Saturday, January 14, 2012

The Bain of Our Existence

Holman Jenkins explains how private equity works in our economic system. And how it worked during the 1980s and 90s when Mitt Romney was making his fortune.
As a rule, private equity takes on the most troubled companies because turning them around offers the biggest profit opportunities. That's why private equity tends to generate more than its share of traumatic headlines. Look no further than Ripplewood Holdings' decision to put the maker of Twinkies into bankruptcy this week. It's the kind of decision that, were Ripplewood's principals ever to run for office, would get them savaged in an ad.
But guess what? Ripplewood also bought the company, Hostess Brands, out of bankruptcy three years ago, when it was called Interstate Bakeries. Ripplewood is just the latest manager to wrestle unsuccessfully with the company's fundamental problem, a unionized workforce in an industry where competitors aren't unionized.
Next time you're choosing a fattening indulgence in the checkout line, ask yourself if you're willing to pay extra so Twinkies and Wonder Bread (made by the same company) can arrive at the store on different trucks? So the driver can be excused from helping to unload? So the company can pay workers-comp costs way out of line the industry's? So a company with just 19,000 employees can administer 40 different pension plans?
We didn't think so...
... What does this have to do with the presidency? Perhaps not much, but one thing he (Romney) didn't learn at Bain Capital was to twiddle his thumbs because taking action might make somebody mad at him. That's not the worst qualification to bring to the Oval Office right now.
UPDATE: President Obama is already attempting to make political hay of Romney's time at Bain. This sort of turnabout will be fair play.

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And this:
CBS News counted 12 clean energy companies that are having trouble after collectively being approved for more than $6.5 billion in federal assistance. Five have filed for bankruptcy: The junk bond-rated Beacon, Evergreen Solar, SpectraWatt, AES' subsidiary Eastern Energy and Solyndra.
According to CBS News, Beacon Power, a "green energy storage company," recieved $43 million from the government. Standard and Poor's had given the project a rating of "CCC-plus." 

7 Comments:

Anonymous Anonymous said...

Or ask yourself if you're willing to pay so much for a Twinkie because of what the CEO and other officers make or because of what capital companies take out of it.

January 14, 2012 at 12:27 PM 
Blogger Bob Bohne said...

Gil - "President Obama is already attempting to make political hay of Romney's time at Bain." Really? No mention of the Republican Super-pac attacks from Newts buddies? Where's the rest of this story?

January 14, 2012 at 1:45 PM 
Blogger Bob Bohne said...

Brought to you by friends of Newt-

http://www.youtube.com/watch?v=BLWnB9FGmWE

January 14, 2012 at 5:59 PM 
Blogger jake said...

Bob felt compelled to gloat about the "quiet around here" on the previous Tebow post.

I find the most remarkable "quiet around here" to be on Solyndra, etal, and all those billions in wasted taxpayer dollars.
It's certainly not possible to celebrate Obama's intellect or good intentions with those bonehead moves.

January 15, 2012 at 9:02 PM 
Blogger Bob Bohne said...

Right Jake. Or Republican Haley Barbour setting free 200 convicts. Some of them murderers. Where's the Gil Spencer column or post about that?

January 15, 2012 at 10:07 PM 
Blogger jake said...

Governor of Mississippi vs the President of the United States... yeah they're equivalent.

January 15, 2012 at 10:35 PM 
Blogger Bob Bohne said...

Jake - See "Condemnation of Urination" for my reply.

January 15, 2012 at 10:44 PM 

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