David Stockman: Mitt Romney was not a Businessman!

[Mustang]

In his new book, "The Great Deformer, former Reagan budget director David Stockman directly addressed and refutes Mitt Romney's stated primary qualification for being able to turn the economy around. Specifically, Stockman deals not only with Romney's claim to be a businessman, he deals with the whole concept of crony capitalism and how LBO have corrupted Wall Street by allowing men to become rich while not creating any wealth or overall economic benefit in the process.

IMHO, Mitt Romney is essentially a salesman. And there's nothing inherently wrong with that. But when the salesman/candidate tries to sell anything (including himself) by offering false information about his qualifications and running commercials (like Romeny's ads about Jeep) which make a mockery of the truth, people are right to question that candidate's central qualifications for higher office. And that's whether or not the candidate is trustworthy enough for the American people to entrust him to the office to which he aspires.

Below is an excerpt of Stockman's book in Newsweek's article as well as the Daily Beast website link below.

I suggest that people actually READ the article prior to commenting.

Mitt Romney claims that his essential qualification to be president is grounded in his 15 years as head of Bain Capital, from 1984 through early 1999. According to the campaign’s narrative, it was then that he became immersed in the toils of business enterprise, learning along the way the true secrets of how to grow the economy and create jobs. The fact that Bain’s returns reputedly averaged more than 50 percent annually during this period is purportedly proof of the case—real-world validation that Romney not only was a striking business success but also has been uniquely trained and seasoned for the task of restarting the nation’s sputtering engines of capitalism.

Except Mitt Romney was not a businessman; he was a master financial speculator who bought, sold, flipped, and stripped businesses. He did not build enterprises the old-fashioned way—out of inspiration, perspiration, and a long slog in the free market fostering a new product, service, or process of production. Instead, he spent his 15 years raising debt in prodigious amounts on Wall Street so that Bain could purchase the pots and pans and castoffs of corporate America, leverage them to the hilt, gussy them up as reborn “roll-ups,” and then deliver them back to Wall Street for resale—the faster the better.


That is the modus operandi of the leveraged-buyout business, and in an honest free-market economy, there wouldn’t be much scope for it because it creates little of economic value. But we have a rigged system—a regime of crony capitalism—where the tax code heavily favors debt and capital gains, and the central bank purposefully enables rampant speculation by propping up the price of financial assets and battering down the cost of leveraged finance.



So the vast outpouring of LBOs in recent decades has been the consequence of bad policy, not the product of capitalist enterprise. I know this from 17 years of experience doing leveraged buyouts at one of the pioneering private-equity houses, Blackstone, and then my own firm. I know the pitfalls of private equity. The whole business was about maximizing debt, extracting cash, cutting head counts, skimping on capital spending, outsourcing production, and dressing up the deal for the earliest, highest-profit exit possible. Occasionally, we did invest in genuine growth companies, but without cheap debt and deep tax subsidies, most deals would not make economic sense.



In truth, LBOs are capitalism’s natural undertakers—vulture investors who feed on failing businesses. Due to bad policy, however, they have now become monsters of the financial midway that strip-mine cash from healthy businesses and recycle it mostly to the top 1 percent.



Needless to say, having a trader’s facility for knowing when to hold ’em and when to fold ’em has virtually nothing to do with rectifying the massive fiscal hemorrhage and debt-burdened private economy that are the real issues before the American electorate. Indeed, the next president’s overriding task is restoring national solvency—an undertaking that will involve immense societywide pain, sacrifice, and denial and that will therefore require “fairness” as a defining principle. And that’s why heralding Romney’s record at Bain is so completely perverse. The record is actually all about the utter unfairness of windfall riches obtained under our anti-free market regime of bubble finance.


David Stockman: Mitt Romney and the Bain Drain - Newsweek and The Daily Beast

//www.thedailybeast.com/newsweek/2012/10/14/david-stockman-mitt-romney-and-the-bain-drain.html

 

[Mustang]

For anyone who's interesting in reading Stockman's book, it won't be published until March 2013.