Thursday, January 19, 2012

venture/vulture capitalism

There was an especially helpful discussion of this issue on PBS last night where Judy Woodruff interviewed Josh Kosman and Stewart Kohl. Kohl is head of a Canadian Venture Capital group that has an much more respectable record than that of Bain Capital. Kosman is one of the most articulate and well-informed critics of venture capitalism that I have heard on the topic.

One aspect of venture capital that is especially troubling to me is those cases, exemplified by Mitt Romney's Bain Capital, in which the debt incurred by Bain to purchase a company - usually one that is not in need of any help, but is unable to defend against the hostile takeover - is then vested somehow in the company itself, so that the purchaser (Bain Capital) can basically swallow up the assets of the healthy company, often including the pension plans of the workers at the purchased company, leaving that company to pay off the debt incurred when Bain Capital purchased them. Statistically speaking, many of these companies go bankrupt, while the venture capital group reaps multimillion dollar profits.

In my view, this practice should be highly illegal. However, it is not. It is, rather, venal, hypocritical, and devastating to the jobs and pension plans of the employees of the company taken over.

I cannot believe that anyone in his right mind can think of such an odious vulture as Mitt Romney in positive terms. The prospect of his ascending to power is abjectly horrifying.