New York Times scribe Andrew Ross Sorkin today delves into Mitt Romney’s private equity past, which is fast becoming a significant issue on the campaign trail. His piece made sense, until I got to the following section:
I’m happy to defend much of Romney’s work at Bain Capital, particularly since the firm’s primary beneficiaries are nonprofit institutions like university endowments and charitable foundations. But how on earth is the Dade International situation not a “true talking point?” Is Sorkin saying that ill-advised dividend recaps are okay so long as the company was in bad shape when originally acquired by its private equity sponsor? You can kill so long as you first rehabilitate?
Let’s imagine I find a starving man on the street. I give him food, and then help set him up with a home and a job (using money out of my own pocket). He then pledges that if he becomes prosperous, he will repay me and then some. But I see him starting to have some modest success, so choose to rob him of most everything. He soon dies of hunger (given that he is once again destitute). Was my action morally acceptable because he would have starved years ago without my help?
Dividend recaps often are the worst of private equity, contributing to the industry’s reputation as destructive financial engineers. If we can’t be honest about that side of the ledger, then we can’t adequately analyze Romney’s resume. The good or the bad.
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