Building equity with the voters

Americans got an introductory crash course on the private-equity business this week, as Newt Gingrich directed friendly fire at GOP front-runner Mitt Romney for his long and lucrative tenure at the head of the LBO shop Bain Capital.

One would also think it would serve as a great narrative for the White House to use in a fall campaign against Romney. But not so fast. Painting Romney’s Bain Capital as a one-stop chop shop isn’t going to be as easy as many of President Obama’s supporters might expect.

The trouble is that when faced with the biggest private-sector challenge of his administration — how to save the US auto industry — Obama turned to a financial engineer, not an auto engineer, to be his car czar. That man, Steve Rattner, said as much in his book on the auto bailout last year.

“This was not a managerial job,” wrote Rattner. “It was a restructuring and private-equity assignment.” And it was Obama handing out the instructions. What’s more, a 2010 report by the special inspector general for the Troubled Asset Relief Program, which invested in GM, named Bain as one of several private equity firms that the Obama folks hired for advice on how to restructure GM.

We all know what happened next: Taxpayers put about $80 billion into Detroit; tens of thousands of jobs were lost as auto dealerships around the nation were forced to close; new management was put in; costs were slashed; GM filed for bankruptcy; and later it went public again, re-listing on the New York Stock Exchange. Pretty much a textbook case of Private Equity 101.

Little wonder then that Rattner found it necessary to opine about Bain last week.

“Bain Capital is not now, nor has it ever been, some kind of Gordon Gekko-like, fire-breathing corporate raider that slashed and burned companies,” Rattner wrote in a piece for Politico, calling the firm’s record “extraordinary.”

It’s unlikely that an Obama booster such as Rattner would gush so publicly about Bain if the White House weren’t having second thoughts about a full assault on Romney’s tenure at the firm. Time will tell, but right now, score one for Team Romney.

keenan@email.com