Bain Capital has been used as a political weapon against Mitt Romney since 1994, but now his opponents might be rethinking ads about attacking him for his time at the private-equity firm as the ads are being criticized by some Democrats as well as Republicans.
President Obama planned to set the political tone for the week with a new ad about an Indiana company that was bought by Bain and then shuttered, as the firm made millions of dollars and workers lost jobs. The biggest problem with the online video: Even Democrats say it attacks the business of private equity too much.
"If your main argument for how to grow the economy is, 'I knew how to make a lot of money for investors,' then you're missing what this job is about," Obama said of the presidency at a news conference on Monday. "This issue is not a distraction. This is what this campaign is going to be about."
On Monday, the campaign was about Obama's allies turning against the ads. Firefighting Newark, N.J., Mayor Cory Booker defended Bain and said he's "uncomfortable" with the ad. Former Rep. Harold Ford said he agreed with Booker. Ex-car czar Steven Rattner had already denounced the ad campaign against Bain.
Obama adviser David Axelrod said in a TV interview that Booker was "wrong" to denounce the ads, but one well-connected person in the finance world, who wished to remain anonymous, said that the effort to demonize the private equity firm was starting to backfire.
Booker, the person said, has been cheered privately by Democrats in private equity and in Congress who want the Obama campaign to abandon its strategy of running against a type of business.
"Barack Obama did the same thing with GM that Romney and Bain did with other companies, so I don't see how Obama can criticize him, because he told us it was the right thing to do for GM," said Chris Whalen, an investment banker who ran the bank-rating firm Institutional Risk Analytics.
Romney argued in the primary campaign that he created thousands of jobs while at Bain, though his campaign won't take the blame for jobs that were lost at companies in which Bain invested if those jobs were lost after Romney left the firm to run the Olympics in 1999. The Obama campaign says that if Romney can point to his time at Bain as a business qualification to be president, then it should be able to unearth the negative sides of the business.
Private-equity firms aren't supposed to create jobs; they're supposed to make money for their investors, which to a large extent include pension funds and university endowments. The companies in which they invest are sometimes on the brink of failure to begin with, and are likely to go bankrupt without outside help. These risky investments often include making decisions like cutting costs and jobs.
But in the little-understood world of private equity, Obama has seized upon a basic formula -- Romney and Bain plus companies equals some lost jobs and millions for Romney -- to argue that he's unfit for the Oval Office.
Defending the Bain ad, Obama spokesman Ben LaBolt said the campaign isn't "questioning the purpose of the private-equity business as a whole."
"Why did Romney and his partners succeed even if the company failed?" LaBolt asked rhetorically on a conference call.
Probably because private-equity firms don't necessarily rise and fall with the companies in which they invest. Finance experts explained that faced with a decision over bankruptcy, those firms are obligated to protect their investors, not the workers at the company. Pumping more money into a company that has shown signs of failure isn't as smart a move business-wise as cutting losses to save investors money.
That might not be good politics and it might not create jobs, but that's what private-equity firms do, a reality that the Obama campaign doesn't mention in its videos.
"In order to have a market economy, you have to have failure," Whalen said. "And yeah, some people may have lost jobs, but hopefully other people gained jobs."
Bain said in a statement on Monday that it has been "focused on growing businesses," and that the Indiana plant in Obama's ad failed four years after the firm stopped controlling it.
Obama suggested at his press conference on Monday that his negative attacks on Romney and Bain are unlikely to halt.
"Republicans attacked my old boss Max Cleland, who was sitting in a chair with no legs, one arm and a Silver Star for service in Vietnam as a man we couldn't count on to defend the country," said Democratic strategist Jamal Simmons, "and they want to squeal about discussing Romney's business record?"