great vision and expertise is just a load of guff. Execs with big egos can be hired on any street corner. Watch where the money goes: it goes to the existing shareholders and its purpose is to get rid of them. I'm surprised this point is not mentioned above.

[jk]

Re: Greed, Debt and Matt Taibbi

i think pe folks looked at company balance sheets to see which could be leveraged up. the targets were always "under-borrowed," otherwise there was no source for the L in lbo. usually the borrowings were followed by a "dividend" payout to the purchasers, who thus quickly got their investments out, or more. after that, they could play with "house" money, heads they win, tails they walk.

[unlucky]

Re: Greed, Debt and Matt Taibbi

i think pe folks looked at company balance sheets to see which could be leveraged up. the targets were always "under-borrowed," otherwise there was no source for the L in lbo. usually the borrowings were followed by a "dividend" payout to the purchasers, who thus quickly got their investments out, or more. after that, they could play with "house" money, heads they win, tails they walk.

True, it's not difficult to see why these deals always make sense from the perspective of the PE investors. But from the perspective of the acquired business (and looking at it from the point of view of what's good for the business, rather than just for the managers or shareholders), do these deals ever make much sense? If the target was under-borrowed, that could be easily fixed without changing ownership - and the borrowed money could have been actually invested in the business, rather than just used (mostly) to pay off shareholders. Likewise it hardly makes sense to borrow huge sums just to bring in new owners who provide "good advice".

So the only circumstance I can see where an LBO helps the acquired business, is where the business really, really needs to retire its existing shareholders.

Very often though, managers go with the deal because they expect a personal reward (and not really for the sake of the business). In cases where the managers themselves are the shareholders and their purpose is to monetize their holding, it's arguable that they are within their rights to do so. But a lot of the larger LBOs do look quite cynical.

[littleshark]

Re: Greed, Debt and Matt Taibbi

Taibbi is using Romney here as a stand-in for Wall Street, but it's unfair. Private equity firms played virtually no role in the global financial crisis. Remember, private equity neither underwrote home mortgages nor securitized them. Private equity firms did not require federal bailouts under TARP or any other program. In fact, the one big concern about private equity's pre-crisis activities -- the so-called debt maturity wall -- has proven unfounded.

PE firms did play a role by taking advantage of the generous terms and amounts of debt that Wall St was willing to lend them. But you can't blame them for taking what was offered, after all, remember Chuck Prince said something to the effect of, "If the music is playing, you've got to dance." He was referring to the huge PE deals that were going on at the time, from Hilton to Equity Office.

The mortgage fraud and securitization scams brought the system down, but this reckless financing helped. Again, you can only blame the lenders though. If they are going to pay huge divs to themselves financed by debt, it's the fault of the debt issuers, they are the ones assessing the risks. The problem is when those risks get socialized.

Where I disagree with you is that although PE wasn't directly needing a bailout, they benefitted immensely from it. The fact that the debt maturity wall hasn't hurt them and all their struggling portfolio companies have been able to kick the can is precisely because of the bank bailout and the fact that the govt took junk debt on their balance sheet, and the distortions that 0% rates cause in the debt markets.

Private Equity is a poster boy for the financialization of the economy that has occured, and just a cog in the huge amt of private debt that this country has amassed, but a great talking point for guys like Taibbi with Romney running for president. It should lead to a bigger conversation by sensible people, but will just get demonized as a job killer/family destroyer on the left and a wonder of capitalism on the right.

[Raz]

Re: Greed, Debt and Matt Taibbi

PE firms did play a role by taking advantage of the generous terms and amounts of debt that Wall St was willing to lend them. But you can't blame them for taking what was offered, after all, remember Chuck Prince said something to the effect of, "If the music is playing, you've got to dance." He was referring to the huge PE deals that were going on at the time, from Hilton to Equity Office.

The mortgage fraud and securitization scams brought the system down, but this reckless financing helped. Again, you can only blame the lenders though. If they are going to pay huge divs to themselves financed by debt, it's the fault of the debt issuers, they are the ones assessing the risks. The problem is when those risks get socialized.

Where I disagree with you is that although PE wasn't directly needing a bailout, they benefitted immensely from it. The fact that the debt maturity wall hasn't hurt them and all their struggling portfolio companies have been able to kick the can is precisely because of the bank bailout and the fact that the govt took junk debt on their balance sheet, and the distortions that 0% rates cause in the debt markets.

Private Equity is a poster boy for the financialization of the economy that has occured, and just a cog in the huge amt of private debt that this country has amassed, but a great talking point for guys like Taibbi with Romney running for president. It should lead to a bigger conversation by sensible people, but will just get demonized as a job killer/family destroyer on the left and a wonder of capitalism on the right.

I agree with your comments, littleshark - except for those I highlighted in red.

I only posted the article for everyone's perusal; your disagreement is with Dan Primack.

[Milton Kuo]

Re: Greed, Debt and Matt Taibbi

So the only circumstance I can see where an LBO helps the acquired business, is where the business really, really needs to retire its existing shareholders.

An LBO can be used to replace bad management with good management at an otherwise good company. [What? You think lousy executive management and their cronies on the board will just resign or fire each other? ] The key to not destroying the company, though, is to not gut the company with unnecessary lay offs and asset stripping and to not pay out massive special dividends to the acquirer. After new management rights the ship, a very large portion of the debt used to take over the company can be liquidated from the proceeds of a new IPO. If new management does its job correctly, the company should not be burdened with new, company-destroying debt and should be more profitable poised to grow.

At least, that's how LBOs are supposed to work in theory. Unfortunately, for the most part, that's not how they work in real life.

[wayiwalk]

Re: Greed, Debt and Matt Taibbi

I think in his article, Taibbi made reference to the book "Barbarians at the Gate", the inside story of the RJR Nabisco LBO. I read that last winter, and thought it a really good look at the culture of ego and greed which took over Wall Street and was an early indication of the mindset that would dominate the street. A good companion piece is Michael Lewis's Liar's Poker.

[littleshark]

Re: Greed, Debt and Matt Taibbi

I agree with your comments, littleshark - except for those I highlighted in red.

I only posted the article for everyone's perusal; your disagreement is with Dan Primack.

Happy we're in agreement....my mistake.

[flintlock]

Re: Greed, Debt and Matt Taibbi

Raz is master of the highlighter.

[astonas]

Re: Greed, Debt and Matt Taibbi

Raz is master of the highlighter.

I have to say, I do like the convention he seems to have adopted: Green for agreement, red for disagreement. It allows for much more nuance in responses, and encourages one to not only consider the points one disagrees with, but to search for common ground.

I may just borrow the convention myself, if there's no objection.

[Sutter Cane]

Re: Greed, Debt and Matt Taibbi

I find it hard to take this rebuttal to Taibbi seriously, when the author himself admits of Taibbi's piece:

His overall thesis is correct

The rest is just quibbling.

At any rate, Taibbi addresses this article himself:

http://www.rollingstone.com/politics...omney-20120905

[Thailandnotes]

Re: Greed, Debt and Matt Taibbi

At any rate, Taibbi addresses this article himself:

http://www.rollingstone.com/politics...omney-20120905

Can someone cut and paste this? or supply the IP number?

rolling stone is still blocked in Thailand.

Computer question: What does it mean if I replace www.rollingstone.com with "64.147.122.110
and can get through to the website. Is rollingstone being blocked in Thailand, or is rollingstone denying access to computers with Thai IP numbers?

[Chomsky]

Re: Greed, Debt and Matt Taibbi

Can someone cut and paste this? or supply the IP number?

rolling stone is still blocked in Thailand.

Computer question: What does it mean if I replace www.rollingstone.com with "64.147.122.110
and can get through to the website. Is rollingstone being blocked in Thailand, or is rollingstone denying access to computers with Thai IP numbers?

Here it is; no idea about the IP problem.

A few people wrote to me this morning asking me about Dan Primack’s critique of my Romney piece ("Greed and Debt," August 29) on CNN.com. His article ("Greed, Debt, and Matt Taibbi") purports to provide a list of factual inaccuracies, but like a lot of these pieces that pore through long features in search of mistakes, the resultant list ends up mainly being a discussion of non-factual issues where Primack and I simply disagree.
For example, take this passage, where Primack quotes me and then critiques:

"Now your troubled firm – let's say you make tricycles in Alabama – has been taken over by a bunch of slick Wall Street dudes who kicked in as little as five percent as a down payment."
While perhaps there have been certain leveraged buyouts that involve just 5% equity, the typical contribution is significantly higher. For example, S&P Leveraged Commentary & Data reports that average LBO equity contributions since 1997 have come in between 28% and 45%. Still a debt game, but not quite so severe.

This is exactly why I used the term "as little as" five percent. I referenced two Bain deals where the company put down such obscenely small amounts of cash to take over companies: the Ampad deal where they put down $5 million to take over a company that was eventually forced to take on over $448 million in debt, and the KB deal where Bain put down $18 million and financed the remaining $302 million (meaning Bain put down more or less exactly five percent on the deal). I then noted, in the piece, that most LBO deals are 60-90% financed, which is not quite exactly but very nearly exactly what Primack says (his numbers are 65%-72% financed), except that he got his data from the S&P Leveraged Commentary & Data, while I got mine from the Journal of Economic Perspectives.
So Primack’s point, I guess, is that I misrepresented how much a PE company typically puts down in a takeover deal, except that I actually went out of my way to point out how much of these deals are typically financed, and then used two concrete examples from Mitt Romney’s own past (remember, this is an article about Mitt Romney) to point out extreme cases, which Primack admits “perhaps” do happen.
Then there’s this, using the same quote-and-critique method:

"So Tricycle Inc. now has two gigantic new burdens it never had before Bain Capital stepped into the picture: tens of millions in annual debt service, and millions more in "management fees." Since the initial acquisition of Tricycle Inc. was probably greased by promising the company's upper management lucrative bonuses, all that pain inevitably comes out of just one place: the benefits and payroll of the hourly workforce."
Or perhaps the company has enough cash flow to cover both in the short-term, while future growth (based on changes enacted by the PE firms) helps bump up profit. There are no hard and fast rules. Even when a PE firm does lay off portfolio company employees post-acquisition -- not an uncommon occurrence -- it isn't always for financial reasons. Sometimes it's because the new strategy is to de-emphasize or shut down a non-core part of the business, or a unit with declining growth (albeit one that is still profitable). Taibbi makes it sound like buy-then-fry is private equity's modus operandi. It is not. And, in the long-term, private equity ownership does not have a significant impact on a company's payroll.

Actually what I say here is that when a PE firm takes over a company, it adds two huge new financial burdens to the firm’s bottom line, in the form of debt service and management fees – and perhaps a third, in the form of big bonuses paid to management to grease the transaction. Primack says nothing about this, moves on to a sentence about how when PE firms fire people, it isn’t always for financial reasons, and then in the end he quotes a study that purports to show that PE ownership has no significant impact on payroll.
If Primack feels comfortable saying that adding hundreds of millions of dollars in new debt to a company and extracting millions more in fees and dividends has no impact on payroll, then he, and the esteemed writers in that study, are certainly welcome to make that argument. I’d be happy to introduce him to some former KB Toys employees who’d love to hear what all those folks have to say about that. It seems to me that when there are deals like the KB situation when the investors, the PE firm, and senior management all made millions of dollars in the middle of a bankruptcy that later resulted in everybody else losing his job, you don’t need an academic study to tell you where the “impact” was felt.
Then there’s this:

"In the Bain model, the actual turnaround isn't necessary. It's just a cover story. It's nice for the private equity firm if it happens, because it makes the acquired company more attractive for resale or an IPO. But it's mostly irrelevant to the success of the takeover model, where huge cash returns are extracted whether the captured firm thrives or not."
This just isn't true. The reference here is to dividend recaps, a noxious private equity practice through which firms can actually generate profits off of investments in portfolio companies that later go bankrupt. But the reality is that, for the most part, dividend recaps alone do not generate the types of returns that bring limited partners back for follow-on funds. Moreover, too many post-recap failures and banks are unlikely to make new loans to fund a private equity firm's future deals (original LBOs or recaps). In other words, the more legitimate wins matter, so long as the private equity firm wants to stick around.

Here Primack is just being disingenuous, particularly in this line:

But the reality is that, for the most part, dividend recaps alone do not generate the types of returns that bring limited partners back for follow-on funds.

This is wild. In the piece I point out that PE firms take over companies and then can induce those companies to pay out massive dividends to their new masters, often taking out giant bank loans to do so. I cited multiple concrete examples of this, like the KB deal where the failing company was induced to pay out a $121 million dividend (financing this with $66 million in bank loans), and the Dunkin’ deal, in which Bain and Carlyle induced Dunkin’ to pay a half-billion dollar dividend, taking out a $1.25 billion loan to finance it.
Primack now takes these passages and calls them factually lacking by arguing that dividend recapitalizations – "for the most part" and "alone" – aren’t a sweet enough carrot to keep investors coming back to the next deal. Which has nothing to do with what I was talking about.
I was never talking about what’s in these deals for Romney’s partners and investors. I was talking about what’s in it for Bain and Romney. And nowhere do I ever talk about whether dividend recapitalizations, "alone," are sufficient to “bring limited partners back.” It would be silly to say that they are.
Instead, the whole "cover story" passage was intended to explain an important point: it’s certainly better for the PE firm if the company turns around, but if it doesn’t, that’s not so bad either, since if all else fails, they can just always just rape the acquired company. And while the "dividend recaps" aren’t by themselves enough to bring investors back to the next deal, you can bet they wouldn’t come to any PE deals at all if the PE firms they invested with didn’t possess this "rape in case of emergency" weapon in their financial arsenals.
As an investor, do you really want to throw your hard-earned cash into a company to whose bottom line Mitt Romney just added $300 million in debt? In a company that just borrowed $300 million not to buy new equipment or invest in R&D, but just to buy the "asset" of new management by Mitt Romney? In a vacuum, you probably wouldn’t invest in that firm – but if you know Romney can force the company to pay out a $120 million dividend on demand, taking out huge bank loans if need be, you’d feel a lot safer.
My point isn’t that it’s not good for PE firms when companies turn around, but that the system is set up so that they don’t have to make companies turn around in order to make profits on takeovers.
Is it better for Bain if a company like Ampad turns around? Absolutely. Did they make a 2000% profit anyway burning the firm to the ground when it didn’t? You bet.
In the long run, sure, a company like Bain will suffer if it leaves behind nothing but a pile of corpses, since that will scare away even the most clueless investors. (Of course that cluelessness can persist for a long time – this same pool of investors needed a world meltdown in 2008 to convince them to stop buying the subprime mortgage bonds bank hucksters were selling them).
But the fact that the occasional bloody casualty not only doesn’t dent the bottom lines of PE firms, but can even enhance them, makes this a very particular kind of capitalism – highly socially destructive, with little or no risk to the PE firm, but with the potential for massive profits to the Bains of the world even when they add zero or negative value to their takeover targets.
I think that sucks. Primack disagrees. He thinks it’s more significant that “legitimate wins matter” in the long run, while I think it’s more significant that they don’t matter in the short run.
This is what you call a difference of opinion. It’s the difference between believing that PE is socially beneficial and believing, as I do, that it’s often predatory and antisocial. It would be healthy to hear this debate aired out normally, but in this case, Primack depicts that disagreement as factual inaccuracy on my part, which is just obnoxious. We just don’t go there in this business unless it’s true (mainly because most experienced writers are cognizantof the "there but for the grace of God" factor when it comes to factual mistakes); you have to learn to distinguish between what is absolutely a wrong fact and what you think is a wrong opinion.
The bit at the end of his piece is a classic example. I quoted Steven Feinberg of Cerberus Captial saying he’d happily kill any employee of his who gets his picture in the paper as part of a larger point that PE titans keep extremely low profiles, compared to the corporate owners of America’s past. Here there was the undisguised implication that PE raiders keep low profiles because the reality of what they do is so shocking and nauseating to the general public that shining a light on it can only hurt their businesses. This was contrasted with the businesses of Rockefeller and Hershey and Ford, who were so proud of what they’d built, they erected museums to their accomplishments and named everything from towns to schools after themselves.
Primack countered by pointing out that Feinberg is an aberrational recluse and that Steve Schwartzman has his name on the New York Public library and Henry Kravis’s name is on a building on the Columbia Journalism School.
Now, Primack admits his own friends don’t know what the hell private equity is. Nobody does. These guys are the richest men in America and nobody knows who they are or what the hell they do for a living. If Primack went to a Cleveland Browns game and worked his way around the stadium asking crowd members what private equity is and what Steve Schwartzman does for a living, how many people in the crowd would have a clue? One in a thousand? Ten thousand?
The kicker to me came when Primack wrote that “many private equity executives appear regularly at financial conferences and on financial television networks like CNBC,” as if that was proof of anything other than the fact that even a private equity executive doesn’t mind getting sucked off on live TV like all the other Wall Streeters who agree to make guest appearances on CNBC.
When Thomas Lee Partners builds a museum to the dividend recapitalization in the Georgia town where 1,000 people used to work making Simmons mattresses (before THL paid itself a $375 million dividend on the company's dime), then we can talk about the willingness of private equity executives to proudly show their faces anywhere outside Maria Bartiromo’s lap and a surrounding strip of Manhattan about the size of the U.S.S. Carl Vinson.
As to the characterization of the Blackstone group as “Democrat-leaning assholes,” Primack disagrees with both the “Democrat-leaning” and, it seems, the “assholes” part, correctly pointing out that Steve Schwartzman and Pete Peterson have long histories of supporting Republican causes. My characterization was more about the firm’s profile in the time period covered in that passage, in the early nineties, when Blackstone had Roger Altman as its vice-chairman; Altman left Blackstone to be Deputy Treasury Secretary under Clinton, whom the firm supported in the 1992 election.
Still, upon reflection, maybe I would have written that passage differently. The rest of it? The bit about “the Mitt Romneys of the world” causing the 2008 crash is, as Primack guesses, a rhetorical device: I meant that phrase in the sense of “greedy, bloodsucking Wall Street pirates who extract huge fortunes for themselves without adding value to society,” and not in the sense of “heads of private equity companies.” He thinks that’s “unfair,” but that’s different from being factually wrong.
And the bit about PE deals tracking upward with the tech bubble: again, he guesses correctly that I’m talking about the indirect consequence of easy money leading to more funding for PE deals, not that private equity firms took over dot-com companies. He finds this confusing, despite the fact that I’d spelled this out – “takeovers rose sharply with each of Wall Street's great easy-money schemes” – but even if the clarity of the writing here is insufficiently penetrating for his tastes, that is, again, very different from it being factually inaccurate.
Private equity firms like Bain wouldn't exist if some people didn't think they made economic and political sense, so obviously someone is going to cry foul when we publish a piece like "Greed and Debt." Primack's piece pretty much sums up the counter-argument, which I personally don't think is terribly convincing, but there it is. Is it time for the Giants-Cowboys game yet?

Read more: http://www.rollingstone.com/politics...#ixzz25pmSh4yv

[Polish_Silver]

What is the meaning of Romney?

What Rolling Stone got right, and wrong, about Bain Capital.FORTUNE --
http://finance.fortune.cnn.com/2012/...iid=SF_F_River

Taibbi's basic idea is that Bain/Romney exploited tax breaks and leveraged finance to loot companies.

He backs this up with examples including Ampad, KB toys, Hertz, Dunkin Donuts.

Does anyone dispute this basic claim ?

If Taibbi is correct, what does it mean that someone as unethical as Romney has just been nominated by the Republican party, and may soon win the presidential election ?