How Job-Killing Republican Economic Philosophy Took Down the Twinkie

Let’s get this straight. Hostess was in trouble long before vulture capitalist hedge funds and equity firms came to roost over the carcass of one of America’s signature brands. The shift, by much of the American public, away from junk foods to more healthy nutrition, combined with Hostesses’ failure to diversify and leverage its brand put Hostess in a tough situation. But that didn’t kill Hostess. And it wasn’t the workers, whom hedge funds controlling Hostess blamed for the company’s downturn. It was the hedge funds and equity firms who decided their own enrichment was more important than responsibly transforming this iconic American corporation.

By 2009, Hostess had declared bankruptcy and was seeking a way to re-establish itself through changing and challenging market conditions. It was then acquired by the private equity firm Ripple Holdings and hedge funds Silver Point Capital and Monarch Capital. These firms then took company capital and credit that could have been used to diversify the brand and expand into new territory to instead enrich management through stock shares buybacks and through cuts in workforce benefits. In total, Hostesses’ 18,500 workers suffered through layoffs and three phases of pay and benefits reductions while executive compensation doubled and company development and competitiveness stagnated.

The equity firms holding Hostess were trying to force workers to endure another 8% cut in pay and a crippling 17% cut in benefits when, on November 9th, workers held a strike in an attempt to compel management to behave responsibly. Instead, equity and hedge fund holders of the company decided to break the company up and sell off its parts for even more profit. In the end, the vulture capitalist holders of Hostess blamed those they victimized — Hostesses’ workers.

But it seems that the equity firms and hedge funds now controlling Hostess can’t even play fair with the bankruptcy. Today the US Department of Justice filed suit against Hostesses’ vulture capitalist owners for increasing executive pay by another 75% — in essence, rewarding executives for taking the company into bankruptcy.

These executives and hedge fund managers are the very people Republicans are fighting to keep taxes low for. The so-called ‘job creators.’ These ‘paragons of industry’ who got rich wrecking an American icon and socking it to American families all at the same time. Likely, many of them feel entitled to pay no taxes for their looted spoils to the federal government who might actually do something useful with the money — like hire a scientist or a teacher. Just let these people do what they please, let them keep all the money they took, and everything will be great, republicans say.

See how well that worked out for the company that was Hostess and the people who worked there?

Links:

http://www.chicagotribune.com/business/breaking/chi-hostess-seeks-bonuses-for-key-manager-in-liquidation-filing-20121119,0,22735.story

http://themoderatevoice.com/168438/twinkynomics-a-case-study-in-romneynomics/

http://www.washingtonpost.com/business/hostess-moves-to-liquidate-as-us-seeks-trustee-control/2012/11/19/46e98922-326d-11e2-92f0-496af208bf23_story.html

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