HyenaCapitalism

James Surowieki, writing in the January 30 New Yorker, has finally shown me how the very rich manage to scarf up the lion's share of the pie and to leave nothing but slivers behind.

I knew they had to be gaming the system, just by looking at the results, but I did not know enough about the details of the game to really appreciate how they accomplish their win. Now, in one page, Surowiecki illuminates the scam.

A typical scheme is to buy a company which is doing pretty well, but starting to lag, as Wasserstein & Company did to Harry and David, the fruit retailers. The private equity guys then borrow a ton of money which becomes Harry and David's debt. Before that borrowed money can help improve the company, the private equity guys (Wasserstein&Co) pay themselves "special dividends" in this case a hundred million dollars. (The special dividends by dint of a very sweet tax provision are taxed at a very low rate.) Then the PE guys charge Harry and David "managment fees," (several million.) Six years later, after the PE guys had sucked Harry and David dry, it defaulted on its debt and dumped its pension obligations. Its workers were out of a job and out of the pensions they had labored years to earn.

Harry and David was sucked dry, a husk, but the PE guys had made millions and moved on.

These are the sorts of shenanigans Mitt Romney played at Bain Capital, but with other companies.

It's all legal, because Republican "job creators," entrepreneurs, don't you know, have enough senators and Congressmen in their pockets--in our case the Frank Guintas and Kelly Ayottes of the world to make this predation legal.

Rick Perry called it "vulture capitalism," but that strikes me as entirely too civil. Vultures, as far as I can tell only pick clean the carcases of animals killed by others. Hyenas, however, actually swarm around living creatures, and bring them down, and then tear them apart.

That's a more apt description of how the private equity nasties at firms like Bain Capital play the game.

But as Mitt Romney has said, he has no apologies to make for his "success."

After all, it's all perfectly legal.