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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsMilken went to prison for 22 months...Mittens? Not so much
Mitt and the junk bond king
http://www.boston.com/news/politics/articles/2012/06/24/the_story_behind_mitt_romneys_work_with_michael_milken_it_was_fun_while_it_lasted/
By Michael Kranish and Beth Healy
Globe Staff / June 24, 2012
It was at the height of the 1980s buyout boom when Mitt Romney went in search of $300 million to finance one of the most lucrative deals he would ever manage. The man who would help provide the money was none other than the famed junk-bond king Michael Milken. What transpired would become not just one of the most profitable leveraged buyouts of the era, but also one of the most revealing stories of Romneys Bain Capital career. It showed how he pivoted from being a relatively cautious investor to risking his reputation for a big payoff. It is one that Romney has rarely, if ever, mentioned in his two bids for the presidency, perhaps because the Houston-based department store chain that Bain assembled later went into bankruptcy. But what distinguishes this deal from the nearly 100 others that Romney did over a 15-year period was his close work with Milkens firm, Drexel Burnham Lambert Inc. At the time of the deal, it was widely known that Milken and his company were under federal investigation, yet Romney decided to go ahead with the deal because Drexel had a unique ability to sell high-risk, high-yield debt instruments, known as junk bonds.
The Obama campaign has criticized the deal as showing Romneys eagerness to make a profit at any cost, because workers lost jobs, and challenged Romneys assertion that his business background best prepares him for the presidency. Romney, meanwhile, once referred to the deal as emanating from the glorious days of Drexel Burnham, saying, it was fun while it lasted, in a little-noticed interview with American Banker magazine. The glorious part, for Romney at least, was that he used junk-bond financing to turn a $10 million investment into a $175 million profit for himself, his partners, and his investors. It marked a turning point for Romney, according to Marc Wolpow, a former Drexel employee who was involved in the deal and later was hired by Romney to work at Bain Capital.
Mitt, I think, spent his life balanced between fear and greed, Wolpow said. He knew that he had to make a lot of money to launch his political career. Its very hard to make a lot of money without taking some kind of reputational risk along the way. Its just hard to do. It doesnt mean you have to do anything illegal or immoral, but you often have to take reputational risk to make money.
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Milken went to prison for 22 months...Mittens? Not so much (Original Post)
SoCalDem
Jul 2012
OP
Nye Bevan
(25,406 posts)1. I think Mitt is finally beginning to realize the true meaning of "reputational risk" (nt)