1/10/12

Mitt Romney, Private Equity and Politics

As most people know, Mitt Romney made a lot of money at Bain Capital, a firm he founded.

What most people don't know is what private equity is and what Bain Capital does.  Bain is a private equity company which basically buys distressed companies using leverage in hopes of selling them in the future for a profit.  That profit is a capital gain and thus currently taxed at 15%, not the 35% most people would pay.  

During the course of 'managing' the companies that were acquired, often times people are let go aka fired and of course, sometimes everyone involved makes out pretty well.

The other republican contenders are jumping on this opportunity to paint Mitt as an elitist who cares nothing about the people they fire and are interested in only profit for themselves (and the investors).

Mitt can probably weather this storm but private equity will be in the spotlight until after the election.  Watch for Gordon Gekko and "greed is good" analogies.

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