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Matt Taibbi wrote a long article in this month’s Rolling Stone called “Greed and Debt: The True Story of Mitt Romney and Bain Capital”. It is the anecdote for the poison of last week’s convention and no doubt the vapors of next week’s convention. It is long, rational, well researched and tells a history we can believe about Mitt Romney because it relates to the history we know, rather than the mirage of the smiling empty suit. It turns out empty suits are greedy, mean people and Mitt Romney is a hero of that tribe.
Taibbi’s story is about the filthy rich preppy Romney who went to Stanford and Harvard Business School and then into the “business” of leveraged buy outs, one of many euphemisms for class warfare – and to make that perfectly clear – class warfare of the rich against everybody else.
The Big Lie in the center of Romney’s act is his rant about the federal debt. Romney added immeasurably (because he’s successfully covered his real worth) to his inherited wealth by high financial scams resembling the way the Mafia takes over a milk processor. Midway through his career, he traded venture capital investing for the leveraged buyout, LBO.
Romney played the LBO game at Bain Capital, a private equity firm, by looking for “floundering companies with good cash flows.” Then, investing 10-20 percent of their own many – just a few million – they borrowed the rest from banks like Goldman Sachs to secure a controlling interest in the company. What makes this strategy viable is that Romney and Bain could saddle the company, rather than Bain, with the debt and interest payments. After that they extorted million-dollar service fees from the company beginning with the leverage buyout and often ending in bankruptcy.
The “creating” and “saving” jobs line is basically bunk if Romney’s record is actually investigated. Once it is investigated, his career invites comparison with the mythical Gordon Gecko who Michael Douglas has played so well. The outstanding character trait is not public service but greed – greed with the capacity for, Gretchen Morgenstern calls it, “reckless endangerment” of the US economy and society. His actual social commitment appears not to go much beyond his immediate family. Economically, he has made his immeasurable (due to the tax code) fortune by destroying companies that made things, including salaries and benefits for working people (the people who really make the things).
What made the LBO scam profitable is that interest on loans Romney took were tax deductible, just like your mortgage. So, that loophole is a crucial federal incentive for the destruction of the side of American business that makes things and hires people. Add the $1.5 billion federal bailout Romney arranged for the Salt Lake City Winter Olympics, for which top Mormon officials had paid an estimated $10 million in bribes to locate in their fair city. Add Romney’s relationship in another deal with Michael Milken, the good friend of former Rep. Tony Coelho of this region, even as Milken was being tried for his crimes.
…minus that tax break, Romney's debt-based takeovers would have been unsustainably expensive. Before Lynn Turner became chief accountant of the SEC, where he reviewed filings on takeover deals, he crunched the numbers on leveraged buyouts as an accountant at a Big Four auditing firm. "In the majority of these deals," Turner says, "the tax deduction has a big enough impact on the bottom line that the takeover wouldn't work without it."
Thanks to the tax deduction, in other words, the government actually incentivizes the kind of leverage-based takeovers that Romney built his fortune on. Romney the businessman built his career on two things that Romney the candidate decries: massive debt and dumb federal giveaways. "I don't know what Romney would be doing but for debt and its tax-advantaged position in the tax code," says a prominent Wall Street lawyer, "but he wouldn't be fabulously wealthy."
Adding to the hypocrisy, the money that Romney personally pocketed on Bain's takeover deals was usually taxed not as income, but either as capital gains or as "carried interest," both of which are capped at a maximum rate of 15 percent. In addition, reporters have uncovered plenty of evidence that Romney takes full advantage of offshore tax havens: He has an interest in at least 12 Bain funds, worth a total of $30 million, that are based in the Cayman Islands; he has reportedly used a squirrelly tax shelter known as a "blocker corporation" that cheats taxpayers out of some $100 million a year; and his wife, Ann, had a Swiss bank account worth $3 million. As a private equity pirate, Romney pays less than half the tax rate of most American executives – less, even, than teachers, firefighters, cops and nurses. Asked about the fact that he paid a tax rate of only 13.9 percent on income of $21.7 million in 2010, Romney responded testily that the massive windfall he enjoys from exploiting the tax code is "entirely legal and fair."
There is little of Romney fit to meet the public eye, which is why the propaganda is so thick. The cost of the flack is record breaking. With the Citizens United decision defining campaign spending in this election, there are fortunes to be made by anyone who can fashion a 30-second video of a rightwing lie. It pays much better than creating a label for a box of lettuce but it is the same field of art deco fact-free art – rows of beautiful crops to the horizon where they meet the rays of the sun coming down from the Sierra – no farmworkers and no smog.
We think “Greed and Debt: The True Story of Mitt Romney and Bain Capital” is going to go down as the best article written this political season. If you read one long political article in the next two months, make it Taibibi’s. Its length is actually one of its more pleasing features because it brings you into the world of top flight investigative reporting and keeps you there long enough that you can forget the campaign propaganda for whole moments.