|Mitt Romney and Partners at Bain Capital|
As for Romney's business success, this article details exactly how that worked, in both its glory and its goriness. A brief excerpt from the end of the piece to show the latter:
Romney’s phrase, “leverage up,” provides the key to understanding this most profitable stage of his business career. While putting relatively little money on the table, Bain could strike a deal using largely debt. That generally meant that the company being acquired had to borrow huge sums. But there was no guarantee that target companies would be able to repay their debts. At Bain, the goal was to buy businesses that were stagnating as subsidiaries of large corporations and grow them or shake them up to burnish their performance. Because many of the companies were troubled, or at least were going to be heavily indebted after Bain bought them, their bonds would be considered lower-grade, or “junk.” That meant they would have to pay higher interest on the bonds, like a strapped credit-card holder facing a higher rate than a person who pays off purchases more quickly. High-yielding junk bonds were appealing to investors willing to take on risk in exchange for big payouts. But they also represented a big bet: if the companies didn’t generate large profits or could not sell their stock to the public, some would be crippled by the debt layered on them by the buyout firms.
The arcane domain of corporate buyouts and junk-bond financing had entered the public consciousness at the time, and not always in a positive way. Ivan Boesky, a Wall Street arbitrageur who often bought the stock of takeover targets, was charged with insider trading and featured on the cover of Time magazine as “Ivan the Terrible.” Shortly after Romney began working on leveraged deals, a movie called Wall Street opened. It featured the fictional corporate raider Gordon Gekko, who justified his behavior by declaring, “I am not a destroyer of companies. I am a liberator of them! … Greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.”
Romney, of course, never said that greed is good, and there was nothing of Gekko in his mores or style. But he bought into the broader ethic of the LBO kings, who believed that through the aggressive use of leverage and skilled management they could quickly remake underperforming enterprises. Romney described himself as driven by a core economic credo, that capitalism is a form of “creative destruction.” This theory, espoused in the 1940s by the economist Joseph Schumpeter and later touted by former Federal Reserve Board chairman Alan Greenspan, holds that business must exist in a state of ceaseless revolution. A thriving economy changes from within, Schumpeter wrote in his landmark book, Capitalism, Socialism and Democracy, “incessantly destroying the old one, incessantly creating a new one.” But as even the theory’s proponents acknowledged, such destruction could bankrupt companies, upending lives and communities, and raise questions about society’s role in softening some of the harsher consequences.