It is called Creative Destruction.

Here is how it works.    Delaware Liberal and Wilmington Trust (now gone) make a bid to buy DelawarePolitics. Net.   They get help from the News Journal, WGMD, and WDEL.  Together they come up with $50 which gives them a 51% voting share of Delaware….  Once they have voting control over,  they fan out to banks, investment houses, and borrow money on DelawarePolitics fine name… They get $50 dollars from Hube.  They get $50 dollars from Duffy.   They get $50 dollars from Jack Markell.  They get $50 dollars from Tony DeLuca.  They get $50 from Steve Newton.  They get $50 from the ShopRite manager off Marrow’s Road.  They get $50 from Ernie Lopez.  They get $50 from Rick Jensen.  They get $50 from that guy selling papers on 11th and Market…..   So, how much did they get?   $450 for a company that was only worth $100.

The board then moves $450 to be paid out in dividends.   $450 gets divided by the 5 entities that went in with $10 and each gets $90.   Net profit $80.

Now, Delaware politics (only worth $100) must pay back on a timed schedule the $450 in loans it took out.  Assuming  it pays $1 per month to each entity, it needs to come up with $9 every month.   Before the takeover it was a profitable firm just chugging away at  earnings of $5 a month…  Now, the consortium led by Delaware Liberal, is screaming at Delaware Politics to come up with $5 dollars more every month…  David Anderson lays off Frank Knotts.  $1 dollar saved… David lays off Tennessee Walker; another dollar saved.  David Anderson lays off Pat Fish… Another dollar saved… But .. without those colorful writers, DelwarePolitics slips down in market share… No one reads Delaware Politics.  What used to be a $5 a month company is now a $3 a month company…  A  $3 a month company which has to pay $9 a month back….

It sues for bankruptcy.  As DelawarePolitics gets liquidated, the computers get sold, (worth $10 by now) .  So, all nine lenders, Hube, Duffy, Jack, Tony,  Steve, ShopRite man, Ernie, Rick, paper man, who put in $50, get back $1 from the first payment, and $1.10 from the sell of DelawarePolitics assets…   In other words, they are short $48….

But not the 5 investors.  Since they moved the money to dividends, they are protected and none of that money gets touched by the bankruptcy court.  It is their property and not that of the corporation, and is therefore not acquirable…..

So Delaware Liberal,  gets rich… Just like Mitt Romney….

This is how Bain Capital makes money.  This is not a job grower….

Is there any fairness in a system where a group of people can borrow a bunch of money to buy a company and pay themselves millions of dollars in dividends and fees, while the company itself ends up bankrupt and its employees lose their jobs, health insurance and pensions?   According to Romney in the debate, it is unAmerican…. NOT to do so….