Willard's sweet dreams of a Capitol Bain

A speculative view of a consultant-heavy Romney Oval Office.

We've all heard the stories about Bain Capital and its uncanny ability to wring huge profit from an otherwise health company while simultaneously sending it and its workers down that treacherous road to massive debt and bankruptcy -- even if it was left standing in the end. These proved to be just one part of the Bain broadside against the American worker.

Over in another corner of world of high finance sits Bain Capital's mother ship Bain and Company, that multinational conglomerate where Mitt Romney cut his teeth as a high-dollar consultant. This other Boston-based firm wasn't the vulture Bain Capital had become, rather, it was a ready partner actually interested in bolstering the bottom line of corporations it advised.

Early on, the parent company collected its fees in the form of "success fees," equity stakes in client companies, thus it developed more symbiotic relationships with the boards it served. However, that early culture, classified as "unconventional" was in full swing when Mitt Romney came on board.

Anyone hunting the genesis of Romney's inability to speak openly of weighty matters need look no further than the tony Bain and Company headquarters, at the time located in historic Lexington.

In its early years, the firm operated under a shroud of secrecy that would have made Jason Bourne envious. The cult of "Bainies," as they were known, had little use for public marketing, preferring to cultivate much of its business in the privacy of corporate boardrooms. Partners never carried identifying business cards and clients were only mentioned by code name. it was under the tutelage of Bill Bain and company that Mitt learned the importance of addressing serious matters in the isolation of "quiet rooms.'

Author David Owen writes of Bain,

"The secrecy is part of consulting machismo, creating a valuable aura of mystery. It also helps prevent outsiders from assessing -- or even detecting -- what strategic consultants do.

The covert style is part of the myth Bain has worked hard to create about itself, and it's a key ingredient in the team loyalty Bill Bain cultivates in his employees."

Why Bain and Company Matters

While much can be written about the cultural oddities of Bain and its industry competition, very serious consideration must be given to the Republican candidate's plans for them. During a 2007 editorial board meeting with Rupert Murdoch's Wall Street Journal, Romney was asked for details about how he would reduce the size of government if elected. His response?

"I would probably have super-cabinet secretaries, or at least some structure that McKinsey would guide me to put in place." He seems to catch a note of surprise in his audience, but he presses on: "I'm not kidding, I probably would bring in McKinsey. . . . I would consult with the best and the brightest minds, whether it's McKinsey, Bain, BCG or Jack Welch."

That comment seemed "to startle the editors and left Mr. Murdoch visibly taken aback" and prompted the Journal to snarkily headline its report of the encounter: Consultant in Chief.

Although Bain cut its teeth on improving its healthier clients' bottom line, there is a category of client that doesn't fare quite as well -- large corporations facing bankruptcy proceedings. Not just Bain partakes in extracting the assets of these wounded companies but a host of scavengers masquerading as outside services swoop in to pick clean the carcasses.

To see how the process works, let's consider Illinois-based tech company Comdisco. In 2001, it fell on hard times and went through the process of bankruptcy protection. The holders of common stock realized between 3 and 37 cents on the dollar once the large stakeholders made back 85 percent of their investments. Basically everyone lost but the little guys lost big.

You know who didn't lose a dime and actually raked in big bucks? The horde of professional services leeches. A Chicago Tribune report breaks it down:

"Consultants from the blue-chip firm McKinsey & Co., for instance, get a $550,000 monthly fee for strategic advice. Comdisco's top-drawer investment bankers, Goldman Sachs, get $250,000 per month, plus "success fees" for completed deals that could climb into the tens of millions of dollars.

Comdisco's lead attorneys in the case, Skadden, Arps, Slate, Meagher & Flom, charge hourly rates between $445 and $670 for partners' services. Already, the firm has billed Comdisco for $7.1 million in work done during the three-and-a-half months before the company filed for bankruptcy."

In the year after the process began, Comdisco's fees to advisors, and consultants jumped from $2 million to $29 million. According to one analyst and longtime stockholder, "Assuming every professional billed at $500 an hour, that means 58,000 hours were spent working on the case," the paper reported adding that he called the fees "ridiculous."
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A hunger for pensions

When the consultants are summoned in a classic corporate bankruptcy, some of the earliest casualties are wages, benefits and pensions. While pensions specifically have special protections, it is generally known that freezing contributions and leaving future ones to chance becomes the PBGC's problem; thus pensions are treated as liabilities to be among the first jettisoned rather than a sacred compact with workers to be protected to the bitter end.

If this all sounds familiar, it should. It's the steel skeleton in the Bain Capital closet and the template by which the Romney-led firm extracted its wealth.

So what impact would a consultant-run country have on the lives of American citizens? After all, consultants help drive practically every facet of our daily lives. As Time Magazine's Michael Kinsley explained in 2007:

"McKinsey consultants are restructuring the educational system of Israel, advising insurers on dealing with Hurricane Katrina, comparing the performance of Indian and American companies, reforming the North Carolina Department of Transportation. Even Time, Inc.. is a client. And a 36-year-old former McKinsey consultant, Bobby Jindal, has just been elected Governor of Louisiana."

After all, hasn't government at all levels flirted with the idea of efficiency experts and management consultants for decades? Indeed it has. Heck current White House occupant President Barack Obama even created a Chief Performance Officer position. So truthfully, how is Romney's proposition any different than that enacted by past presidents?

As then-recent Bryant University grad and Independent blogger Joe Pelletier aptly said at the time:

"Though I support Romney's plan to utilize consultants as mediators among the magnitude of distress and disorganization in government, I fear his desire for "super cabinets" and the opportunity for excessive power. Unlike business, government is a function of its citizens, not it's leaders. Our democratic system provides us with checks and balances against the powers of our elected officials, so that we can ensure all decisions are fair, balanced, and in the best interest of the people. A cabinet with consultants possessing the same horizontal powers as official appointed cabinet positions will only create confusion ..."