Reporters Discuss Romney's Time at Bain Capital

By The NewsHour, The NewsHour - January 11, 2012

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JUDY WOODRUFF: As we heard earlier, Mitt Romney's tenure at Bain Capital has already emerged as a major issue in the campaign.

Tonight, we examine what's known and not about Bain's record and Romney's.

One of the world's largest private investment firms, Bain now manages roughly $66 billion. Romney was its founder and led the company from 1984 through 1998. During that time, Bain invested in 77 businesses. A Wall Street Journal analysis found that Bain made $2.5 billion in gains for investors from those businesses and did successfully turn around many of them.

But both The Journal and The Boston Globe also found that at least 20 percent of the businesses either filed for bankruptcy or closed down several years after Bain invested.

We look more closely at all this now with two reporters who have been examining the records. Beth Healy is with The Boston Globe. And Dan Primack is a senior editor at Fortune magazine.

Welcome to you both.

Dan Primack, first of all, for those of us who don't work in the financial services industry, what does Bain do?

DAN PRIMACK, Fortune: Bain for the most part -- they have a lot of different businesses, but their primary business is private equity, which basically means you buy a company, you try to improve it, and then you try to sell it later at a higher price, either to another private equity firm, another corporation, or, in some cases, take it public.

That's the gist of the business. They have investors who give them the money to do it. And they take a cut basically of the profits, if there are some.

JUDY WOODRUFF: And, Beth Healy, what's the role of borrowing in all this? Because we know that a lot of this has to do with leveraged -- so-called leveraged buyouts. So what's the role of debt in all this?

BETH HEALY, The Boston Globe: That's right.

So when the companies buy -- when companies like Bain go and buy a firm, they also borrow a lot of money from the bank. And, in fact, they borrow much more than they typically put down. You might put down $10 million and then borrow many tens of millions more or even hundreds of millions more.

JUDY WOODRUFF: Dan Primack, so the stated goal of a private equity firm involved in these buyouts like Bain, what is it? What do they say their purpose is?

DAN PRIMACK: Make money for their investors. And the investors in a firm like Bain and most other private equity firms typically are large institutions: pension funds, college endowments, private foundations, sometimes sovereign wealth funds or public pension funds.

But their primary goal is to make money for their investors. That's -- to be honest, that's their only goal and it's their only fiduciary responsibility.

JUDY WOODRUFF: And what is Bain's record?

DAN PRIMACK: Bain's record is very good.

And the way you kind of judge, you sometimes can judge on returns. But Bain -- most private equity firms keep those numbers under wraps, and the only way they come out is if you have public investors. Bain really doesn't. The way you can judge it is, Bain's still not only in business, but they keep raising larger and larger funds.

The first fund Romney raised when he was there was $36 million, approximately. Right now, they're raising billions, $10 billion for their funds. So they're doing quite well.

JUDY WOODRUFF: And, Beth Healy, is it possible to isolate what -- how successful Bain was during Romney's tenure, how much money they made, how successful they were for their investors?

BETH HEALY: Yes, mainly because there's this Deutsche Bank report, a Wall Street report that came out a number of years ago, and we were able to examine it. Others have as well. And they made 88 percent a year for their investors under Romney's tenure, which is -- was one of the best records in the business at that time, from '84 to '99.

JUDY WOODRUFF: So, compared to the rest of the industry, they did well?

BETH HEALY: That was an extraordinary return, to get 88 percent a year.

And they aren't making those type of returns any more today. It was a really good time in the '80s and early '90s, but it was an extraordinary return then.

JUDY WOODRUFF: Dan Primack, what about the question of jobs?

This, of course, has come up from the candidates during the campaign, both -- especially Rick Perry, Newt Gingrich going after Romney, saying Bain Capital when he was there -- in Perry's word, they're like a vulture. They go in, they take a company that's in distress and lay people off, people lose their jobs.

What is the record in terms of jobs at Bain Capital?

DAN PRIMACK: The answer is, we really don't know.

The original claim that Romney made was that they had created over 100,000 jobs. Actually, first, it was tens of thousands. Then it became 100,000. And when he just says that, it's true. Look, they used to be venture capitalists when they began. So they actually started businesses, not these leveraged buyouts.

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