During the second presidential debate, Mitt Romney returned to one of the original themes of his campaign – namely that his financial experience at Bain Capital qualifies him to solve the problems of a nation plagued by unemployment and debt. Ridiculed and reviled in millions of dollars of advertising by his political rivals, from Newt Gingrich to Rick Perry to President Obama, Romney’s private sector career remains his central argument for electing him on November 6.
Today Peter A. Joseph, a respected and experienced figure in the private equity business as well as a civic activist, scrupulously debunks that argument on the New York Times website.
Over the past three decades, Joseph founded two private equity firms, gaining considerable insight into Romney’s success at Bain as well as the differences between political leadership and investment savvy. While not unsympathetic to the pressures Romney faced at Bain or his industriousness in overcoming them, Joseph says those financial triumphs have no special relevance to the Oval Office.
The role of the private-equity financier, he notes, has very little to do with being a “job creator”:
A businessman seeking to optimize profitability will look to lower labor costs by reducing headcount, whether through technology, outsourcing, or rationalization. This is right out of the basic playbook. It is not the mission of the financier to create jobs. In fact, his mission is often to do just the opposite.
Joseph gently tweaks Romney for indulging in harsh anti-government rhetoric when so much of his and Bain’s wealth derive from investing the pensions of teachers, cops, firefighters and other public-sector employees. (He might also have noted Romney’s venomous hatred of the very unions whose contractual power enabled him to get his hands on their accumulated assets.) He also suggests that Bain and other private-equity outfits have ripped off their clients, including the workers, through inflated fees:
Romney constantly derides big government, but government is made up of individuals, whose pension funds helped make him and Bain unimaginably rich. There is no doubt that these pension funds sought the higher returns offered by private-equity investing. But as the private equity business grew, the public pension funds and other capital providers have gotten the short end of the stick. They have not completely shared in the value of the franchise that is created in part by their investment in the industry. It seems odd to hear Romney criticize big government without any acknowledgment that he has made much of his fortune managing the retirement funds of many public employees.
Joseph concludes by contrasting the qualifications of a private-equity financier with what is required from a president of the United States, which don’t have much in common:
Romney’s financial success is admirable and enviable, but it came by following the mantra of increasing cash flow, cutting jobs and minimizing taxable income. Though the Obama campaign has tried to exploit this with millions of dollars in anti-Bain ads, the real issue is how Romney’s experience relates to a president’s need to balance budgetary responsibility with the heavy lifting required to address our collective concerns, our common obligations. We have heard a lot about pragmatism and practicality, but I can assure you that compassion and broader social concerns rarely make it into an investment memo. If Romney really wants to push his Bain experience, Americans will have to decide whether the answers to the problems facing them are best provided by a financier president.