Relevant and even prescient commentary on news, politics and the economy.

Did Romney Begin to Reverse-Etch-A-Sketch Today?

CINCINNATI, Ohio — Mitt Romney tried Thursday to borrow the campaign themes that got President Barack Obama elected in 2008.

The Republican nominee repeatedly promised “big change” in Washington, a fresh phrase for him and one that he used more than a dozen times in a 20-minute speech at a rally that kicked off a day-long Ohio bus tour.

Romney borrows Obama campaign themes, James Hohmann, Politico, today,

Seems to me that Obama should point out what big changes would be in store.  He can start with Medicare and then get into some other highlights of the Ryan budget—and of Romney’s primary-campaign statements, and run ads using clips of Romney saying these things.

He can then point out that Romney is doing what he’s so good at: writing generic fine print that he can then point to and say, “But this is what I said during the campaign that I would do! Seeee??”

Sorta like, it depends on what the meaning of “Let Detroit go bankrupt” means.  Which depends on what the meaning of “managed bankruptcy” is, when you’re suggesting that the government shouldn’t provide GM and Chrysler with money to fund a managed bankruptcy that would not result in liquidation.  Which in turn, I guess, depends on what the meaning of liquidation is.  

Which a very large number of people who are now employed directly or indirectly by those companies would have no trouble defining.

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Romney’s Prescience—a.k.a., The OTHER important point about Romney’s auto-bailout position

IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

— Mitt Romney, Let Detroit Go Bankrupt, New York Times, Nov. 18, 2008

The problem for Romney?  That the turnaround that Detroit needed could not have occurred without that check.

The solution for Romney?  Say that he was proposing a “managed bankruptcy” rather than a liquidation bankruptcy, and pretend that those two things are mutually exclusive.  And—voila!—everyone’s focused on whether Romney was or was not proposing a liquidation of GM and Chrysler. 

Which, of course, he was, because, well, the turnaround that Detroit needed could not have occurred without that check. 

But in that op-ed, Romney said—unequivocally—that receipt of that check by the auto companies would spell the demise of the American automotive industry.  He said he could virtually guarantee it.  

That’s right, folks.  The man who claims that his business savvy means he will, if elected president, cause the creation of 12 million new American jobs didn’t know that there was no private-sector financing available to fund a non-liquidation managed bankruptcy for these companies.  And, even more important, he thought that federal funding would spell the demise of the automotive industry

In other words, even more important than that this guy is the Houdini candidate is that, by his own accounting—by his own words in that op-ed—he economics prowess is an apparition.  

Well, it isalmost Halloween.

Good thing that guarantee was only virtual.

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Solamere Capital offered to help fund the auto-industry managed bankruptcy … just like Bain Capital!

Ah.  Well, now we know what Romney has in mind when he says that GM and Chrysler didn’t need federal bailout funds in late 2008 and early 2009 in order to undergo bankruptcy reorganization rather than be forced to liquidate, because there was private-equity funding available for that purpose.  Solamere Capital and its Rolodex of potential investors were available to provide the funding, but, stupidly, no one from the Obama administration thought to contact them. 

Anyway, I can’t wait to hear the statistics on how many jobs Tagg Romney created!

(NOTE: This entire post, including its title, is intended as facetious.)

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Steven Rattner Misses the Point (Romney’s and Obama’s) – POSTSCRIPT ADDED 5/16*

Last February, in the lead-up to the all-important Michigan primary, Romney wrote an op-ed piece in the Detroit News titled “U.S. autos bailout ‘was crony capitalism on a grand scale’.”  The dual purpose of the piece was to defend the recommendation he made in a November 18, 2008 op-ed article in the New York Times titled “Let Detroit Go Bankrupt” by saying falsely that GM and Chrysler did not need federal funds to proceed successfully through bankruptcy reorganization rather than having to liquidate, and to complain that the terms of the federally-financed bankruptcy outcome included an agreement by which the UAW received shares of stock in GM in exchange for the union’s assuming the company’s healthcare liability. 
In a rebuttal op-ed in the New York Times, Steven Rattner, the Obama administration’s auto taskforce chief advisor and himself a venture capitalist, deconstructed Romney’s claims, especially the statement that private capital was available to fund the reorganization process.  Rattner wrote:

In late 2008 and early 2009, when G.M. and Chrysler had exhausted their liquidity, every scrap of private capital had fled to the sidelines.

I know this because the administration’s auto task force, for which I was the lead adviser, spoke diligently to all conceivable providers of funds, and not one had the slightest interest in financing those companies on any terms. If Mr. Romney disagrees, he should come forward with specific names of willing investors in place of empty rhetoric. I predict that he won’t be able to, because there aren’t any.

So even though Rattner is a venture capitalist, I was a little surprised to read that he characterized a new Obama ad as unfair for targeting Romney’s work as a venture capitalist for Bain Capital by illustrating what that work actually entailed.  The ad, which responds to Romney’s claim to have created 100,000 jobs while at Bain, shows what happened at a Kansas City steel mill that Bain bought not for the purpose of creating jobs but for the purpose of shuttering it after Bain had made some money from it. 

Rattner said that the two candidates should not pretend that the purpose of venture capitalism is to create jobs.  Romney, he said, should not have claimed that he created 100,000 jobs while at Bain.  And Obama should not complain that Bain’s brand of venture capitalism often was to buy ongoing businesses, milk them quickly, and disassemble them in liquidation or for the value of their parts.

“Bain Capital’s responsibility was not to create 100,000 jobs or some other number. It was to create profits for its investors,” Rattner is quoted as saying. “This is part of capitalism, this is part of life.  I don’t think there’s anything Bain Capital did that they need to be embarrassed about.”

Well, okay.  And the more common types of venture capitalism—of the funding-of-Silicon-Valley-or-biotech-start-up variety, for example—will, if all goes well, create profits for the investors and create jobs.  But that’s not the type of venture capitalist Romney was. 

Yet the entire premise of Romney’s campaign is that he’ll use his business acumen, demonstrated during his Bain years, to create jobs, not that he’ll use it to create profits for investors.  He’s running for president, not for chairman of the board of Goldman Sachs.  Which is why he says he created 100,000 jobs as head of Bain Capital.  And which is why Obama wants to show that, well, Bain Capital’s responsibility was not to create 100,000 jobs or some other number; it was instead to create profits for its investors.  And that it created profits for its investors.  And exactly how it did that, and what the consequence was for the employees who were the collateral damage.  (“Like watching an old friend bleed to death,” one of the former steel mill employees says in the ad.)

Rattner’s right that it is indeed part of capitalism, part of life.  And Bain Capital may not have done anything it needs to be embarrassed about.  But Bain Capital is not running for president claiming that its purpose is to create jobs and that it knows how to have the economy create hundreds of thousands of jobs each month, when in fact its sole purpose is to make a profit for its investors and all it has demonstrated is that it can do that well and that job creation and job loss are irrelevant to its purpose and to the outcomes.  Romney, by contrast, is running for president claiming exactly that.  An ad by his opponent pointing out that, contrary to his incessant assertions, Romney’s work at Bain was disconnected from job creation in both purpose and result is not only fair but directly on point.  

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*POSTSCRIPT: In the comments to this post, reader SW wrote:

Isn’t this completely obvious to everyone except those who are paid to confuse the issue?  Or who are incredibly stupid?

I responded:

I would think so, and for that reason I debated whether to write the post.  I decided to write it because I’ve been surprised that there has been almost no public discussion, best as I can tell, about the difference between the type of venture capitalism that helps startups or helps companies expand, and the type of venture capitalism—appropriately nicknamed vulture capitalism—that Romney practiced at Bain Capital.  For example, the prominent Silicon Valley venture capitalists do not (to my knowledge) buy companies in order to strip them down or outright liquidate them. The key paragraph in my post is:

Well, okay.  And the more common types of venture capitalism—of the funding-of-Silicon-Valley-or-biotech-start-up variety, for example—will, if all goes well, create profits for the investors and create jobs.  But that’s not the type of venture capitalist Romney was. 

I’d love to see mainstream news outlets and the Obama campaign discuss this.  

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The Beginning of the End of Corporate Gaming of the Bankruptcy Laws?

It will take a few more months of legal maneuvering before American finally throws in the towel and agrees to a US Airways merger. American executives and directors will no doubt have to be bought off with golden parachutes, while trade creditors such as Hewlett-Packard and Boeing will likely be brought on board with promises of future contracts. That’s how things work in the bankruptcy racket. And all of it will be negotiated behind closed doors by legions of bankruptcy lawyers whose $1,000-an-hour fees make those $250-an-hour pilots look like pikers.

For years now, Corporate America has viewed the bankruptcy court as a blunt instrument by which failed executives and directors can shift the burden of their mistakes onto shareholders, employees and suppliers. The auto industry bailout orchestrated by the Obama administration posed the first challenge to that assumption. Now the unions at American airlines have taken another step in curbing this flagrant corporate abuse and restoring the rule of law.

— “Two can play the airline bankruptcy game,” Steven Pearlstein, Washington Post, Apr. 28 (Boldface mine)

Enough said.  I think. Except for this: I’d love to see Obama mention this and explain it during the campaign, and not fear that it’s too complicated to be explained briefly. It’s not.

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Chris Christie’s Sweet Dream (And Romney’s)

“I’ve never seen a less optimistic time in my lifetime in this country and people wonder why,” the first-term Republican governor said at the Bush Institute Conference on Taxes and Economic Growth in New York City.

“I think it’s really simple. It’s because government’s now telling them ‘stop dreaming, stop striving, we’ll take care of you.’ We’re turning into a paternalistic entitlement society,” he said.

“That will not just bankrupt us financially, it will bankrupt us morally because when the American people no longer believe that this a place where only their willingness to work hard … determines their success in life then we’ll have a bunch of people sittin’ on a couch waiting for their next government check,” Christie said.

That, pretty clearly, is the message that the Republicans, party-wide, have settled on for this election: People are depressed because of the existence of the social safety net and other government programs such as student-loan and job-retraining programs, and because the very wealthy haven’t had their tax rates cut enough, the gap between the very wealthy, and all those couch potatoes who work regular jobs isn’t large enough.  

I wish them all the best with that message.  And I hope they keep pushing it, all the way to November. 

I think it’s simple, too. I’ll leave it at that.

Can’t wait to hear the next installment of Christie’s VP audition script.  Maybe something about all those auto-industry-worker couch potatoes who’ve stopped dreaming and striving now that Obama has handed GM and Chrysler to the UAW?

By the way, did Christie ever use the student-loan program, I wonder?  Or did he, like Romney and Romney’s kids, have no need for it?

Christie was speaking at the Bush Institute Conference on Taxes and Economic Growth. Tomorrow’s audition will be by Paul Ryan. It’s a follow-up audition, actually.

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Apparently, not all government programs cause mental depression.

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