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Mitt Rommey might rail against U.S. debt, but in doing so, says ProPublica's Jesse Eisinger,...

Mitt Rommey might rail against U.S. debt, but in doing so, says ProPublica's Jesse Eisinger, Romney is "running away from his entire career in business." That's because under his watch, Bain would use the classic P-E technique of leveraging debt to amplify its returns.
Comments (4)
  • Stone Fox Capital
    , contributor
    Comments (7948) | Send Message
    is he against US debt or racking up debt due to deficit spending? Big difference.
    19 Jan 2012, 01:29 PM Reply Like
  • Killer454
    , contributor
    Comments (950) | Send Message
    What in the world does private equity funds using leverage to juice returns have to do with U.S. government debt that creates a burden on the taxpayers?


    Nothing , that's what.


    Eisinger is in lefty looney tune land.
    19 Jan 2012, 01:32 PM Reply Like
  • Jeff@WMD
    , contributor
    Comments (23) | Send Message
    Article misses the rather obvious point that Romney (and nearly every other thinking person on the planet) very likely views a private equity fund as qualitatively different than the federal government. Just as "Business A" and "Business B" make different financing decisions based on their respective goals and restraints, "Private Equity Fund A" and "Government B" also make different financing decisions based on their goals and constraints.


    One has sophisticated "accredited" investors that made a decision to invest in the fund and can gauge their risk of loss. The sophisticated investors bear the risk of loss.


    The other has bridges, roads, institutions, a military, a vast health and science research arm, a space program, and millions of employees and entitled beneficiaries whose livelihoods depend on it. Oh, and if it fails due to over-leveraging it will come after you and me to bail it out.


    There is no reason why Romney (or anyone else) is obligated to view financing the government in the same way he views financing a private equity fund. Apple, orange.


    The article does get one big point right that has been missed in the recent public debate. Bain's goal was never to create jobs. It is a private equity shop. Its fiduciary duty was and is to its investors, not to the unemployed. Wasn't it Henry Ford that ran afoul of his fiduciary duties to his company's shareholders when he overpaid his employees? Heart was in the right place, but don't do it with somebody else's money.
    19 Jan 2012, 03:48 PM Reply Like
  • bkpark
    , contributor
    Comments (325) | Send Message
    Of course debt is used as leverage to get better return on equity---speaking of equity, can anyone even reliably calculate the "equity" backing the U.S. treasuries?


    Whatever it is, if we take reported "earnings" (revenues minus expenditures) seriously, it's been decreasing for many decades.
    19 Jan 2012, 05:30 PM Reply Like
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