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“Unintended Consequences” author Ed Conard on the misconceptions about Mitt Romney and his work at Bain Capital.
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The troops joining me now former managing director of Bain Capital and -- It was written a new look described by some of the national media as the most hated book of the year for its defense of the one person sat.
Said easier right there unintended consequences why everything you've been told about the economy is wrong I certain reading this today -- It's really fascinating read your very controversial.
-- a lot of the issues we talk about on the show from a different -- view.
Fascinating but let's talk about that Obama at -- -- -- some of it here.
And I'm good paying job that you can support raise a family on his hugely important.
That's stop with the sale of the plant today capital.
So they're talking about a chemical GSE assuming -- fracture.
Which I think it's probably bought when the steel industry in this country was in the toilet -- yes -- Mitt Romney yeah -- jobs killer weapons.
Well I don't speak for Bain Capital and I'll speak for myself and I was -- Bain Capital at the time they bought two steel companies in the early 1990s.
This is one of the two companies.
The other one which was a Greenfield facility we've built from scratch -- now employs 6000 people when was the fifth largest us steel company left in the United States.
But over the course of the 199050%.
Of the steel industry went out of business.
We spent a hundred million dollars and ten years working on this company trying to make it successful it was put up for sale originally will be bought it.
Because was in the process of being shut down we tried to make it successful we weren't able to make it successful 50% of the industry wasn't success hard and so.
Criticism.
Is that that Bain Capital and companies that do what -- does come -- they strip out the assets they take the money out of it and they let these companies fail -- respond.
-- if it was only that obvious as a way to make profits as if you could stay in business very long with a strategy like that.
I think one of the biggest misnomer about Bain Capital is that -- it is very focused on the long run and in order to be successful in business you have to satisfy your customers first and foremost.
And second of all your investors and he also your investors include.
Lenders for example as well when you do that by making companies stronger and get him to grow and when the people investors come behind you look forward into the future.
They see a stronger more successful future.
Then when you bought the company and -- willing to pay.
And -- during those years had a lot of financial success what's interesting about your book is that you who.
Back to the hilt the 1% you say the 1% is important it's key it's critical to this economy why.
Sure I really defend innovation and I think innovation does have a certain effect but.
I show you that the most talented people in the United States have been far more successful than our counterparts in Europe and Japan.
And our economy has grown a lot faster as a result we grew over 60%.
From when the Internet was -- to the financial crisis.
France good about thirty something percent Germany grew -- 20% Japan grew at about.
16% we created forty million jobs on a base of a hundred million employees they grew about -- 15%.
Maybe 20% at the high end.
In terms of employment we put far more people to work than those economies ever did we.
Our 1% has been much more productive in the argument that it's not helping the middle class is is almost laughable.
But middle class incomes have been going down -- were gaining no traction.
For people who are right in the middle of the income -- yeah I think there's a lot of.
-- I don't know what the right word is but it is certainly a lot of work to try to dissuade people and the success of the middle class so.
You know a lot of that report comes from picketing -- but but.
They avoid aid looking at things like changes and household sizes tax rates on people.
Non taxpaying come so there are other demographics of the workforce they do a lot of things to make the numbers look as bad as it can possibly make them.
All right well one -- the -- you talk about the book that I -- -- violently disagree with you about is you seem to be a big fan bank bailouts how comp.
Well I think there's two issues that banks face and we should differentiate between the two of them so they make loans and they lose money they got to pay every nickel that that loss but there's a second issue that the banks -- And that is that depositors can withdraw their money from the banks.
And they can withdraw them from all banks we have a 30% drop in real estate prices and institutional depositors withdrew their money.
But magnitude the size of those would draws about one point five trillion dollars.
Way bigger than the loan losses that that that were incurred on sub prime finance.
That's really what takes down our banking system and if we hold banks responsible for withdraw -- they have no choice but to leave money sitting in the vaults of the available when that.
Depositors come to -- to withdraw the money if we do that.
We'll get a slower growing economy with much higher employment.
JPMorgan Chase I'm sure you saw there are lots.
Which really isn't that big and when you look at their entire assets right I mean 2.2 trillion vs two billion not a big -- to be huge difference sure.
But a lot of people -- reminded.
Of the worst of the worst years in 20072008.
Should there be some more regulation on these banks to make sure the taxpayers are not backing these banks when they make stupid bets.
Well I did think their -- I don't think anybody would argue that there doesn't need to be regulation on banking banking is a risky business largely because it's the vehicle through which we borrow short term savings in London law so we're always running this risk that people can withdraw their money in the banking system will.
Will collapse what I say in the book is let's stop -- -- ourselves.
The government is making the guarantees we're just not charging for the guarantees and so instead what happens is the Fed -- the interest rate to zero.
They dare anybody to use the short term deposits as -- nobody learned their lesson all the money sits -- and we end up with slow growth and high unemployment that strategy is working.
A lot of strategies that are working you've got to come back and talk to us about more pleasure having you on the show really appreciate it thank you for have.
