The Bain debate

Political Ads Don’t Tell Full Story on Private Equity

By JULIE CRESWELL, NYT

In an advertisement released this month by President Obama’s campaign, Mitt Romney and the private equity firm he co-founded, Bain Capital, are painted as vampires. They sucked the lifeblood out of GST Steel in the 1990s, which pushed it into bankruptcy, destroying jobs and eliminating pensions.

In a quick counterattack, the Romney campaign released an ad that highlighted the robust job growth at another Bain investment, the manufacturing company Steel Dynamics. The ad featured employees who said the investment had helped them achieve the American dream.

So, which version of private equity is true? The answer, of course, is both. The business of private equity firms is buying and selling companies, all done with the goal of earning big returns for themselves and their investors. Sometimes that means jobs are created; sometimes it means jobs are lost.

In fact, job creation was actually never part of the industry’s mission statement, just a nice happenstance if it occurred.

The world of private equity is a nuanced, complicated business that will never be fully captured in anybody’s ads this political season. Yet, despite the debate swirling around it, private equity plays a central role in the economy.

(More here.)