Mitt Romney is no champion of “free markets” according to Reagan budget adviser.
Bain Capital was essentially a carpet-bagging outfit that latched itself to the government corporate welfare teat. Their racket was to a) buy firms with poor earnings but sizable assets. b) leverage those assets and slash capital spending and payroll in order to buy additional firms. c) report the new, combined sales as “top line” growth for the firm in “a”. d) sell the Frankenstein firm to daytraders on wall Street.
This is not “bad” in and of itself. Speculation is critical to the functioning of a market. What’s phony about Bain is they partnered with Goldman Sachs to tap into their infinite stream of monopoly money printed by Greenspan’s Federal Reserve to make these acquisitions at 40 and 50 times leverage.
One thing that all MBA programs and Finance professors get utterly wrong is that they teach that the purpose of a firm is to “maximize share price”. The wrongness is that the stock exchange “share price” is formulated by very, very short time horizons. The time discounting for share price does not match reality of the NPV of future cash flows. The manic push to drive up share price encourages firms to liquidate their assets, starve capital budgets, borrow and expand unsustainably, and slash human capital.
Bain, partnering with Goldman with infinite money to lend, bought these firms, mortgaged them to 25Xs revenue, then offloaded them onto Wall Street for big capital gains. Bain’s entire operation was a great big ponzi scheme with Mitt “Gordon Gecko” Romney at the head.
I wonder if Obama, who is utterly and shamefully clueless when it comes to economics and markets, could be cajoled into hammering Mittens on his corporate welfare in the debate. I doubt it because they are both funded by Goldman Sachs.
P.S. The same goes for Warren Buffet who uses inside-the-government knowledge to buy firms who have been guaranteed bailouts by the government.
P.P.S. This system is not a free market. It’s called “corporatism”… or Mussolini called it “fascism”.
P.P.P.S. Finance MBAs are ignorant of the proper goal of a firm. The proper goal is not to “maximize shareholder weatlh” (see above). The proper goal of a firm is to “maximize the present value of future cash flows” (ie maximize future profits). MBAs are destroying capitalism with their ignorance.