Tuesday, July 10, 2012

Mitt Romney and the Vanity Fair report

BUD FOX: There’s no nobility in poverty anymore, dad.
— Wall Street (1987)

JAKE GITTES: Why are you doing it? How much better can you eat, what can you buy that you can’t already afford?

NOAH CROSS: The future, Mr. Gittes! The future!
— Chinatown (1974)

A NEW, exhaustive and well-written exposé by Nicholas Shaxson of Vanity Fair sheds sustained light on Romney’s financials where there hasn’t been much, as comprehensively, until now.

What’s revealed is a man whose acquisitive nature is almost rapacious; a mandarin of finance with a breathtaking blindness to the optics of his own campaign; a multimillionaire who’s been largely tone-deaf to the depth of the national economic despair.

Even excerpts from Shaxson’s reporting are illuminating.

... [T]here is a Bermuda-based entity called Sankaty High Yield Asset Investors Ltd., which has been described in securities filings as “a Bermuda corporation wholly owned by W. Mitt Romney.” It could be that Sankaty is an old vehicle with little importance, but Romney appears to have treated it rather carefully. He set it up in 1997, then transferred it to his wife’s newly created blind trust on January 1, 2003, the day before he was inaugurated as Massachusetts’s governor. ...

That’s not the only money Romney has in tax havens. Because of his retirement deal with Bain Capital, his finances are still deeply entangled with the private-equity firm that he founded and spun off from Bain and Co. in 1984. Though he left the firm in 1999, Romney has continued to receive large payments from it—in early June he revealed more than $2 million in new Bain income. The firm today has at least 138 funds organized in the Cayman Islands, and Romney himself has personal interests in at least 12, worth as much as $30 million, hidden behind controversial confidentiality disclaimers. Again, the Romney campaign insists he saves no tax by using them, but there is no way to check this.

Ed Kleinbard, a tax-law professor at the University of Southern California, told Vanity Fair that a mysterious Swiss Bank account that turned up in Romney’s 2010 returns, then vanished a year later after a Romney trustee closed it, “has political but not tax-policy resonance.”

The account, Shaxson observed, “like many other Romney investments […] constituted a bet against the U.S. dollar, an odd thing for a presidential candidate to do.”

Illinois Democratic Sen. Dick Durbin said it plain Sunday on CBS’ “Face the Nation”: “You either get a Swiss Bank account to conceal what you’re doing, or you believe the Swiss franc is stronger than the American dollar.”

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One of the more damning parts of Shaxson’s piece undercuts much of the Romney = Economic Savior meme that the campaign has been cultivating for months.

“His work at Bain was unquestionably good for himself and for Bain,” Shaxason writes, “but was it also good for the businesses he acquired, for their workers, and for the economy, as he claims?

“A report by Bain and Co. itself, looking at the period from 2002 to 2007, concluded that there is ‘little evidence that private equity owners, overall, added value’ to the companies they took over: nearly all their returns are explained by broad economic growth, rising stock markets, and leverage […][i.e., use of borrowed money, which magnifies returns, while off-loading the risks onto others].”

The recent news stories about Romney’s role in outsourcing jobs to China and India are problem enough. This report, Shaxson suggests, would put the lie to Romney’s reflexive claim that private equity concerns are the lever to an enhanced grassroots American economy.

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SO WHAT makes Mitt Romney so electable, anyway? Is it his net worth, the power of his own deep pockets? That confronts the reality of the campaign as it’s unfolded: To this point in the campaign, Romney has invested little of his own personal income in this quest for the presidency. He hasn’t had to. Buoyed by money raised from various Super PAC donors — people tied to Bain Capital, as well as hedge funds and private sector companies — Romney doesn’t have that much skin in the game.

He spent about $45 million of his own cash in the 2008 race; to this point, according to a report from the Center for Responsive Politics, Romney has spent what amounts to chump change — about $52,500 — of his own money for the 2012 nomination. This from a man who makes about $57,000 a day on investment income.

More couch-cushion money: ABC News’ Matt Negrin recently reported that Romney and his wife Ann donated $150,000 to a joint fund with the Republican National Committee.

“By doing so,” Negrin writes, “Romney avoids the charge that he's just a rich guy who's able to run for president because he can afford to. Instead he's perceived as just a rich guy who's able to run for president because his friends can afford to donate to his super PAC.”

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Is it his previous experience in government? His platform or his campaign’s biographical talking points don’t have that much to do with his previous elective office. The one unassailable electoral qualification Romney has — as a leader of citizens, not a leader of employees — is the qualification Romney runs away from.

What’s made him the most electable is his perceived business acumen. But ironically, his tax returns are more central to his claim to being a sound fiscal manager than he might have thought possible. We know what Romney’s done as a macro manager, wielding big budgets for Bain and the Olympics.

But what resonates with the American people is how well you communicate the grasp of the micro — in his case, the micro of his own finances. And Romney’s done all he can to make that an unknown, and that’s problematic. At the end of the day, there’s no way to know how good a money manager he really is until we do see his personal tax returns.

There’s good and recent reason to be suspicious. On Monday in an interview with Radio Iowa, Romney, responding to a question about the direction of his offshore holdings, said “I don’t manage them, I don’t even know where they are.”

Hard to be a good manager if you don’t know what you’re managing.

Honestly, you don’t know what’s worse: a man with so much money that he’s lost all ethical and patriotic perspective about where he puts it, or a man with so much money that he’s lost all knowledge of, vacated all responsibility for even knowing where his money is.

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Paul Krugman seems to understand what’s behind this — a level of ambition that’s outstripped its ethical underpinnings, a willingness to advance his own personal financial gain regardless of the possible impact to his reputation, or his prospects for winning the presidency as a man of his people.

“To the extent that Mr. Romney has a coherent policy agenda, it involves cutting tax rates on the very rich — which are already ... down by about half since his father’s time,” Krugman wrote in a New York Times op-ed on Sunday. “Surely a man advocating such policies has a special obligation to level with voters about the extent to which he would personally benefit from the policies he advocates.

“Yet obviously that’s something Mr. Romney doesn’t want to do,” Krugman wrote. “And unless he does reveal the truth about his investments, we can only assume that he’s hiding something seriously damaging.”

What the Vanity Fair report seems to confirm is what’s been floating in the campaign ether for years generally since 2008, and certainly for the months of the primary season: Mitt Romney is a world apart from the people he seeks to lead; that his reluctance to release his tax returns follows on his similar reluctance to drill down into his vaunted 59-point economic plan — to offer its particulars to voters on the campaign trail; that Romney’s main focus in this campaign (certainly between now and the August convention) is running out the clock, and releasing as few specifics about anything, as long as possible.

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And while David Plouffe and the others in the Team Obama war room ponder Romney’s exploitables, much of the message they’re trying to send to the electorate about Romney isn’t that complicated:

You can tell how someone will govern this country by his willingness to be forthright about what matters to this country, and his ability to connect with its citizens.

And the man with money in the Cayman Islands and Switzerland and Bermuda and who knows where else has a fundamental disconnect with his country. The man who promises to jump-start the American economy doesn’t trust the American economy enough to keep his money in the American economy.

That’s not just a disconnect. That’s potentially the disconnect.

Image credits: Vanity Fair logo: © 2012 Condé Nast Digital. Romney: Fox News. Romney 2012 campaign donations snapshot: Center for Responsive Politics/opensecrets.org. 

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