What's wrong with private equity? Debt. What Mitt Romney and Sam Zell have in common.
A lot of the debate over Mitt Romney's time at Bain Capital has been focused on how many jobs he did or didn't create, did or didn't destroy. That's understandable, given that we're in a time of sustained high unemployment, but I'm not sure that tallying lost jobs really gets to the heart of what might be objectionable about Romney's business practices. The problem is debt. In the case of the shuttered Kansas City steel mill at the center of the debate, the chain of events is pretty clear: • Bain Capital bought the steel mill in October 1993, putting up just $8 million of its own money to gain majority control—even though the total purchase price was $75 million. • The next year, Bain had the company issue $125 million in bonds—debt used to pay Bain itself a dividend of $36 million in 1994. Understand again: Bain made a quick profit on its investment, but it wasn't by helping the steel mill earn greater profits—but by having the mill take on a