The Difference Between Private Equity, Venture Capitalism, and Vulture Capitalism
With Romney and Obama painting such different pictures of these concepts, let’s try to nail down what they really mean. Another term that is often used but not quite as often as it once was is the term, LBO, or Leveraged Buy Outs.
Venture Capitalism is the easy one. If you have money in a 401K or a mutual fund or if you own stock in a company, in a simple way, you’re a venture capitalist. You’re venturing your capital for part ownership in a company. This is really small potatoes, though. The more accurate term is when someone with money buys part of a company, usually in the way of stocks, so the company will have capital to succeed as a business.
This is what capitalism is all about. This is good for America when it’s regulated appropriately.
Private Equity and Vulture Capitalism and Leveraged Buy Outs
Private Equity and Vulture Capitalism and Leveraged Buy Outs are all pretty much the same thing. For a good video on this, check out Robert Reich’s Eight Steps. In a nutshell, a vulture capitalist will find a successful business and buy it by taking out a loan and assigning the loan to the business. Then, they strip and squeeze the business until nothing is left. Then they file bankruptcy and steal the employee pensions or if the company doesn’t go broke, they sell it off and make a 20% commission on the sale, all the while skipping out on their income taxes and sticking you and me with the bills.
The scam used to be illegal but thanks to Reagan, it is now just fine. It used to be called leveraged buy outs but it made such a bad name for itself that they decided they needed to change the name. Now they call it Private Equity firms.
Romney’s Bain was a vulture capital company, an LBO. A Private Equity firm. Once or twice they would invest outright, as venture capitalists, but in most cases, they were just out to pump and dump companies and you and I got stuck with the unemployment insurance payments, welfare payments, pension payments, and the taxes for the bankrupt companies and for tax breaks for the vultures.
Don’t let Romney fool you. His company was not out to create jobs. It was out to destroy them and steal the pensions.
Oh, yes, he wants to run America the same way.