Private equity firms like Bain Cap. are classic examples of crony capitalism and enemies of free market capitalism.

The Dirty Little Secret of Private Equity Profits

Wednesday, 17 October 2012 11:41 By Jim Hightower

Today, for the first time, I am officially notifying the honchos of Bain Capital, Blackstone Group, Carlyle Group, Kohlberg Kravis Roberts and other big-time private equity funds that I am available. My little company, Saddle Burr Productions, can be had. For a price.

I publish this notice in response to a recent news item revealing that these firms have a unique and perplexing problem: They have too much money on hand. In all, they're holding a cool trillion dollars that super-rich speculators, banks and others have entrusted to them. Private equity funds are corporate predators that borrow huge sums from these richies, using the cash to buy out targeted corporations, dismantle them and sell off the parts to make a fat profit for the investors and themselves.

However, in these iffy economic times, these flush funds have hesitated to do big takeovers, so they've just been sitting on all that money (which the predators refer to as "dry powder"). The problem is that, under the rules of this high-stakes casino game, the firms have to spend their borrowed money by a set time -- or give it back. And the clock is ticking.

So, using Wall Street's macho lingo, the big players have announced that they're now ready to go "elephant hunting" and are prepared to fire big bucks to bag some companies. To which I say: Fire away at Saddle Burr Productions!

OK, my company is hardly an elephant. But maybe it could be what the equity hucksters refer to as a "hot potato." That's what they call it when one fund grabs a company just to sell it to another fund, which might pass it off to yet another.

This year, equity firms are expected to spend more than $22 billion this year selling hot potatoes to each other -- in part, just to move cash out the door so they don't have to give it back.

This is what passes for good business sense in the truly screwy world of private equity. It's just churning money, producing absolutely nothing -- except, of course, huge fees for the churners. But if that's the game, hey, put me in the mix. A billion dollars sounds about right.

Executives in private equity firms -- such as Mitt Romney of Bain Capital and Henry Kravis of Kohlberg Kravis Roberts -- tend to be peacocks who think quite highly of themselves.
Fanning their splendid tail feathers, they unabashedly claim to be the ultimate free-enterprise risk-takers -- worth every dime of the multimillion-dollar paychecks they award themselves each year. Excuse me, but the risks by these self-anointed "heroes of the market" are actually taken with other people's money, not their own. That's quite a bit short of heroic. But here's a revelation that really ruffles their feathers: It seems they've been hauling in their massive profits not by bold and savvy competition in the marketplace, but through old-fashioned financial collusion with each other.

An antitrust civil lawsuit filed in federal court against 11 of the biggest equity firms includes internal emails in which they agree not to compete. In 2006, for example, yhe head of Blackstone sent an email to the co-founder of KKR: "We would much rather work with you guys than against you. Together we can be unstoppable, but in opposition we can cost each other a lot of money." The KKR honcho happily emailed back a one-word response: "Agreed."

Collusion, of course, perverts the marketplace they pretend to worship, artificially lowering the market price they'd otherwise pay. And they are not shy about playing this mutual backscratching game. In the 2008 takeover of the giant HCA hospital chain, KKR expressly asked its market rivals "to step down on HCA" and not bid. Agreeing to this blatantly illegal collusion, one rival wrote in an email: "All we can do is do unto others as we want them to do unto us. It will pay off in the long run."

For his part, Romney insists that any collusion by Bain occurred after he left the firm. "He had no role," says a spokeswoman. Well, none besides pocketing the loot. Documents from the lawsuit show that Romney clearly received millions in profits from deals that Bain appears to have made through its collusion in the grand game of market manipulation. If so, can we expect him to return those ill-gotten gains?

Krugman vindicated in his policy battle with IMF kool aid drinking economists in the EU. IMF Admits They got it Wrong!

Oops!

Posted: 10 October 2012 

The headline news from the latest IMF World Economic Outlook is the downward revision of 2013 growth forecasts—from 1.8 percent  to 1.5 percent for advanced countries, and from 5.8 percent down to 5.6 percent for emerging and developing countries.

But the report contains an even more extraordinary admission (highlighted in Box 1.1, written by Olivier Blanchard and Daniel Leigh): the IMF were wrong about the fiscal multipliers it has been using in its forecasts and policy recommendations by a factor of 3! Yes, instead of .5, which they had been using, Blanchard and Leigh estimate the fiscal multiplier to be closer to 1.5.

What this means concretely is that the IMF and all the other mainstream economists who were using the lower multiplier severely underestimated the negative effects—on investment, consumption, and unemployment—of the austerity measures that have been imposed in the wake of the economic crisis of 2007-08.

Paul Krugman feels vindicated. Jonathan Portes is willing to give the IMF credit for “going back, looking at their forecasts, analysing what went wrong, and saying very clearly ‘We thought the impact of fiscal consolidation on growth would be relatively small. We got it wrong.’”

For me, there can’t be any forgive and forget. The one thing mainstream economists are supposed to get right is the calculation of multipliers. And they didn’t. And the lives of millions of people have been ruined as a result.

The aristocratic old grandpa state

by Jen Sorensen

 

Romeny says corporate money is speech, union money is not.

Romney: Campaign Funding Okay For Corporations, Not Teachers

By karoli

Mitt Romney appeared on NBC's Education Nation Tuesday morning to give a pitch for private schools and charter schools. During the question and answer session with Brian Williams, he was asked about the Chicago teachers' strike, and whether he thought teachers should be allowed to go on strike.

His response was quite remarkable. While he believes teachers should have the right to go on strike (or so he says), he was quite adamant that teachers and by extension, teachers' unions, should not have the right to donate to campaigns or purchase advertising in the same fashion that corporations do.

If Citizens United ruled that money is speech, then why isn't teachers' money speech? They're citizens, they vote, and they also happen to be public employees.

According to Mitt Romney, "in the case of the Democratic Party, the largest contributor to the Democratic party is the federal teachers' unions." He went on to say that "if they elect someone, then that person is supposed to be representing the public, vis a vis the teachers union, but actually most of their money came from the teachers' union." He wrapped it all up by declaring it an "extraordinary conflict of interest."

I'm going to do my best to first sort out what Mitt Romney actually said, without regard to whether he's factually correct. As I understand it, he says elected officials represent the public, but their campaigns are funded by some thing that's not the public called a union and therefore there's a conflict.

I don't think I did that very well. Or perhaps he didn't say it very well, because it's just a silly argument. Teachers are citizens. They vote. They contribute to a union which then contributes to candidates and clearly discloses that they have made that contribution. When a union pays for an independent expenditure, it's clearly understood that union members paid for that. When a corporation pays for an independent expenditure, it's not even disclosed.

Mitts Tax Plan Would Transfer Wealth From The Hard Working Middle And Lower Class To The True Moochers, The Government Dependent Idle Rich!

How Romney’s Economic Plan Redistributes Wealth To The Wealthy

By Pat Garofalo 

Mitt Romney yesterday attempted to turn attention away from the fallout of his comments regarding the “47 percent” by pointing to a video from 1998 in which President Obama, then a state senator, says, “I actually believe in redistribution, at least at a certain level to make sure everybody’s got a shot.” The video was aggressively pushed by the Drudge Report and was detailed in a Romney campaign memo today.

This video doesn’t show much of anything new: President Obama has consistently advocated for higher tax rates on the rich, a position most Americans support, and more support for low-income Americans.

Romney’s response also ignores that his own economic plan would redistribute wealth too — Romney would just redistribute it to the already wealthy.

According to a Tax Policy Center analysis, Romney’s plan would increase after-tax income for those making more than $200,000 annually, while lowering it for everyone else:

The upshot of Romney’s plan is that “taxpayers with incomes over $1 million would see their after-tax income increased by 8.3 percent (an average tax cut of about $175,000), taxpayers with incomes between $75,000 and $100,000 would see somewhat smaller increases of about 2.4 percent (an average tax cut of $1,800), while the after-tax income of taxpayers earning less than $30,000 would actually decrease by about 0.9 percent (an average tax increase of about $130).”

This analysis made the most generous assumptions about Romney’s plan, factoring in that he would eliminate tax deductions and loopholes in the most progressive way possible in order to finance his tax cut. And still, it would constitute a dramatic shift in income to the already wealthy.

According to the latest data from the Census Bureau, income inequality increased last year, despite ongoing government efforts to combat the Great Recession. Romney’s plan would make that trend even worse.

Romney Tells His Fat Cat Donors What He Thinks Of The Real Hard Working Americans. They Are Moochers!

Romney demands that seniors take 'personal responsibility'

by Armando

 

Romney promises tough choices for you, but not for him and his rich friends.

 

Most of today's seniors, who worked hard, played by the rules and paid their taxes, have retired. Most seniors do not pay federal income taxes.
Mitt Romney says about them:

My job is not to worry about those people [...]’ll never convince them they should take personal responsibility and care for their lives.”

In his press conference last night, Romney said:

I recognize that among those that pay no tax, approximately 47 percent of Americans, I’m not likely to be highly successful with the message of lowering taxes.

Romney's message is that in order to lower taxes for his wealthy friends he will demand that retirees who worked hard, played by the rules, saved for retirement and counted on the promise of Social Security and Medicare, "take personal responsibility" and pay higher taxes, receive less in Social Security and trade in the promise of Medicare for Ryan's Vouchercare, ending Medicare as we know it.
Tax cuts for the rich. Tax hikes and benefits cuts for seniors and the undeserving rest of us.
That's the Romney promise. That's Romney's idea of personal responsibility.

Class warfare, anyone?

Adelson's $100 Million Election Investment Should Return About $2.3 Billion. A 2,200% Return On Investment. And We get A $2000 Tax Increase To Pay For It.

How One Mega-Donor Could Save $2.3 Billion Under Romney’s Tax Plan

By Travis Waldron

The $100 million that billionaire casino mogul Sheldon Adelson pledged to donate to Mitt Romney will turn out to be a good investment if the Republican nominee wins the presidential election in November, a new report from the Center for American Progress Action Fund found. Thanks to Romney’s tax proposals, which call for massive tax cuts for the rich, corporate tax reforms that will encourage the offshoring of profits, and the elimination of certain investment taxes, Adelson could personally save more than $2 billion in taxes, according to CAPAF Director of Fiscal Reform Seth Hanlon.

Romney’s tax plan would help Adelson in the following ways:

• Cut top tax rates, saving Adelson approximately $1.5 million on his annual compensation as chief executive of his casino company.

• Maintain the special low rates on dividends, potentially saving Adelson nearly $120 million on a single year’s worth of dividends, more than enough to recoup his political donations.

• Maintain the special low rates on capital gains, allowing Adelson to make back his political donations in capital gains tax cuts just by selling a fraction of his stock.

• Provide a tax windfall of an estimated $1.2 billion to Adelson’s company, Las Vegas Sands Corp., on untaxed profits from its Asian casinos, as well as a tax exemption for future overseas profits. Adelson’s casinos already enjoy a special foreign tax exemption from the Chinese administrative region of Macau, and Gov. Romney would make those foreign profits exempt from U.S. taxes as well.

• Eliminate the estate tax, potentially providing a staggering $8.9 billion windfall to Adelson’s heirs.

Romney’s corporate tax reforms would also provide Adelson’s casino company approximately $1.2 billion in tax breaks on overseas profits and $565 million from Romney’s proposed shift to a territorial tax system. Adelson’s share of that, the report says, would be upward of $900 million, nine times what he pledged to spend to get Romney to the White House.

While Romney’s tax plan would further enrich billionaires like Adelson, it would have to raise taxes on middle class families by as much as $2,000 if Romney were to keep his plan to maintain current levels of revenue.