How Mitt Romney Puts His Money Where Obama's Mouth Is
This story is part of a package on Mitt Romney's Bain holdings. For the full report, go here.
When it comes to the economy, Romney's plan is all about gutting regulation and reducing government spending. When it comes to using his gargantuan wealth to make even more money, it's a different story. The investor letters for some of the Bain funds Romney owns stakes in provide clear-eyed analyses of the economy that are in many cases directly at odds with Romney's vision.
For instance: Romney has between $1 million and $5 million parked in Prospect Harbor Credit Partners LP, a $1.2 billion (as of 2010) fund. According to a 2010 investor letter from its advisors, the tenuous economic recovery underway in 2010 was at risk of a Republican victory in the midterm elections:
With an economy that is still highly dependent on fiscal support, the outcome of the midterm elections could lead to gridlock that would have major ramifications for the economy. An expiration of stimulus would be a significant fiscal drag.
Let that one sink in: An expiration of stimulus would be a significant fiscal drag. Here is Romney's position on the stimulus: "The largest one-time careless expenditure of government money in American history." Here's another: "That stimulus didn't work. That stimulus didn't put more private-sector people to work."
The same letter cites a Democratic talking point as a worrisome economic indicator: "Consumer consumption activity differs increasingly between the 'haves' and the 'have nots.'"
In this confidential 2010 Sankaty Advisors PowerPoint presentation on "Market Opportunities" in the "Altered Landscape," financial industry regulation is actually cited as a positive force on the "New Market Reality."
"Regulation will improve liquidity and tranparency," one slide reads. Here is Romney's position on financial regulation: "Obama-era laws and regulations must be rolled back, and pre-existing ones must be carefully scrutinized." He has pledged to repeal Dodd-Frank, the financial regulatory reform that his money managers credit with improving transparency.
Not all of Romney's investment managers are so enamored of Obama's policies, though. Viking Global Equities LP, a $6.8 billion hedge fund Romney is invested in via a Goldman Sachs "fund of funds," warns potential investors in its August 2011 confidential offering memorandum of the dangers of Dodd-Frank:
The Dodd-Frank Act directly affects the Partnership by requiring registration with the SEC and mandating additional new reporting requirements, including, but not limited to, position information, use of leverage and counterparty and credit risk exposure. Until the SEC implements the new reporting it is unknown how burdensome such new reporting requirements will be. The Dodd-Frank Act may also affect the Partnership in a number of other ways. The Dodd-Frank Act creates the Financial Stability Oversight Council (the "Council") that is charged with monitoring and mitigating systemic risk. As part of this responsibility, the Council would have the authority to subject banks and other financial tirms to regulation by the Federal Reserve Board, which could limit the amount of risk-taking engaged in by the Partnership. In the area of derivatives, the Dodd-Frank Act requires that swaps and security-based swaps be traded through an exchange with few exceptions. This may limit the Partnership's ability to hedge certain risks or otherwise pursue certain investment interests. ln addition, because the Dodd-Frank Act requires that dealers and other swap counterparties post initial and variation margin, counterpartics to swaps and security-based swaps may pass along those obligations and require that the Partnership post initial and variation margin. lt is impossible to predict what, if any, changes in regulation applicable to Partnership, the General Partner, the markets in which they trade and invest or the counterpartics with which they do business may be instituted in the future. The effect of any future regulatory change on the Partnership could be substantial and adverse.
If Mitt Romney wins, he has pledged to clear that right up.
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