Comments for NPR Does Fluff Piece for Private Equity at http://www.cepr.net , comment 1 to 15 out of 15 comments http://www.cepr.net Wed, 22 May 2013 15:41:49 +0100 FeedCreator 1.7.3 http://www.cepr.net/index.php/blogs/beat-the-press/npr-does-fluff-piece-for-private-equity#comment-14295 "his leaves Gingrich Inc. with $700 million in before tax profit. Deducting the 35 percent tax, Gingrich Inc. now has $455 million a year to distribute to Romney Capital, 70 percent as much as before ($455 million/$700 million) even though Romney Capital has already recovered two-thirds of what it paid for Gingrich Inc.." that should say 455 million/650 million, shouldn't it? - br Mon, 23 Jan 2012 04:48:49 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/npr-does-fluff-piece-for-private-equity#comment-14243 If the $6 billion loan taken out by Gingrich Company is paid to Romney Capital as a dividend, wouldn't Romney Capital have to pay taxes on that? So in the short run, at least, Uncle Sam would actually get additional tax revenue. In fact, the dividend would get taxed at a rate higher than the capital gains rate. Therefore, even in the long run, total tax revunue would be greater, unless the repayment takes so long that the total interest exceeds the principal. Of course, this does not contradict your main point about this kind of financial engineering being non-productive, but we should always be fair and factual. - Al Schmeder Sat, 21 Jan 2012 19:36:34 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/npr-does-fluff-piece-for-private-equity#comment-14120 Excellent account of the process. I actually was employed, like I am sure many others, in a company taken over by a VC. It is not possible to describe in words the [b]destruction [/b]of wealth this process brings to a company, community and a nation. - scott moore Tue, 17 Jan 2012 06:02:16 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/npr-does-fluff-piece-for-private-equity#comment-14099 Very well done imho. And, a note for when, after the revolution, the social democracy legislates that all corporate boards of directors be 'public good oriented', your explanation illustrates succinctly why creditors are an important stakeholder in corporations. - fairleft Mon, 16 Jan 2012 19:58:01 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/npr-does-fluff-piece-for-private-equity#comment-14064 Now you know why Mr. Romney won't release his tax returns. Some of those interest losses and other tax tricks may have been used to reduce his tax liability to virtually zero. It's not even that he pays an obscenely low percentage on lots of income, the Republican echo chamber could finesse that by pointing to the actual number as being high. No, he probably pays virtually nothing. - Mark Jamison Sun, 15 Jan 2012 00:26:29 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/npr-does-fluff-piece-for-private-equity#comment-14057 Please put these calculations in a table to make them easier to follow. - McDruid Fri, 13 Jan 2012 17:17:26 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/npr-does-fluff-piece-for-private-equity#comment-14055 NPR/Bain also implicitly promote the canard that pension funds can only earn adequate returns by investing in companies that undermine job security of workers in order to fund retiree benefits. As has been pointed out, private equity does nothing more than skim off cash in management fees (deja vu all over again with LBOs in the late 1980s). Like insurance companies pensions need steady returns over long time horizins because they have to match long-dated assets with their liabilities. Thus, their bond/stock mix is usually around 70/30. Declining bond yields have pushed up the present value of the assets and libilities, however, for a properly funded pension that is in actuarial banlance, this shouldn't be a big problem. However, as the embedded yields fall, they will need to up contributions from current workers. Now with wages stagnating, workers will opt to take cash today and not fund their pensions in the future. Solution: repatriate the $1.5 in overseas cash earnings and use it to fund pensions who will invest in long-lived infrastructure projects. - TVeblen Fri, 13 Jan 2012 12:22:06 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/npr-does-fluff-piece-for-private-equity#comment-14050 that PE firms make money while destroying manufacturing companies: by cheapening the quality of the product, so increasing short term profits as the costs are lowered, and then selling off the manufacturer at a premium based on the increased profits. But as the manufacturer loses its market because its products are now inferior, the company ends up in bankruptcy - after the PE has walked away from the wreck it made. - John Q Fri, 13 Jan 2012 11:09:05 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/npr-does-fluff-piece-for-private-equity#comment-14045 The author left out one thing that benefits Private Equity enormously...when they pay out a dividend to themselves it is taxed as capital gains, not ordinary income. So they get a nice break on their taxes. All around this is the clever exploitation of tax loopholes. This how to argue against it - not just from a 1% - 99% standpoint, but from the clever exploitation of tax loopholes that allowes multimillionaires - maybe billionaires - to keep their taxes low while working class Americans have no such access to loopholes. Classic case of the golden rule (cynical version) - those who have the gold make the rules. - Will Fri, 13 Jan 2012 05:39:19 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/npr-does-fluff-piece-for-private-equity#comment-14044 Could you please give your definition of "value?" Is it synonymous with profit? - Jeffrey Stewart Fri, 13 Jan 2012 05:31:21 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/npr-does-fluff-piece-for-private-equity#comment-14042 "Thanks to Whose Your Nanny Baker for clarifying how we - the One Percent Job Producers - achieved our economic position in life without dependence on the nanny state." Uh, infrastructure (including financial)...defense...etc. etc. etc. - trish Fri, 13 Jan 2012 04:41:48 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/npr-does-fluff-piece-for-private-equity#comment-14039 The name "private" equity seems to be misleading, since these outfits make money by buying into corporations and seizing control. To the extent that this is harmful, it is another loophole in the hodgepodge of custom and court decisions that is corporate law. There is no reason that the operation of corporations should be governed by things such as the Santa Clara v. Southern Pacific Railroad decision which established corporate "personhood" (and which was really aimed a very narrow issue) not to mention Citizens United. It is long past time for Congress to directly address the issue of corporate structure and the role they should play in society. This could be a winning issue for Democrats, if not in this election cycle maybe in the next one after the effect of Citizens United money shows up in this one. - skeptonomist Fri, 13 Jan 2012 04:00:38 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/npr-does-fluff-piece-for-private-equity#comment-14036 This is a helpful explanation. I'm wondering if it would also be useful for the media to address the issue of how hard it is to make real money---in reality performing real services and making real goods requires real effort. The major theme of financial engineering seems to be all about shifting numbers around and playing rules to tilt the numbers in a desired direction. But that activity is disconnected from the real value of producing real goods and services. PE firms would not be able to loot functional though imperfect companies of their value if they were actually relying on the value of those products to earn profits. And since it is very hard and can be very expensive to make real things, it makes sense that financial engineering would become all the rage since it can be easier to make money by sitting comfortably in a climate-controlled room (or on a balcony overlooking an ocean) and shifting numbers rather than doing heavy lifting. In the case of financial engineering the value is coming from the automation of computing capacities rather than production of a company's product. So just wanted to mention that, the concept of making real money has been blurred---it's interesting to become more aware of the distinctions among real work, real effort, real products, real earnings. - MB Fri, 13 Jan 2012 03:19:18 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/npr-does-fluff-piece-for-private-equity#comment-14034 [quote]Private equity companies absolutely do not have to increase the value of a company to make a profit. They can end up making a profit on their investment even if they take the company into bankruptcy and leave it much worse off than it was before the takeover.[/quote] Thanks to Whose Your Nanny Baker for clarifying how we - the One Percent Job Producers - achieved our economic position in life without dependence on the nanny state. We knew that competition drives resources to their highest valued use and now we know exactly how it took us to the top as well. Do continue the excellent work as we fire and hire our way to the top on behalf of everyone to achieve Pareto Efficient outcomes. You have choices. Make them. Fire Obama and hire Romney and run the country like a business. Stupid liberals. - izzatzo Fri, 13 Jan 2012 02:40:31 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/npr-does-fluff-piece-for-private-equity#comment-14031 Oooops. Millions not billions in paragraph 5. Might make someone think you were a Republican. - Robert W. Mann Fri, 13 Jan 2012 01:18:22 +0100