Comments on: How private equity firms make billions by driving companies into bankruptcy http://boingboing.net/2009/10/06/how-private-equity-f.html Brain candy for Happy Mutants Sun, 19 May 2013 05:24:00 +0000 hourly 1 http://wordpress.org/?v=3.4.1 By: noen http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606474 noen Wed, 30 Nov -0001 00:00:00 +0000 #comment-606474 <i>"Is this what political theorists mean by "late stage capitalism"?"</i> Why, yes it is. Can you guess what comes next? Sadly, the only "new economic model" around is the Chinese model of totalitarianism plus capitalism. “Is this what political theorists mean by “late stage capitalism”?”

Why, yes it is. Can you guess what comes next? Sadly, the only “new economic model” around is the Chinese model of totalitarianism plus capitalism.

]]> By: Anonymous http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606225 Anonymous Wed, 30 Nov -0001 00:00:00 +0000 #comment-606225 While I can't condone this activity, the fault lies with whomever is dumb enough to loan money to these people. While I can’t condone this activity, the fault lies with whomever is dumb enough to loan money to these people.

]]> By: ill lich http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-607305 ill lich Wed, 30 Nov -0001 00:00:00 +0000 #comment-607305 "Well, I lost my job, but at least somebody got to maximize their profits, so that's good, right?" “Well, I lost my job, but at least somebody got to maximize their profits, so that’s good, right?”

]]> By: chris http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606049 chris Wed, 30 Nov -0001 00:00:00 +0000 #comment-606049 uggh I woke up to the new format, and I hate it! uggh I woke up to the new format, and I hate it!

]]> By: yer_maw http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606051 yer_maw Wed, 30 Nov -0001 00:00:00 +0000 #comment-606051 see: Manchester united Liverpool FC Borrowing money to buy a company then transferring the borrowed money to the company you just bought doesnt seem like a very risky endeavour. see:

Manchester united
Liverpool FC

Borrowing money to buy a company then transferring the borrowed money to the company you just bought doesnt seem like a very risky endeavour.

]]> By: wil9000 http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606310 wil9000 Wed, 30 Nov -0001 00:00:00 +0000 #comment-606310 Oh for christ's sake! Nothing about the scumbags at the top surprises me anymore. None of it makes sense, none of it can make sense. If people actually knew what was going on in the "financial services industry", there would be an awful lot of guys in suits being tarred and feathered and run out of town on a rail. I don't mean to be alarmist, but these people are getting paid obscene amounts of OUR money for robbing US all blind. Oh for christ’s sake! Nothing about the scumbags at the top surprises me anymore. None of it makes sense, none of it can make sense. If people actually knew what was going on in the “financial services industry”, there would be an awful lot of guys in suits being tarred and feathered and run out of town on a rail. I don’t mean to be alarmist, but these people are getting paid obscene amounts of OUR money for robbing US all blind.

]]> By: bcsizemo http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606314 bcsizemo Wed, 30 Nov -0001 00:00:00 +0000 #comment-606314 You know it's times like these that I wouldn't mind my government sticking it's finger into the money pie if you will. As a peon, how am I suppose to challenge such corporate take overs or they subsequent pillaging of them? This is one of the few areas that I could see big government actually helping the economy. It's this kind of mentality that needs to be contained and destroyed. A company should fail from it's own doing, not from the greed of the new owners. You know it’s times like these that I wouldn’t mind my government sticking it’s finger into the money pie if you will. As a peon, how am I suppose to challenge such corporate take overs or they subsequent pillaging of them? This is one of the few areas that I could see big government actually helping the economy. It’s this kind of mentality that needs to be contained and destroyed. A company should fail from it’s own doing, not from the greed of the new owners.

]]> By: noen http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606070 noen Wed, 30 Nov -0001 00:00:00 +0000 #comment-606070 Somehow, this seems appropriate: <a href="http://www.youtube.com/watch?v=FgMn2OJmx3w">Corporate Cannibal</a> Somehow, this seems appropriate:

Corporate Cannibal

]]> By: phisrow http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606080 phisrow Wed, 30 Nov -0001 00:00:00 +0000 #comment-606080 I eagerly await an otherworldly explanation of how this mechanism actually represents efficient capital allocation, rather than a subtler variation on classic smash_and_grab. I eagerly await an otherworldly explanation of how this mechanism actually represents efficient capital allocation, rather than a subtler variation on classic smash_and_grab.

]]> By: dr.hypercube http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606081 dr.hypercube Wed, 30 Nov -0001 00:00:00 +0000 #comment-606081 Unfortunately, the NYT couldn't bring itself to use the real name for this behavior: looting. http://www.nakedcapitalism.com/2009/10/quelle-surprise-new-york-times-reluctant-to-call-private-equity-looting-by-its-proper-name.html http://www.scribd.com/doc/13579076/Looting-Akerlof-Romer Unfortunately, the NYT couldn’t bring itself to use the real name for this behavior: looting.

http://www.nakedcapitalism.com/2009/10/quelle-surprise-new-york-times-reluctant-to-call-private-equity-looting-by-its-proper-name.html

http://www.scribd.com/doc/13579076/Looting-Akerlof-Romer

]]> By: gollux http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606339 gollux Wed, 30 Nov -0001 00:00:00 +0000 #comment-606339 An additional thought, Alan Greenspan put it so well: <blockquote>I made a mistake in presuming that the self-interest of organizations, specifically banks and others, was capable of protecting their own shareholders and the equity in the firms...</blockquote> Self-interest splays out in so many different ways, in the end, remember that it is the self-interest of those wielding the power, not the shareholder, the customer or the worker that counts... An additional thought, Alan Greenspan put it so well:

I made a mistake in presuming that the self-interest of organizations, specifically banks and others, was capable of protecting their own shareholders and the equity in the firms…

Self-interest splays out in so many different ways, in the end, remember that it is the self-interest of those wielding the power, not the shareholder, the customer or the worker that counts…

]]> By: gollux http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606091 gollux Wed, 30 Nov -0001 00:00:00 +0000 #comment-606091 Heh, the American people are pretty stupid and put up with this stuff. Had it happen to a local industry that actually was doing quite well, but you don't want that to happen to your company because it makes for easier takeover. Asset rich, average stock price, low liabilities, all things that a company with a good long-term market for their product might think are good management practice also make them easy to be acquired. Killed off 220+ jobs as the plant was closed, assets and standing stock sold off for maximal short term profit. Hey, hey, it's the American Way! Heh, the American people are pretty stupid and put up with this stuff. Had it happen to a local industry that actually was doing quite well, but you don’t want that to happen to your company because it makes for easier takeover. Asset rich, average stock price, low liabilities, all things that a company with a good long-term market for their product might think are good management practice also make them easy to be acquired. Killed off 220+ jobs as the plant was closed, assets and standing stock sold off for maximal short term profit. Hey, hey, it’s the American Way!

]]> By: avraamov http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606348 avraamov Wed, 30 Nov -0001 00:00:00 +0000 #comment-606348 Frog: 'Why did you sting me? now we'll both drown' Scorpion: 'Because I'm a scorpion.' Frog: ‘Why did you sting me? now we’ll both drown’

Scorpion: ‘Because I’m a scorpion.’

]]> By: dr.hypercube http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606094 dr.hypercube Wed, 30 Nov -0001 00:00:00 +0000 #comment-606094 @phisrow - I think the proper nomencature is bustout - http://www.youtube.com/watch?v=5ydqjqZ_3oc - there is zero diff between Paulie and the PE criminals, as far as I can see - other than the risk of doing time. @phisrow – I think the proper nomencature is bustout – http://www.youtube.com/watch?v=5ydqjqZ_3oc – there is zero diff between Paulie and the PE criminals, as far as I can see – other than the risk of doing time.

]]> By: Omir The Storyteller http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606106 Omir The Storyteller Wed, 30 Nov -0001 00:00:00 +0000 #comment-606106 Wow, I used to do this all the time in Railroad Tycoon. Who knew you could do it in real life? (Well, besides Jay Gould, James J. Hill and THL) Wow, I used to do this all the time in Railroad Tycoon. Who knew you could do it in real life? (Well, besides Jay Gould, James J. Hill and THL)

]]> By: millionpoems http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606112 millionpoems Wed, 30 Nov -0001 00:00:00 +0000 #comment-606112 An island. As if that would be enough protection from the zombies! An island. As if that would be enough protection from the zombies!

]]> By: mmechanic http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606117 mmechanic Wed, 30 Nov -0001 00:00:00 +0000 #comment-606117 Things get even worse when you combine private equity with something like affordable housing... here's a piece Mother Jones ran recently on that very thing: http://bit.ly/liyI1 Things get even worse when you combine private equity with something like affordable housing… here’s a piece Mother Jones ran recently on that very thing:

http://bit.ly/liyI1

]]> By: DWittSF http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606638 DWittSF Wed, 30 Nov -0001 00:00:00 +0000 #comment-606638 I suggest we trade Goldman Sachs to the Chinese to pay down our debt. They know how to deal with business criminals over there. I suggest we trade Goldman Sachs to the Chinese to pay down our debt. They know how to deal with business criminals over there.

]]> By: zikzak http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606155 zikzak Wed, 30 Nov -0001 00:00:00 +0000 #comment-606155 Is this what political theorists mean by "late stage capitalism"? It seems like the free market has gotten to a point where the best opportunities for profit involve destroying value, rather than creating it. Time for a new economic model? Is this what political theorists mean by “late stage capitalism”? It seems like the free market has gotten to a point where the best opportunities for profit involve destroying value, rather than creating it. Time for a new economic model?

]]> By: Pooky tha quant http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606414 Pooky tha quant Wed, 30 Nov -0001 00:00:00 +0000 #comment-606414 "the fault lies with whomever is dumb enough to loan money to these people." Never was a truer word said, one of the myriad of problems was that the people writting loans were paid based on how much they gave away meaning. They had no vested interest in the quality or probabilty of repayment. People respond to incentives. “the fault lies with whomever is dumb enough to loan money to these people.”

Never was a truer word said, one of the myriad of problems was that the people writting loans were paid based on how much they gave away meaning. They had no vested interest in the quality or probabilty of repayment. People respond to incentives.

]]> By: tp1024 http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606174 tp1024 Wed, 30 Nov -0001 00:00:00 +0000 #comment-606174 Oh well, nothing that you couldn't have seen a thousand times over in East Germany, after West German companies took over about 85% of East German companies (and subsequently shut them down, serving the consumers from West Germany instead - job losses were horrific, about ~80% of jobs were lost). But of course, that was aaallll because Communist companies were all not viable and people in the east too lazy to work ... When will people start to learn that sometimes the obvious is just obvious? Oh well, nothing that you couldn’t have seen a thousand times over in East Germany, after West German companies took over about 85% of East German companies (and subsequently shut them down, serving the consumers from West Germany instead – job losses were horrific, about ~80% of jobs were lost).

But of course, that was aaallll because Communist companies were all not viable and people in the east too lazy to work …

When will people start to learn that sometimes the obvious is just obvious?

]]> By: WalterBillington http://boingboing.net/2009/10/06/how-private-equity-f.html#comment-606430 WalterBillington Wed, 30 Nov -0001 00:00:00 +0000 #comment-606430 This happens because of the cash that individual deal-makers can pull from the deals. They work on a "carry" system, which rewards them for the increase in the value of the funds they represent. That's a purely financial measure, which makes it liable to manipulation. As indicated, the game is to convert an asset to cash. Some firms do, some firms don't. Private Equity is powerful and greedy, but is in second place to the investment bankers in terms of financial societal impact - they're the bankers' clients. This happens because of the cash that individual deal-makers can pull from the deals. They work on a “carry” system, which rewards them for the increase in the value of the funds they represent. That’s a purely financial measure, which makes it liable to manipulation.

As indicated, the game is to convert an asset to cash.

Some firms do, some firms don’t. Private Equity is powerful and greedy, but is in second place to the investment bankers in terms of financial societal impact – they’re the bankers’ clients.

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