Teamsters well know what happens when a private equity company takes over a profitable business. The private equity company siphons as much cash as it can from the business, fires its workers and then drives it into the ground.
That's pretty much what Mitt Romney did as CEO of Bain Capital -- before he became a politician 18 years ago.
Don't take our word for it. Here's what Bloomberg reported:
A Bloomberg News review of several Bain deals during Romney’s tenure found that not all of Bain’s investments were beneficial for workers. Several ran into trouble, dismissing hundreds of workers, filing for bankruptcy or facing lawsuits from shareholders who said they were misled by management.People who've actually worked in finance criticize the private equity industry as a whole. Zero hedge, for example, shows how private equity deals (aka leveraged buyouts, or LBOs) destroy companies by loading them up with debt, firing as many workers as possible and then kicking them to the curb:
One such example was Dade Behring Inc., a Deerfield, Illinois-based medical-testing company, where Bain cut at least 1,600 jobs after taking over the company.
Moody's has compiled a useful report, entitled "$640 billion & 640 days later: how companies sponsored by big private equity have performed during the U.S. recession." The track record is simply abysmal: Of the top 10 deals, only Hertz, HCA and First Data are considered "stable" which is actually saying a lot ("stable" by Moody's means these firms are likely about to have an alien burst out of their ribcage). ...Therefore one can say that virtually all of the blockbuster LBO deals are on the verge of collapse/bankruptcy/default/insolvency, etc.Teamsters General President Jim Hoffa wrote a terrific takedown of private equity firms in The Huffington Post last year. He's what he wrote,
...when financial services firms actually undermine our society's goal of economic growth, they should not be granted favors, privileges or protections. And now that tax season is over, it's a good time to remind people that private equity firms that destroy productive companies should not receive special tax treatment.
But they do. Private equity fund managers pay a much lower tax rate than ordinary Americans.
A loophole in the tax law lets them treat most of their income as capital gains, and so they pay a 15 percent tax rate on those gains. That's less than half the 35 percent rate that ordinary Americans pay on income from their paychecks.
And that's wrong. Private equity firms don't deserve special tax treatment because they choke economic growth by wrecking healthy companies.
They do it by draining a company's cash so it can no longer afford to pay decent wages, buy new machinery, invest in technology or compete in the marketplace. Nearly half of all companies owned by private equity firms in 2009 were on the verge of collapse, default or insolvency, according to Moody's Investor Service.
