Giving Romney credit for the Auto Bailout is like crediting Bush for the recovery

Romney will take a lot of credit for the auto recovery he said yesterday.

Ok. Sure. After he said for years that what needed to happen is for the marketplace to work—letting the automobile industry crash and burn and then after the loss of millions of jobs, crawl its way back with the help of vulture capitalists like Bain Capital.

Oh, I forgot: Bain Capital—and every other vulture—would not assist unless the government stepped in first.

Reminds me of the cartoon I saw in the late 1980’s while working on many failed Leveraged Buy-Outs, where the vultures swooped in, bought a troubled company with debt, planning to sell off some of the company’s operations, pay off the debt with the proceeds of the sale, and make a tidy profit on the remnants either through operating (not so much) or selling what was left to a new investor group who usually bought with borrowed money.

Leveraged Buy Outs very often were put together by management with the assistance of aggressive investment bankers (an example is Bain) and banks.  The general rule was that the leveraged buy outs were done with Other People’s Money—typically banks—and seldom did the management team or the investment banker have any of their own money in it and usually the money was loaned without recourse to management or the investors. What this means is that if it worked, the banks got their loan paid and the owners got a huge return. If it didn’t, the banks took a bath and the owners moved on to the next deal.

Watch the movie Other People’s Money with Gregory Peck and Danny Devito, with Devito playing the ruthless investment banker Larry the Liquidator or what they are called colloquially, bottom feeder. It is a primer on unrestrained capitalism and the speech Devito gives to the shareholders is better than anything that  comes out of any MBA program, which begins:

Amen. And amen. And amen. You have to forgive me. I’m not familiar with the local custom. Where I come from, you always say “Amen” after you hear a prayer. Because that’s what you just heard – a prayer. Where I come from, that particular prayer is called “The Prayer for the Dead.” You just heard The Prayer for the Dead, my fellow stockholders, and you didn’t say, “Amen.” This company is dead. I didn’t kill it. Don’t blame me. It was dead when I got here. It’s too late for prayers. For even if the prayers were answered, and a miracle occurred, and the yen did this, and the dollar did that, and the infrastructure did the other thing, we would still be dead.

But in the case of the auto industry, it was just too risky for these guys to get involved, so the government stepped in.

I guess Romney taking credit makes as much sense as giving the credit for the recovery from the recession to President Bush and not Obama because if the financial sector had not crashed under Bush’s watch and decimated the economy, there would have been nothing from which to recover.

I need a little more kool-aid to buy this.

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