…the ACLU shines a light on a harrowing “debtors’ prison” system in Ohio — one that violates both the United States’ and the Ohio constitution. Ohioans are being jailed for “as small as a few hundred dollars,” despite the constitutional violation, and the economic evidence that it costs the state more to pay for their jail sentence than the amount of the debt.
- Matt Taibbi: This is how private equity deals work, and this is what most people don’t understand. When a company like Bain wants to take over a company, let’s say, like KB Toys, what they do is — it’s very similar to the process of getting one of those no-money-down mortgages — you put down a tiny amount of money, in the case of Bain, you put down about 5 percent of his own cash, $18 million. He financed the other $302 million that he got, and what he did was he went to a bank and you’re borrowing against the assets of a company you don’t own yet. So what you do is you say to the bank …
- Ahmed Shihab-Eldin: Which is legal.
- Matt Taibbi: Which is totally legal. But what you do is you say to the bank, ‘I’m going to take over this company,’ or ‘I’m going to take over some company, and when we do that company is going to be indebted to you.’ So they borrow $300 million. With that money, and his money, you buy a controlling stake in the company that you’re trying to take over, and once you do that, the debt that you yourself took out becomes the debt of the company that you have taken over. And this is very poorly understood by most people. Now there’s the other problem, now if you’re KB Toys, you’ve borrowed $300 million and you owe the bank. And you haven’t done it to buy new equipment or open new stores or do research and development, all you’ve bought with that $300 million is …
- Ahmed Shihab-Eldin: Debt.
- Matt Taibbi: Yes, and the privilege of being managed by Mitt Romney, that’s really all you’ve bought.
- Ahmed Shihab-Eldin: Privilege.