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New site? Maybe some day.

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:	post by ShadowSD at 2012-10-28 18:28:53

Burnsy said

[orig][quote]

Gotcha.

I dunno, dude. Not really feeling how you paint the financial industry. It's not just moving money around. It's a pretty essential industry. The banks have the
capital to make loans to companies so that creativity and innovation can continue to spur growth. That having been said, I know all about the subprime mortgages,
financial collapse, and i'm not downplaying their role in the most recent recessions. I just think the whole who's donating to whom isn't some shocking revelation.
Seems to me like you're implying that the Republican party is against technology or something haha.

As a matter of policy, they consistently vote and argue against investment of public money in technology and research. It wasn't always that way, but that's been a steady position of the Republican party in Congress for years now.

I'm definitely not saying private equity should be banned or is all bad, just that being a private equity CEO is not a resume to run for President, considering that private equity was largely involved in the creation of bad debt that crashed our economy:

"KB Toys, which used to be headquartered out in Pittsfield, Massachusetts. Bain Capital took over the company with like $18 million down. They financed the other $302 million. So that’s borrowed money that subsequently
became the debt of KB Toys. This is an important distinction for people to understand. When they borrowed that money to take over that company, they didn’t have to pay it back, KB had to pay it back. Once they
took over the company, they induced it to do a $120 million, quote-unquote, "dividend recapitalization," which essentially means that the company had to cash in a bunch of shares and pay Bain and its investors a huge sum of money.
And in order to finance that, they had to take out over $60 million in bank loans. So, essentially, you take over the company, you force them to make enormous withdrawals against their credit card, essentially,
and pay the new owners of the company. And that’s essentially what they did. They took over a floundering company that was sort of in between and faced with threatening changes in the industry, and
they forced them to cash out entirely and pay all their money to the new owners." - http://www.democracynow.org/2012/8/30/matt_taibbi_the_secret_to_mitt

In other words, private equity makes debt for already failing companies by cashing out on them, creating a situation that makes it unlikely those debts will ever be paid back to the bank. Those bad debts as well as others
like bad mortgages pile up and get bought by other financial institutions, while yet other financial institutions bet whether all those bad debts will be repaid; that is in a nutshell the house of cards collapse that crashed the economy in 2008.

But here's what gets me; it gets much, much worse...

Romney would be the first President in history to have entered the office having personally profited as a private citizen from adding to our national debt and deficit: private equity firms make a lot of their money by taking
equity financing taxed at 36.4% and putting it into the column of debt financing, which is taxed at -4%. Their profit margin in such balance sheet transactions therefore comes entirely on the back of the taxpayer:
a net 40% windfall on every such transaction thanks to government subsidies (according to an analysis by the relatively conservative Business Insider's lead financial blogger, Joe Weisenthal, discussed in this video)

The idea that private equity gets so much taxpayer money is way worse than any bailout: with the TARP, auto, the S and L bailout from the eighties for that matter, the idea was at least saving a major industry from collapse.

However, there was no potential financial industry collapse prevented by the debt buying subsidies private equity firms profited from - only a financial industry collapse caused by all the debt purchased and swapped.
Instead of saving us from massive collapse, the policy led us to massive collapse. That's an important differentiation, as it's the difference between night and day. Only the private equity industry actually was paid by taxpayers just to crash the market.

So, Romney sits home and collects $20M interest a year from years of being a giant leech of taxpayer money while inflating public and private debt; getting wealthy in America in that manner wouldn't have even been possible for most of our history.
That's all legal, but if he were ever to be elected President on top of that, let alone on a campaign of being a debt reducer, it would be the ultimate victory for government subsidization of corporations and increased government spending/debt.

After all, if someone were to become President with such a record, what legitimate economic conservative movement would even be left in this country going forwards? It would have been bought out
completely at that point by corporatist conservatives who advocate a continued state of corporate socialism for elites and individualistic capitalism for everyone else ("Can't afford to buy food or gas, consumers?
Don't ask for a government handout, it's a free market! My oil company/private equity firm/drug company wants billions in taxpayer money! Give it to us or everything will collapse!")

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