Venture Capital vs Vulture Capital

The big todo about whether Romney's work at Bain was good or bad for society is missing the whole point.  I guess I should expect this, but I always hope . . . .

Anyway, there are lots of different kinds of venture capital deals.  On one end of the spectrum are the ones that benefit society.   Investors come in, buy up a company that is at risk of going bankrupt (possibly laying off all the employees), merge it with a stronger company, and save it.  Some people may still get laid off, but it is fewer than would have if they didn't come in.  The investors are richly rewarded, but so are the owners of the other businesses and at least some jobs are saved.

At the other end of the spectrum are the truly evil ones that deserve the name vulture capital.  In these, the investors borrow a ton of money from banks, paying little of their own cash to run the company.  As owners, they pay themselves a special dividend to get their own money out right away.  Then if the company goes bust, they declare bankruptcy and the banks eat the losses.  If not, they still own 50% of the company or so, which is just gravy since they already got their original money out.  And with the load of debt the company now has (it is the company's debt, not the investor's), they often go under and all the workers lose their jobs.

Then of course there are a lot in the middle.  So if Romney did Type 1, he was a great business leader.  If he did Type II, he is the devil.  Most likely, he did a bunch of different kinds of deals in the middle - some good, some not so good.