Mark Mellman: How Bain Used Government Handouts To Make Its Principals Rich
Let’s be clear: President Obama is not attacking free enterprise or capitalism.
Capitalism did not require Bain to issue debt that GS Steel could not afford to repay, mainly to put money in the pockets of Bain partners. Capitalism did not require Bain to take tens of millions in profits while workers lost their livelihoods. Private equity is not to blame for the company underfunding its pensions system and sticking the government with the bill.
The problem isn’t capitalism; it’s how Bain played the game.
Although Bain’s partners were pulling down millions from the investment, they asked Kansas City for a $3 million tax break. If the company could afford to pay Bain partners $36 million, what justification could they have for asking the city for a $3 million subsidy — money that the citizens of Kansas City could not use for schools or law enforcement because it ended up in Romney’s pocket, 1,300 miles away?
When GS Steel went under, Bain decided to keep every penny it had taken out of the company but renege on its commitment to pay healthcare and severance for employees. Greed? Yes. Capitalism? Not really.
Neither is underfunding pensions a natural consequence of capitalism. It reflects a conscious decision to evade obligations. And that’s what Bain did. It simply decided not to meet its legal responsibilities. The end result: The federal government was stuck with a $44 million bill. Do we want a president who cannot be trusted to keep his signed contracts, let alone his word? Do we want a president who is willing to leave the government holding the bag for his failures to meet his obligations?
That’s right, Mitt Romney and Bain depended upon the largess of government to line their pockets.