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Mitt Romney’s Federal Bailout: The Documents

Highlights from the records of the FDIC’s rescue of Bain & Company

bain capital romney

To uncover the true story behind the Federal Deposit Insurance Corporation's $10 million bailout of Mitt Romney and Bain & Company, Rolling Stone made a Freedom of Information Act request that forced the FDIC to release more than 500 of pages of records. (The government, which was owed more than $30 million in all, had become a creditor to Bain when it took over the failed Bank of New England in early 1991.)

Prior to releasing the documents, the FDIC allowed Bain & Company to scour and redact the records. Dozens of pages were blacked out entirely, on Bain's claim that these nearly two-decade-old records contain secret "commercial or financial information." Most pages looked something like the image at left.

bonuses paid

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The terms of the 1991 restructuring deal required that all of Bain's creditors agree before repayment terms could be modified. Several creditors were unwilling to give in to demands for a bailout. In short: They called Romney's bluff.

Today, as a presidential candidate, Romney is running under a banner that declares: "We have a moral responsibility not to spend more than we take in." But Romney operated under a different moral calculus at the helm of Bain & Company.  Even though the firm was deeply in debt and losing money, Romney decided to place executive compensation above fiscal responsibility, paying out big bonus checks beginning in April 1992. (The Romney campaign refused to disclose whether Romney himself received a bonus.) The move was all the more egregious because Bain's top performers had just been awarded a large equity stake in the company to keep them invested in the success of the turnaround effort.

back in default

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As a result of Romney's reckless bonus spree, Bain & Company was soon on the rocks.

In May 1992, an analyst warned the FDIC that Romney's firm had defaulted on the revenue targets of the 1991 loan agreement.

no value going concern

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Attempting to cut its losses, the FDIC explored the option of selling its stake in Bain & Company. But by August 1992, analysts reported to the agency that Bain & Company had "no value as a going concern."

bonus replay

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By December 1992, Bain & Company had returned to its creditors, proposing a new bailout with even less favorable terms: The firm asked to repay its debts at "up to $.30 on each dollar."

If creditors didn't agree? Management would once again raid the company's coffers to pay themselves fat bonus checks.

romney principal

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According to Romney legend — and to this official history on Bain's website  — "Mr. Romney left Bain & Company in 1992 to return to Bain Capital."

But the government documents obtained by Rolling Stone reveal that Romney remained in an official capacity with Bain & Company well into 1993, and that he was intimately involved in finessing the firm's bailout.

This March 11, 1993 document detailing the final proposal for FDIC's bailout of Bain lists "Mit Romney" [sic] as the sole entry under "principals" for the consulting firm.

write down

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In the end, the FDIC — in concert with other creditors — capitulated, agreeing to Romney's demands to do away with much of Bain's debt.

The terms of the final proposal are discussed in the same March 11, 1993 document.

bain will fail

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The FDIC ultimately agreed to give Bain & Company a $10 million bailout (in the form of "debt forgiveness"). The reason: analysts working for the agency — through a company called RECOLL — believed that Romney's firm would otherwise "fail," and the government would see very little money from the firm's dissolution after Romney doled out the final round of bonus pay.

romney letter

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To secure his bailout, Romney wrote a personal appeal on Bain & Company letterhead dated March 23, 1993, assuring balky creditors that his latest scheme would lead  the firm back to "long term financial stability."

The government records show that Bain & Company's final agreement with the FDIC was signed just a week later, on March 31, 1993.

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