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Thu Sep 27, 2012, 09:34 AM

NEW ROMNEY VIDEO: In 1985, He Said Bain Would "Harvest" Companies for Profits

Source: Mother Jones

NEW ROMNEY VIDEO: In 1985, He Said Bain Would "Harvest" Companies for Profits

This clip shows the young CEO focusing on businesses as targets for his investors, not as job creators or community stakeholders.

—By David Corn | Thu Sep. 27, 2012 3:00 AM PDT

...............................

But at Bain, Romney's top priority wasn't to boost employment. As the Wall Street Journal recently noted, creating jobs "wasn't the aim of Bain or other private-equity firms, which measure success by returns produced for investors." And, the newspaper reported, Romney's 100,000-jobs claim is tough to evaluate.

Mother Jones has obtained a video from 1985 in which Romney, describing Bain's formation, showed how he viewed the firm's mission. He explained that its goal was to identify potential and hidden value in companies, buy significant stakes in these businesses, and then "harvest them at a significant profit" within five to eight years.

The video was included in a CD-ROM created in 1998 to mark the 25th anniversary of Bain & Company, the consulting firm that gave birth to Bain Capital. Here is the full clip, as it appeared on that CD-ROM (the editing occurred within the original):

Read more: http://www.motherjones.com/politics/2012/09/1985-romney-bain-harvest-firms-profits-video



&feature=player_embedded

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Reply NEW ROMNEY VIDEO: In 1985, He Said Bain Would "Harvest" Companies for Profits (Original post)
kpete Sep 2012 OP
hifiguy Sep 2012 #1
pangaia Sep 2012 #2
Enrique Sep 2012 #3
valerief Sep 2012 #4
freshwest Sep 2012 #28
JHB Sep 2012 #37
freshwest Sep 2012 #38
aint_no_life_nowhere Sep 2012 #33
BadgerKid Sep 2012 #43
Major Nikon Sep 2012 #5
kathman-duzi Sep 2012 #18
FailureToCommunicate Sep 2012 #6
littlemissmartypants Sep 2012 #42
bupkus Sep 2012 #7
freshwest Sep 2012 #31
bupkus Sep 2012 #44
corkhead Sep 2012 #8
highplainsdem Sep 2012 #9
highplainsdem Sep 2012 #10
kathman-duzi Sep 2012 #19
yardwork Sep 2012 #11
highplainsdem Sep 2012 #13
eggplant Sep 2012 #14
midnight Sep 2012 #32
bupkus Sep 2012 #15
highplainsdem Sep 2012 #17
MissMarple Sep 2012 #16
highplainsdem Sep 2012 #29
kathman-duzi Sep 2012 #20
kathman-duzi Sep 2012 #22
grasswire Sep 2012 #30
highplainsdem Sep 2012 #36
M_M Sep 2012 #12
kathman-duzi Sep 2012 #21
GEOpix Sep 2012 #23
AndyTiedye Sep 2012 #24
Arugula Latte Sep 2012 #25
global1 Sep 2012 #26
closeupready Sep 2012 #35
midnight Sep 2012 #27
closeupready Sep 2012 #34
Stuart G Sep 2012 #39
reformist2 Sep 2012 #40
Tx4obama Sep 2012 #41
bupkus Sep 2012 #45
emulatorloo Sep 2012 #46
maddogesq Sep 2012 #47

Response to kpete (Original post)

Thu Sep 27, 2012, 09:39 AM

1. David Corn has been a hero of heroes this campaign

 

cycle.

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Response to kpete (Original post)

Thu Sep 27, 2012, 09:41 AM

2. Doesn't sound to me like this guy is talking

at all about people, actual humans, jobs. But of course, that is not what private equity firms do, now is it. They exist, as far as I can tell, to make money ONLY for themselves and their investors.
And that is NOT the type of behavior required or desired to run a nation.

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Response to kpete (Original post)

Thu Sep 27, 2012, 09:42 AM

3. if he was harvesting he would need the right tool

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Response to kpete (Original post)

Thu Sep 27, 2012, 09:43 AM

4. What a grim job reaper. nt

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Response to valerief (Reply #4)

Thu Sep 27, 2012, 12:58 PM

28. Truly. Shades of Gordon Gecko. He played that role to the hilt.

Last edited Thu Sep 27, 2012, 02:26 PM - Edit history (1)

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Response to freshwest (Reply #28)

Thu Sep 27, 2012, 01:54 PM

37. Not close enough. Gordon did jail time...

...but then, he didn't start off with Mitt's connections.

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Response to JHB (Reply #37)

Thu Sep 27, 2012, 02:36 PM

38. And there were still a few regulators to spank him. Obama had Warren in place, but the GOP

Raised hell and defunded the office, so he had to go with Plan B.

http://www.alternet.org/newsandviews/article/635582/obama_appoints_elizabeth_warren_ally_richard_cordray_to_head_consumer_financial_protection_bureau

Corduray is making inroads, but quietly. For some, not fast or flashy enough, it's necessary to keep Obama in office to stop the end of this bureau's work.

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Response to valerief (Reply #4)

Thu Sep 27, 2012, 01:06 PM

33. Dollars are the grain - people and jobs are the chaff

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Response to valerief (Reply #4)

Thu Sep 27, 2012, 07:49 PM

43. Hey, I didn't even eat the salmon mousse. n/t

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Response to kpete (Original post)

Thu Sep 27, 2012, 09:57 AM

5. Bain Capital was founded with the same money that financed death squads in El Salvador

[font color="black" size="4"]Mitt Romney Started Bain Capital With Money From Families Tied To Death Squads[/font]

In 1983, Bill Bain asked Mitt Romney to launch Bain Capital, a private equity offshoot of the successful consulting firm Bain & Company. After some initial reluctance, Romney agreed. The new job came with a stipulation: Romney couldn't raise money from any current clients, Bain said, because if the private equity venture failed, he didn't want it taking the consulting firm down with it.

When Romney struggled to raise funds from other traditional sources, he and his partners started thinking outside the box. Bain executive Harry Strachan suggested that Romney meet with a group of Central American oligarchs who were looking for new investment vehicles as turmoil engulfed their region.

Romney was worried that the oligarchs might be tied to "illegal drug money, right-wing death squads, or left-wing terrorism," Strachan later told a Boston Globe reporter, as quoted in the 2012 book "The Real Romney." But, pressed for capital, Romney pushed his concerns aside and flew to Miami in mid-1984 to meet with the Salvadorans at a local bank.

...

http://www.huffingtonpost.com/2012/08/08/mitt-romney-death-squads-bain_n_1710133.html

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Response to Major Nikon (Reply #5)

Thu Sep 27, 2012, 12:25 PM

18. Thank you for this video of harvesting businesses. Wow Warren Buffet acturally buys companies to

make healthy and run, not harvest.

So the video talks about having capital available to chip in up to Bain puts into the pot and there is also 50 million dollars available to sweeten the deal. This is an inappropriate question but do you think LSD Inc is the source of the additional dollars available to ensure this deal. I realize this is 1984 or 85 dollars the video is speaking about.

Romney can't wait to get his hands on social security and medicare to harvest those dollars.

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Response to kpete (Original post)

Thu Sep 27, 2012, 09:58 AM

6. Here comes Bain...

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Response to FailureToCommunicate (Reply #6)

Thu Sep 27, 2012, 06:07 PM

42. Would you

get in bed with this? The RR idea of a warm fuzzy.

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Response to kpete (Original post)


Response to bupkus (Reply #7)

Thu Sep 27, 2012, 01:01 PM

31. And the results of his becoming CEO of America would be...

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Response to freshwest (Reply #31)


Response to kpete (Original post)

Thu Sep 27, 2012, 10:03 AM

8. "Soilent Green is People, My Friend"

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Response to kpete (Original post)

Thu Sep 27, 2012, 10:13 AM

9. I wish the term "harvest" was as damning as it initially sounds, but this is the typical meaning in

private equity, as taken from Private Equity: History, Governance, and Operations:

A "harvest" or "exit" is an event whereby the investors and management of a company sell at least a portion of their shares to public or corporate buyers. The harvest provides an opportunity for private equity (PE) funds to realize returns for their investors, while enabling managers with equity stakes to have a "liquidity event" for their shares -- in other words, an opportunity to sell their shares by making them "liquid."

Along these lines, there are three primary methods by which PE funds harvest companies: initial public offerings (IPOs), mergers, and acquisitions. The latter two exit methods (discussed in subsequent chapters) are frequently discussed in parallel and are collectively known as M&A transactions.



So "harvest" is essentially a neutral term.


What was harmful to many of the companies Romney acquired when he ran Bain Capital was the way he acquired them -- maximizing the use of leverage, as this Bloomberg article explains, which loaded the companies with debt, socialized the risks and privatized the profits:

http://www.bloomberg.com/news/2012-07-15/romney-s-bain-yielded-private-gains-socialized-losses.html

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Response to highplainsdem (Reply #9)

Thu Sep 27, 2012, 10:17 AM

10. From that Bloomberg article, an example of how the way a company was acquired set up a disaster

for everyone except Bain:

In 1992, Bain Capital bought American Pad & Paper by financing 87 percent of the purchase price. In the next three years, Ampad borrowed to make acquisitions, repay existing debt and pay Bain Capital and its investors $60 million in dividends.

As a result, the company’s debt swelled from $11 million in 1993 to $444 million by 1995. The $14 million in annual interest expense on this debt dwarfed the company’s $4.7 million operating cash flow. The proceeds of an initial public offering in July 1996 were used to pay Bain Capital $48 million for part of its stake and to reduce the company’s debt to $270 million.

From 1993 to 1999, Bain Capital charged Ampad about $18 million in various fees. By 1999, the company’s debt was back up to $400 million. Unable to pay the interest costs and drained of cash paid to Bain Capital in fees and dividends, Ampad filed for bankruptcy the following year. Senior secured lenders got less than 50 cents on the dollar, unsecured lenders received two- tenths of a cent on the dollar, and several hundred jobs were lost. Bain Capital had reaped capital gains of $107 million on its $5.1 million investment.

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Response to highplainsdem (Reply #10)

Thu Sep 27, 2012, 12:32 PM

19. Quite a harvest, um I mean neutral transaction . So the firm was harvested and the investors were

harvested and the unsecured lenders were royally screwed blue and tattooed! How sweet a deal huh?

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Response to highplainsdem (Reply #9)

Thu Sep 27, 2012, 10:33 AM

11. It's not neutral. He's talking about outsourcing and laying off people. Look what happened.

Look at the history of the companies that Bain bought. They were literally sucked dry and abandoned. Look at the department stores, for instance. Gone.

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Response to yardwork (Reply #11)

Thu Sep 27, 2012, 11:24 AM

13. Again, that ISN'T what "harvest" necessarily means in private equity. It's a neutral term

that's used by both the more ethical venture capitalists AND the vulture capitalists like Romney.

If you don't believe the textbook I quoted above, maybe you'll believe this page at the University of Michigan's site:

http://www.bus.umich.edu/CourseManagement/ViewCourseDescriptions.asp?course=626&dept=FIN&term=1

This enables us to study how the four main aspects of venture capital and private equity – valuation, deal structuring, governance, and harvesting – are conducted in different legal and regulatory settings, under different customs, culture and business practices. The case method is used to demonstrate the practical, hands-on application of techniques following their development in class.


Emphasis added.

Again, "harvest" is simply a standard, neutral term.

I had the same initial reaction to it that you did. I thought, "Wow, what a damning video! What a horrible word to use!"

But I majored in political science, not business. And I know I'm not familiar with a lot of business terminology.

So I just googled "harvest" and found out, within a couple of minutes, that it means what I explained in my first reply here.

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Response to highplainsdem (Reply #13)

Thu Sep 27, 2012, 11:35 AM

14. I agree.

I hate Bain; they are scum. But not everything that comes out of Mitten's mouth can be considered damning, and there is enough that *is* damning that it does us a disservice to focus on the quotes that simply *sound* bad.

All VC firms expect to be able to extract profits from an investment after a specific amount of time. This is independent of the evil that is Bain. (But don't get me started on the evil that all VCs are.)

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Response to eggplant (Reply #14)

Thu Sep 27, 2012, 01:02 PM

32. eggplant VC business model in the hands of mittens is particularly worrisome and perhaps should be

outlawed.

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Response to highplainsdem (Reply #13)


Response to bupkus (Reply #15)

Thu Sep 27, 2012, 12:18 PM

17. I agree that Romney is a vulture capitalist. I hate what Bain did. But I still think that

since the term "harvest" is neutral, this video of Romney using that term isn't particularly harmful to him -- let alone devastating, like the "47%" video. His use of the term "harvest" can be explained, and then dismissed, too easily.

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Response to highplainsdem (Reply #13)

Thu Sep 27, 2012, 12:16 PM

16. So Bain could either leave a viable company or a dying hulk

depending on how the deals were structured? Would they have had a choice or was the destruction just a sure way to take out profit for Bain? Would that depend on the amount of short term gain which could kill or cripple the company versus a longer involvement that would be much less exciting in the amount of profit for Bain?

I think Bupkus may have answered the question. Amoral and sleazy. That's all I can say about Bain.

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Response to MissMarple (Reply #16)

Thu Sep 27, 2012, 12:59 PM

29. They had choices. All too often they made the wrong ones, the amoral ones.

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Response to highplainsdem (Reply #13)

Thu Sep 27, 2012, 12:38 PM

20. I believe you! Using the harvest definition so broadly allows the vultures and

the economic rapists to sleep at night. It is like lawyer speak to keep the unwashed out of legal business. Doctors also have their own language and some are harvesting their patients.

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Response to yardwork (Reply #11)

Thu Sep 27, 2012, 12:40 PM

22. Absolutely! n/t

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Response to highplainsdem (Reply #9)

Thu Sep 27, 2012, 01:00 PM

30. it's not a neutral term to the average voter n/t

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Response to grasswire (Reply #30)

Thu Sep 27, 2012, 01:36 PM

36. Probably not, but I think it's too easily explained as a standard term for this to be a bombshell.

I posted in GD about Andrew Sullivan's response to it:

http://www.democraticunderground.com/10021425411

He called the term "clinical."

I've been checking Google News and Twitter, and this new video definitely isn't getting the sort of reaction that the "47%" video got as soon as Mother Jones published it.

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Response to kpete (Original post)

Thu Sep 27, 2012, 10:42 AM

12. Hmmm, Har-vest-ing.....

 

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Response to M_M (Reply #12)

Thu Sep 27, 2012, 12:39 PM

21. LOL it was a fun read~! n/t

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Response to kpete (Original post)

Thu Sep 27, 2012, 12:47 PM

23. In it's simplest form

they are literally fattening companies for slaughter!

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Response to kpete (Original post)

Thu Sep 27, 2012, 12:50 PM

24. Engulf & Devour

?w=500&h=315

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Response to kpete (Original post)

Thu Sep 27, 2012, 12:50 PM

25. First he'll harvest your companies, then he'll harvest your organs.

 

You'll wake up sitting in a bath of ice and your kidney will be MIA.

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Response to kpete (Original post)

Thu Sep 27, 2012, 12:54 PM

26. Is This What Is Happening To That Company In Freeport, Illinois That Bain Has Interest In?......nt

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Response to global1 (Reply #26)

Thu Sep 27, 2012, 01:10 PM

35. Make no mistake - yes. Yes. Oh, and yes.

 

nt

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Response to kpete (Original post)

Thu Sep 27, 2012, 12:58 PM

27. K&R

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Response to kpete (Original post)

Thu Sep 27, 2012, 01:08 PM

34. Right. This is consistent with 'vulture' capitalism - a corruption

 

of what capitalism was founded to do. K&R

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Response to kpete (Original post)

Thu Sep 27, 2012, 03:01 PM

39. K and R nt..

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Response to kpete (Original post)

Thu Sep 27, 2012, 05:26 PM

40. When you harvest a crop, you mow it down and leave it for dead.


So much for Mitt's record of "building" companies that last...

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Response to kpete (Original post)

Thu Sep 27, 2012, 06:05 PM

41. Rev. Al just played the Romney 'Harvest' clip on his show


And they are discussing it


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Response to Tx4obama (Reply #41)


Response to kpete (Original post)

Thu Sep 27, 2012, 08:46 PM

46. Great work, David Corn!

Thanks for posting this.

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Response to kpete (Original post)

Thu Sep 27, 2012, 09:00 PM

47. Gosh, the only line miissing from that is "Greed is good!" NT

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