I realize that I tend to conflate the PE and VC, and I’ll bet that I’m not the only one who makes this error. Unfortunately, this error lends PE a ‘policy cache’ that it doesn’t actually deserve; PE is assumed to be far more innovative than its actual role in the economy would justify. (I suppose somewhat like mistaking a mortician for an obstetrician, if I might be so frank.)

This leads to policy and public opinion muddles.

The debt financing point comes from a piece by Merrill Goozner, a crack journalist who knows this stuff very well (underlying source: http://leeds-faculty.colorado.edu/bhagat/LBO-VC.pdf), and the second–the fact that the tax system subsidizes debt–from a Brookings paper linked in my post.

This leaves me with a question — do PE firms ever receive a ‘tax rebate’ for incurring vast amounts of leverage?
Second question: where did Dr. Bernstein come by the 60 – 90% stat?

FWIW, I personally appreciate the courteousness with which this topic was raised: I don’t view Romney as intentionally evil. I view him as a True Believer in financial capitalism. He appears to believe that using Other People’s Money to saddle companies with debt — and then extract a share of profits which he off shores to the Caymans as his ‘cut’ — is ‘capitalism’, and it certainly does involve creative uses of capital.

I am not being snarky to state that I think Romney personifies the apotheosis of the GOP’s (and Blue Dog Dems) political-economic ideology of the past 20+ years, and I believe the conversation starting to take place about Bain Capital and the role of PE (and finance) in the US economy is a critically important topic for the nation.

If it is true that PE firms can debt-finance 60 – 90% of their purchases — which is actually simply a form of paying yourself a handsome fee to use Other People’s Money (OPE) in order to load a third party down with unmanageable debt — then Americans need to clearly understand that process.
Because it’s my view that this kind of economic parasitism helps explain larger problems in the US economy in recent decades.

I believe that the way in which people make their money matters a great deal, both for their own lives and the health of their communities.

If that 60 – 90% statistic is accurate, that has enormous implications for HOW Romney made his money (even before he off shored so much of it), which is an economic and political issue that needs much more discussion.
Here’s hoping…

This ties very neatly (but not nicely) with one of the scariest things I ever heard from a Presidential candidate: last week, Mitt Romney commented on the Chase losses with:

The $2 billion JPMorgan lost, someone else gained.

In other words, the economy is a zero-sum game. So what kind of President sees the US (or world) economy as one where for every man’s hand is set against the rest? And what does he mean to bring to that country, or that world?