Monday, May 7, 2012

Money for Nothing

Private equity mogul Mitt Romney claims he made his money the old-fashioned way, he earned it. Really? The traditional way for entrepreneurs to earn money is to put their own capital on the line, but Romney didn't do that. His personal risk was minimal, because he was putting other people's money to work instead of his own. Essentially he made money for nothing. He enjoyed nearly infinite leverage, but without the attendant risk.

If an investment went south it was other people who lost their money, not Romney or his private equity firm Bain Capitol. He collected his management fees and walked. If an investment went well Romney and Bain Capitol did very well indeed, though the workers at the business taken over usually did not. They often lost their jobs, or had their wages reduced, or their retirement plans wiped out.

Robert Reich explains all this and how it affects the rest of us in the following video clip.

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  1. Got it. Thank you, Panderbear, for walking us through this. Galling, isn't it!

  2. As I see it, making money isn't bad, it's the TAX LAWS that are bad!

    I wish he'd do a video on HEDGE FUNDS! They lobbied and conned Congress (of course Congress gets $$ from these hedge funds) and Congress willingly obliged the HF's cry that they "risk their own money". But they don't, they skim off their profits: if the HF loses money, they don't lose a penny of their own $$. Yet, they pay a special tax (far less than what we pay in income tax) when it's income for them!