POTUS led an LBO, remember?

Corey Booker is right that the Obama administration is acting absurdly and childish.

Corey Booker is right that this whole discussion of Bain Capital is nauseating.

Private equity is the dark side of capitalism in some ways. Such firms’ game is to catalyze creative destruction. Specifically: squeeze every ounce of productivity possible out of failing firms and dump them when the timing is right by either palming them off or taking them public.

Some firms might not have failed if not taken private. Some firms failed anyway. Not the point. There’s no reason to become mired in counterfactuals and fostering employment is not the goal of private equity. Some asshole discovered a number of years ago, not that many really, that you can  buy out companies, pile them on with debt, and that it was possible to make enough return in doing so to be profitable. Private equity was born.

Anyone who has worked with private equity, including yours truly, understands that these firms are willing to do what it takes to turn around a business, and often their greatest asset (from the standpoint of achieving their ends) is their ability to let people go remorselessly.

What intrigues me is that I think, in a way, Obama and Romney are on opposite sides of the issue from where they ought to be.

Romney’s experience at Bain helped him prove he is a capable manager and a bright man. He’s sharp. He is a rare example of a very rich boy who still earned most of his life’s wealth. That’s admirable enough. There’s no reason to lie about creating jobs through private equity. He’s pigeonholed now.

Our president, on the other hand, detests private equity only when it’s not being performed by the government — call it “public equity.” It’s ruthless when rich people invest in companies that restructure failing ones by in part laying people off. It’s heroism when the president unilaterally decides to make the American people equity holders in an operation to restructure the darling auto industry and to abuse the rule of bankruptcy law in the process. Taken at face value, the president’s stated positions are that private equity is inhumane and exploitative while an LBO of the auto industry designed to score political points is laudable.

And yet, despite maximizing political capital rather than monetary return, the LBO of GM did just fine. President Obama, and to be fair Tim Geithner, were leaders of one of the more successful LBO’s since the financial crisis.

Because Obama hates private equity, he can’t play that up. Because Romney loves private equity, he has to concede the auto bailout was successful. This is in spite of Obama supporting publicly-backed leveraged buyouts and Romney detesting them.


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