Newt and the public’s right to know about Bain Capital

The New Neo Posted on by

I almost feel I need to apologize for writing so much about this, but the Gingrich/Perry v Romney/Bain business has fascinated me far more than I expected it would, and much more than the usual campaign imbroglio. I think the reason is that it conjures up a host of deeper issues to ponder—about capitalism and free enterprise in general, and about the business of finance and how that fits into the mix.

So I may come out with quite a few posts related to this before it’s done. Not that I expect it to be done all that soon. And even if the Republicans start leaving the topic alone (which I doubt), the Democrats will be sure to pick it up if Romney is nominated. Of that you can be certain, if you can be certain of anything at all in this election.

Much of the brouhaha about Gingrich’s (and to a lesser extent, Perry’s) recent attacks on Bain’s tenure have centered on statements about looting and vulture capitalism. But these recent remarks by Gingrich in South Carolina about Romney and Bain had a somewhat different focus [emphasis mine]:

I think it’s funny that on the one hand [Romney] wants to run around touting his record, on other hand if anybody asks a question about his record, he hides behind an entire framework and to question the facts is to be anti-capitalist. That is nonsense ”” baloney is the term I think I was using the other morning. The fact is, we have a right to know. We have a right to know what happened at Goldman Sachs, we have a right to to know what happened with trillions of dollars in New York. We have a right to know what happens when companies go bankrupt. I think the country would like to know. And if we’re going to run a presidential campaign on a record, the record has to be open to review. Now this is not anti-capitalism. That is the smoke screen of those who are afraid to be accountable.

Just so you don’t think this “people’s right to know” meme was a momentary thing for Newt, he also said [emphasis mine]:

I am for entrepreneurship, but I am also for the American people’s right to understand how the games are being played: Are they fair to the American people, or are the deals being cut on behalf of Wall Street institutions and very rich people?

I’ve read that last statement of Gingrich’s several times, and it’s hard to escape the conclusion that he is suggesting that the deals should give some general “fairness” and benefit to the “American people” as a whole, rather than profit to the “Wall Street institutions” and the “very rich people” who populate them. I just can’t parse the statement any other way.

This actually doesn’t seem like a fiscally conservative notion or a capitalist one. What does Gingrich mean when he says that Bain or similar companies shouldn’t cut deals “on behalf” of themselves? Why not? Because they are “very rich” already? Should they make no profit at all? How much would be too much? And who gets to decide where to draw the line?

I keep saying that I’m no financial expert, and I’m not. But I was under the impression that capitalism and free markets were supposed to work this way: first and foremost, people work very hard to make money for themselves. In the process, if they start a company and grow and manage it well they make money not only for themselves, but for their stockholders too if stock is involved. They also provide wages and salaries to employees, and a service to the general public (the “American people”?): the company’s products, or whatever else it is that’s being offered, are bought and used if they are good enough and reasonably enough priced. Thus, it’s competition and the profit motive that end up benefiting us as a whole—with no significant sacrifice of liberty, and with the idea that everyone has an opportunity to make it although not everyone will.

Of course, it doesn’t always work out perfectly, or even nearly so. But built into the deal is that companies will sometimes do poorly, and then sometimes they will fail. When they’re on the cusp of failure, or just not doing very well, other companies (such as Bain, for example) may be asked to come in and evaluate the situation and do what’s necessary to save the struggling company, which often involves implementing rather Draconian measures. If that doesn’t work, the troubled company can go under. That means the loss of all the jobs there, not just some. In the process, the turnaround company often makes money for its pains (why else would it engage in the endeavor?), although it sometimes loses money because the entire undertaking is inherently very risky. That’s why not everybody attempts this sort of thing, and not everyone can make a profit at it when they do.

Certain transactions along the way are supposed to be open to public scrutiny. And of course, those who break the law in the process of doing business are supposed to be pursued and apprehended. But generally there are certain restrictions on that “right to know” that’s so dear to Newt, limits that protect the companies’ ability to do business:

Bain has blocked many of the avenues that would enable reporters to get information on their own, declining to give The Wall Street Journal a list of the companies it has invested in (“citing privacy reasons”) or even any information about when its involvement with its investments ended.

It’s not clear how much of a choice Bain has about what it can disclose. Private equity companies often tend to have confidentiality agreements with their investors (Bain would not comment on what agreements it has). Several equity experts interviewed for this story thought any disclosures from Bain were likely to spook its investors.

The private equity business model is based on taking companies out of the public markets, where reporting requirements are strict and investors punishing, making changes that will hopefully make them more profitable and then selling them or taking them public through an IPO.

The part that happens behind the curtain is not always pretty, and private equity firms have learned over the years that it’s hard to tell a complicated story in the media.

You better believe it.

So, do we have “a right to know what happened when companies go bankrupt [and companies such as Bain takes over in the private equity business],” as Gingrich insists? And how would he suggest that such a right be enforced? And what about those confidentiality agreements? Does he think they should be outlawed? And is that anti-capitalist?

Romney at Bain: job creator or destroyer?

The New Neo Posted on by

This caught my attention:

Given the nation’s economic condition, Mr. Romney’s experience at Bain Capital has become central to his narrative for Campaign 2012. At a time when jobs are the issue, the narrative goes, voters ought to entrust the country to somebody with real experience in the private sector where jobs are created.

That’s apparently going to be part of Romney’s “multi-pronged” approach to the Bain charges:

They’ll start with advertisements featuring employees of companies started and rescued by Bain telling their stories – a direct response to the documentary released by the pro-Newt Gingrich super PAC that features employees of four companies closed by Bain that brutally slams Romney as a job killer…“For every scare story that they try to present related to the governor’s experience in the private sector and free enterprise,” [Romney advisor] Madden said, “we can point to a whole host of successful enterprises that have resulted in job creation and wealth and prosperity.”

I probably don’t have a future as a strategist for a candidate, but I have to say that I never thought Romney’s Bain experience was being touted because it meant he was such a hot jobs creator. When he mentioned those 100,000 jobs Bain supposedly created, it seemed to me it was more to defend himself against the charge that Bain destroyed more jobs than it generated by reorganizing the troubled companies it advised.

What I thought Romney’s Bain experience was about that would be a plus in this election was the ability to size up an organization, decide where the fat resided, and cut in order to make it more profitable. I thought that making companies leaner and yet retain (or enhance) their efficiency was exactly what he was selling, and that the argument would be that he’d apply it to the government rather than the private sector.

I’ve assumed he’d be making that argument soon. But I’ve learned not to assume that my assumptions are correct—especially when they’re prognostications.

[NOTE: So, is it time for me to start a “Romney” category on the blog?]

Reflections on the NH results

The New Neo Posted on by

(1) It’s not at all surprising that Ron Paul would do well in New Hampshire. Not only was he helped by the fact that Independents (known as “undeclareds” in New Hampshire, and who are more likely to be Democrat-leaning than Republican-leaning) are able to vote in either party’s primary there, but the state has a very strong libertarian tradition. “Live Free or Die” and all that. So my prediction is that this will be Ron Paul’s finest hour, and there will be no significant carryover into subsequent states’ primaries.

(2) Conventional wisdom is that Romney did well in New Hampshire because he’s a regional native son, having been governor of neighboring Massachusetts. But remember that he lost there to McCain in 2008 despite that fact. New Englanders know that there’s no great love lost between Massachusetts and New Hampshire. In fact, a great many residents of New Hampshire, especially the more recent ones in the southern and more urban tier of the state, left Massachusetts for the less liberal climate of New Hampshire and are happy to have done so. I think that, although Romney did get a bit of a bump from the familiarity of having been governor of a neighboring state, it was more determinative that New Hampshirites have somewhat of a history of liking moderate Republicans rather than the more extreme conservative types, especially those of the socially conservative variety.

(3) Perry was never going to do well in New Hampshire, where Bush lost in 2000 despite ultimately getting the nomination. Whether such a judgment is fair or unfair, Perry is too reminiscent of Bush.

(4) What’s New Hampshire’s record of choosing the ultimate winner of the Republican nomination? Pretty good, actually. The only Republicans since the primary began in 1948 to win New Hampshire and not ultimately be nominated by the party were Harold Stassen (1948; Dewey was the eventual nominee), Henry Cabot Lodge (1964; Goldwater was the eventual nominee), a surprising Pat Buchanan (1996; Dole was the eventual nominee), and McCain (2000; Bush was the eventual nominee). Note how much New Hampshire Republicans seem to have liked RINO McCain, voting for him twice. But they couldn’t take him across the finish line in 2008 against Obama, who won the state in the general by approximately 54 to 44 percent.

So, oddly enough, although New Hampshire is unrepresentative of Republican voters as a whole and is quite tiny, and although many non-Republicans there can (and do) vote in the primaries, and although it votes very very early in the game before many other states have declared themselves and while there are still a large number of candidates from which to choose, New Hampshire actually has an excellent track record of picking the eventual Republican nominee.

Go figure.

Solving a decades-long science fiction mystery via the blog

The New Neo Posted on by

Isn’t the internet wonderful? Through this blog, I recently got the answer to a question that’s been tormenting me for close to fifty years.

Well, maybe not tormenting exactly. But I’ve long been troubled by my inability to identify a sci-fi story that had transfixed me when I’d first read it as a youngster. It concerned a society in which people lived for so long that, to counteract their inevitable boredom and ennui, they learned a way to temporarily transfer their consciousness into different creatures, such as animals.

Funny how memory goes. For a long time I thought the author must be Clifford Simak, and I had a vague recollection of the title of the collection as being something with the word “strange” or “strangers” in it. I kept looking for an anthology by Simak entitled Strangers in the Universe, and about two decades ago I’d gone so far as to locate a used copy and to read each story to see if the plot resembled the one I remembered. No dice.

But all I had to do was post this query last December on a thread about memory enhancement and bam!—a couple of hours later, a commenter volunteered the information I’d been seeking for so long.

It turns out the story was actually not so short; it was a Poul Anderson novella known as “The Star Beast,” which had appeared in his 1961 collection Strangers From Earth, although it had first been published in a magazine in 1950.

So I hadn’t been so far off on the title of the correct book after all, although my error had kept me from locating it. Memory (and it was in a thread about memory where the question and its solution first appeared) is a funny thing, and I’m pleased to see that mine wasn’t so faulty.

While I was researching this post, I discovered that, coincidentally, “The Star Beast” is also the name of a later novel by Robert A. Heinlein (1954), strangely enough. And in another odd coincidence, an even earlier short story (1940) by (of all people) Clifford Simak comes very close in title: it’s called “The Space Beasts.”

As I was looking this stuff up I noted two other things. The first is how astoundingly prolific both Anderson and Heinlein were (see this and this). The second is how evocative and poetic many of the great sci-fi short story titles are. I’d sensed that as a child and had responded to it; some of the best titles (which I’d forgotten in the interim) sent little shivers of remembered delight and mystery through me as I saw them again: “All the Traps of Earth,” “The Stars Are Also Fire,” and “The Moon Is a Harsh Mistress.”

[NOTE: My very favorite sci-fi writer when I was young was Philip K. Dick. His stories had creeped me out mightily—the stuff of nightmares—while simultaneously fascinating.]

Calling all Newt supporters

The New Neo Posted on by

Tell me, what do you think is going on here (please read the link to understand what I’m referring to)?

(1) Gingrich is just being helpful in trying to move Romney to the right, because he knows that Romney will face the same charges at the hands of the Obama crowd come the general.

(2) Gingrich feels a deep moral outrage by Romney’s actions during his tenure at Bain and by all similar business practices, and he thinks the American people ought to be informed, come what may.

(3) Gingrich really thinks the lies in the movie are true; he’s just misinformed.

(4) It’s payback time, and all’s fair in love and campaigns.

(5) Gingrich has gone over to the Dark Side (or maybe he was always there).

(6) Gingrich knows nothing about this film, disapproves of it, has no power to stop it, and will denounce it.

(7) Gingrich is like the drowning man who knows he’s going under and wants to pull Romney down with him (oh, I guess I said something like that yesterday).

(8) Gingrich thinks he will win the Republican nomination this way.

(9) Gingrich thinks Santorum will win the nomination if Romney gets knocked out and that he’ll then pick Gingrich as VP.

Or, if your answer is (10) (none of the above), please let me know what you think is really going on in the cranium of Newt Gingrich.

More spelling confusion

The New Neo Posted on by

It’s time for another grammar rant, to go with my “it’s vs. its” harangue. But this time we will deal with “who’s” and “whose.”

On the face of it there’s no reason to confuse the two—“who’s” follows the classic rule for contractions, short for “who is,” and “whose” is quite clearly the possessive form of “who.” It ought to be much easier than the distinction between “it’s” and “its,” because the it-words are spelled exactly the same except for that apostrophe, whereas the who-words are spelled differently from each other.

And yet I continue to see them used incorrectly. Who’s doing it? People whose education has been sorely lacking, that’s who.

And while I’m at it, I might as well tackle another mix-up that puzzles me just as much: the “loose/lose” confusion. There’s no apostrophe there to get in the way and cloud the brain, just straight spelling. And yet, along with “choose/chose,” mistakes are legion.

It’s not that I’m some sort of schoolmarm. But I’m puzzled by the ubiquity of certain errors, when words that seem much more difficult are seldom written incorrectly. Maybe it’s the fact that Spellcheck catches the latter and not the former, which generally involve substitutions of one common word for another. But whatever the reasons for the errors—and if you have any explanations, please offer them—let’s rededicate ourselves to the motto of this blog:

Romney the projected NH winner

The New Neo Posted on by

Fox News projects Romney as the NH winner by double digits, with Ron Paul second, and Huntsman third.

An interesting statistic is that this is the first time since 1976 that the same person has won the Republican primary in both Iowa and New Hampshire. The two states are not similar. And South Carolina, up next, is dissimilar to both of them as well.

[ADDENDUM: Frivolous comment alert: Ann Romney is wearing a white suit. On TV. A brave, brave—and slim—woman, who’s given birth to five children, is in her 60s, and looks smashing.]

[ADDENDUM II: Happy to see that Romney’s speech is mainly focusing on criticizing Obama’s policies. “The president has run out of ideas; now he’s running out of excuses”—and tonight he’s appealing to South Carolina voters to make sure Obama is also “running out of time.”]

Republican candidates against capitalism

The New Neo Posted on by

I don’t know about you, but I’m angry.

I’m used to politics and its dirtiness and hypocrisy, the misrepresentations one candidate routinely makes about the other. They all pretty much do it, especially in their ads. This does not surprise me.

But I can’t recall an attack that’s made me as angry as the one launched by Gingrich, and to a lesser extent Perry and Huntsman, against Romney’s record at Bain Capital. Before I even read this editorial in National Review (with which I agree), I was aghast when I saw some of their statements on the news last night.

Readers of this blog know that my preferred candidate this year is Romney. And not just because he’s more electable (although polls show he’s that), but because I think he’s competent, smart, conservative enough—and, very importantly, has an understanding of the business world that not only prospective opponent Obama lacks, but that Romney’s current Republican rivals lack as well.

As I said, I’ve seen one candidate unfairly misrepresent something about the other before; it happens all the time, although I never like it. But this one is different. I can’t recall a time when the attack featured statements that violated basic principles that the attacker and his/her party were supposed to stand for—such as, for instance, knowledge of what capitalism is and what sometimes happens when companies are failing. Any candidate who wants to run against the bailouts cannot attack Romney for what he did at Bain, which was to try to save failing companies by (among other things) cutting costs, which sometimes worked and sometimes didn’t, and to make money into the bargain. Any candidate who wants to appeal to people who would like a president who actually knows something about how business works cannot attack Romney for what he did at Bain (unless, of course, he was unethical in some way, which is not being alleged).

But that’s what they (especially Gingrich) are doing. Here’s NR on the subject:

Newt Gingrich’s risible super-PAC factotum has gone to the length of producing a feverish little film about Romney’s tenure as a “corporate raider” at Bain. Governor Perry, for his part, told a Republican audience: “If you are the victim of Bain Capital’s downsizing, it is the ultimate insult for Mitt Romney to come to South Carolina and tell you he feels your pain ”” he caused it.” To appropriate Governor Perry’s favorite adjective, that is the ultimate in populist pandering, or something close to it.

Huntsman’s private-sector experience consists of having served as an executive at the firm owned by his billionaire father. Gingrich and Perry have between them about eleven minutes’ worth of relevant private-sector experience ”” Perry being subsidized by the federal government to farm cotton, Gingrich subsidizing himself by farming his political connections ”” and therefore may not know (or care) what a private-equity firm such as Bain does. (Gingrich might consider asking his friends at leveraged-buyout firm Forstmann Little, where he was on the board.) Bain is involved in, among other things, leveraged buyouts, meaning that the firm and its investors borrow money from banks to acquire companies, usually firms that are in trouble but believed to be salvageable. These firms generally are bought on the theory that they represent fundamentally sound underlying business enterprises that are for one reason or another performing deficiently, usually because of incompetent management. Strong, thriving companies rarely are targets for leveraged-buyout acquisitions ”” if things are going well, there is no incentive to sell the company. If the firms are publicly traded, they often are taken private, their stocks delisted from the exchanges, and then reorganized. Once the company has been returned to profitability, it is taken public again or sold to a private buyer, in the hopes of turning a profit on the deal.

As you can imagine, companies that are buyout targets often are in very poor shape, and reviving them is no small thing. Many of them go into bankruptcy. Product lines are discontinued, retail locations are closed, assets are sold off, and, almost inevitably, jobs are lost. Some never recover. When the restructuring is successful, reinvigorated firms expand, add locations, develop new products, and create jobs. That is the creative destruction of capitalism…

[T]o abominate Mitt Romney for having been a success at the business of investing in struggling American companies, connecting entrepreneurs with capital and producers with markets, is foolish and destructive. Republicans ought to know better, and the fact that Gingrich et al. apparently do not is the most disturbing commentary on the state of the primary field so far.

This is very different from attacking the attackers for merely attacking; the big problem is the form the attack takes. These people are supposed to be the principled conservatives; you know, the ones who don’t toss out their beliefs when it’s expedient.

So what’s happening here? These guys know that if they don’t raise their poll numbers and lower Romney’s pretty soon it’s going to be curtains for them. As a result, they’ve become the equivalent of the drowning man who, in his desperate efforts to save himself, clutches at people around him and manages to drag them down too. And that includes their own supposedly conservative principles, and may include Republican chances for victory this year as well.

Nice going.

[ADDENDUM: I don’t usually listen to Rush Limbaugh, but today he’s tearing into Gingrich for this. And Limbaugh is hardly a Romney fan.]

[ADDENDUM II: Ron Paul shows some class.]

[ADDENDUM III: Jay Nordlinger nails it:

I fled the Democratic party many years ago. And one of the reasons was, I couldn’t stand the class resentment, the envy, the hostility to wealth, the cries of “Richie Rich!” And I hear them from conservatives, at least when Romney is running.

Go ahead, have your “bloodbath” in South Carolina. Make Romney the little guy in the top hat and tails, from the Monopoly game. Have your Santorum, your Perry, your Newt. They may carry something like four states in the fall, but at least they’ve never sullied their hands with ”” eek! ”” business.]

New Hampshire primary today

The New Neo Posted on by

Unless you’ve been under a rock for quite some time, you’re no doubt aware that today is the New Hampshire primary. New Hampshire’s small, but it has a traditional day in the sun in choosing the nominee, although New Hampshire voters also tend to be rather quirky in their picks.

Here’s a thread to discuss the primary and its results.

[UPDATE 8:11 PM: Romney is projected to win New Hampshire by double digits, with Ron Paul second.]

Compare and contrast

The New Neo Posted on by

Here’s Walter Shapiro in TNR on the most boring primary ever, this one (which he thinks Romney will win):

Romney inspires all the enthusiasm of “Vegetables Are Our Friends” week in an elementary school cafeteria. My nominee for the typical New Hampshire Romney voter is Dwight Corning, a recent transplant from Connecticut who moved to Dover after he retired from an electronic firm. “I think Romney’s reliable,” Corning said after the rally in Rochester. “I don’t think he’ll do anything crazy when he gets in.” A vote is a vote, but Corning sounded about as passionate as if he had been asked to recommend a CPA.

And here’s Michael Gerson in the WaPo on Romney:

Romney is temperamentally conservative but not particularly ideological. He reserves his enthusiasm for quantitative analysis and organizational discipline. He seems to view the cultural and philosophic debates that drive others as distractions from the real task of governing — making systems work.

His competitors have attempted to portray Romney’s ideological inconsistency over time as a character failure. It hasn’t worked, mainly because Romney is a man of exemplary character — deeply loyal to his faith, his family and his country. But he clearly places political ideology in a different category of fidelity. Like Dwight Eisenhower, Romney is a man of vague ideology and deep values. In political matters, he is empirical and pragmatic. He studies problems, assesses risks, calculates likely outcomes. Those expecting Romney to be a philosophic leader will be disappointed. He is a management consultant, and a good one.

Has the moment of the management consultant arrived in American politics? In our desperate drought of public competence, Romney has a strong case to make.

The two quotes highlight, among other things, some of the differences between liberals and conservatives. Liberals were wowed by Obama during the 2008 campaign; he excited and inspired them. Shapiro considers Romney dull, and perhaps he is in many ways. But although conservatives like a charismatic candidate as well (Ronald Reagan, for example), they tend to be less focused on that sort of emotional reaction. And perhaps the entire nation is less interested in such a thing now, A.O. (after Obama).

Shapiro interprets New Hampshirite Corning’s statements as a lack of enthusiasm. But it could just as easily be relief. Maybe we don’t need an inspirational, charismatic, president. Maybe—as Gerson indicates—we need someone who is competent and who can lead.

I’m a bit surprised at Rush Limbaugh

The New Neo Posted on by

I think that Limbaugh lets his disapproval of a Romney nomination blind him to the other possibilities here when he offers the following exchange as support for his thesis that “the Democrats want Romney [as Republican nominee] — and you all know it”:

BRAZILE: Mitt Romney won tonight because no one touched him — and for Democrats, you know what? It was good news for us.

KARL: Why is that?

BRAZILE: Because we believe that the weakest candidate is the candidate that the Republicans are not attackin’, and that’s Mitt Romney.

KARL: Oh, come on.

STEPHANOPOULOS: No, you don’t believe that, Donna.

RUSH: That’s Stephanopoulos. What Stephanopoulos is saying is, “Shut up, Donna! What the hell are you doing, Donna? Did you not take your meds?”

I think Limbaugh is underestimating the degree of possible game-playing here. Maybe he’s even correct, but I doubt it; there’s absolutely no reason to suppose that it’s Brazile who’s being straightforward.