All the cash has been sucked from Simmons’ mattresses.

Is it any wonder we don’t trust Wall Street?

I saw it back in the 80′s up close and personal, when the debt was called “junk,” but the practice goes on and on and on. When credit markets are good, investors (called “private equity firms” or “merchant bankers” or “leveraged buy out firms” or the like among their peers and minions) will sell a company’s bonds to finance their purchase of the company, take fees for issuing those bonds, issue more bonds later on to take cash out of the company for themselves (and fees for the new issuance), and then, when the debt becomes to burdensome for the company, the purchasers of the bonds are left high and dry — that is, broke or, at best, with equity in a new, reorganized, and crippled company worth a fraction of what they paid for their bonds.

The latest victim? Simmons Bedding Company, the maker of the Simmons Beauty Rest Mattress. As the New York Times reports:

Simmons says it will soon file for bankruptcy protection, as part of an agreement by its current owners to sell the company — the seventh time it has been sold in a little more than two decades — all after being owned for short periods by a parade of different investment groups, known as private equity firms, which try to buy undervalued companies, mostly with borrowed money.

For many of the company’s investors, the sale will be a disaster. Its bondholders alone stand to lose more than $575 million. The company’s downfall has also devastated employees like Noble Rogers, who worked for 22 years at Simmons, most of that time at a factory outside Atlanta. He is one of 1,000 employees — more than one-quarter of the work force — laid off last year.

But Thomas H. Lee Partners of Boston has not only escaped unscathed, it has made a profit. The investment firm, which bought Simmons in 2003, has pocketed around $77 million in profit, even as the company’s fortunes have declined. THL collected hundreds of millions of dollars from the company in the form of special dividends. It also paid itself millions more in fees, first for buying the company, then for helping run it. Last year, the firm even gave itself a small raise.

Wall Street investment banks also cashed in. They collected millions for helping to arrange the takeovers and for selling the bonds that made those deals possible. All told, the various private equity owners have made around $750 million in profits from Simmons over the years.