APPRAISING THE RUBES: What happened at Bain!

TUESDAY, MAY 22, 2012

Part 2—Sharpton explains private equity: In today’s column, David Brooks does a very rare thing—he pretends to explain what “private equity” means.

In the course of discussing Mitt Romney’s career, every pundit uses the term—and very few voters haveany idea what the puzzling term means. So it goes as the liberal world connects, or fails to connect, with average American voters.

In the past few weeks, this problem has come to a head. Barack Obama has been running ads attacking Mitt Romney’s conduct at Bain Capital, a so-called “private equity” firm. These ads resemble ads from 1994, when Ted Kennedy used this approach to beat Romney for the Senate.

As he closes his column, Brooks raises a fairly dumb question about the reprise of such ads:
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BROOKS (5/22/12): In a country that desperately wants change, I have no idea why a party would not compete to be the party of change and transformation. For a candidate like Obama, who successfully ran an unconventional campaign [in 2008] that embodied and promised change, I have no idea why he would want to run a campaign this time that regurgitates the exact same ads and repeats the exact same arguments as so many Democratic campaigns from the ancient past.

Brooks seems to be very clueless. Why is Obama running those ads? Duh! Because they worked in the past! But this does raise a genuine question—will the ads, and the theme they present, work again this year? Will they work outside Massachusetts, on a national basis?

We have our doubts. This raises the question we’ll look at all week—do we liberals understand the way the world looks to the average voter? Do we really understand the great unwashed, the yokels, the yahoos, the rubes?

Just yesterday, Obama said, “This is what this campaign is going to be about,” referring to Romney’s record at Bain. How well are liberals explaining this topic to voters?

In our view, not very well! Let’s start with the way Brooks describes Bain’s conduct in today’s column.

In this passage, Brooks discusses Bain’s conduct with respect to GST, a Kansas City steel mill the company has been accused of “looting” (though only by us). Very few voters will turn against Romney based on Brooks’ account:

BROOKS: Last week, the Obama administration unveiled an attack ad against Mitt Romney’s old private equity firm, Bain Capital, portraying it as a vampire that sucks the blood from American companies...

The Obama attack ad accused Bain Capital of looting a steel company called GST in the 1990s and then throwing its workers out on the street. The ad itself barely survived a minute of scrutiny. As Kimberly Strassel noted in The Wall Street Journal, the depiction is wildly misleading.

The company was in terminal decline before Bain entered the picture, seeing its work force fall from 4,500 to less than 1,000. It faced closure when Romney and Bain, for some reason, saw hope for it in 1993. Bain acquired it, induced banks to loan it money and poured $100 million into modernization, according to Strassel. Bain held onto the company for eight years, hardly the pattern of a looter. Finally, after all the effort, the company, like many other old-line steel companies, filed for bankruptcy protection in 2001, two years after Romney had left Bain.

This is the story of a failed rescue, not vampire capitalism.

Yikes! If voters accept that account, it’s hard to believe that they’ll turn against Romney. Indeed, this account almost makes it sound like Bain lost money trying to help GST. Bain “poured $100 million into modernization,” Brooks reports (citing Strassel), the admiration clear in his voice. But despite “all the effort” by Romney and Bain, GST eventually failed.

Based on this account, why would any sensible person think GST had been “looted?” Indeed, Brooks makes it sound like Bain was involved in some sort of charity scheme!

Of course, when Reuters described this same episode at the start of the year, it told a different story. According to Reuters, Bain was taking large profits and fees from GST even as the company limped toward its eventual death. Most strikingly, Bain was looting GST’s pension fund, according to the Reuters report.

“The U.S. Pension Benefit Guaranty Corp...determined in 2002 that GS [Bain] had underfunded its pension by $44 million,” Reuters reported, four months ago. Reuters noted that the PBGC, a federal entity, had to bail out the underfunded pensions, though workers still lost large chunks of their pensions due to Romney’s looting.

$44 million! This morning, Brooks doesn’t mention the pension fund when he tells his stirring tale, debunking the claims of looting. He doesn’t say that this is why some folk have used the term “looting” to describe Romney’s conduct. But then, we liberals rarely raise such concerns as we stumble and fumble along, pretending to analyze Romney’s conduct.

Consider the utterly discussion conducted last night by Al Sharpton. (To watch the whole segment, click here.)

Let’s be fair! For the bulk of the past two months, Sharpton has been running a journalistic scam, spreading reams of disinformation about the killing of Trayvon Martin. Perhaps he was so busy making shit up that he hasn’t had time to arrange his thoughts concerning Romney and Bain.

But Ed Rendell wasn’t so involved, and he joined Sharpton last night in the type of useless discussion we liberals tend to present about Bain. The analysts screamed and covered their ears as these used-up old fellows argued with Republican Michael Steele about Romney’s conduct at Bain.

Remember those apocryphal angels, the ones who dance of the heads of pins? Even they screamed in protest last night at the tedium of the discussion. Romney’s looting wasn’t mentioned—except when Rendell seemed to defend it. Instead, these worthless old burnouts argued with Steele about the precise number of jobs Bain may or may not have produced.

We apologize for the length of the excerpt which follows. But the angels danced till they dropped as Sharpton and Rendell helped pave Romney’s road to the White House:

RENDELL (5/21/12): Can I ask a question, Michael? Do we know, and I think this is an honest and fair question, what the net [job gain] was? You say that Governor Romney did in fact produce some jobs in those 78 percent [of companies that didn’t go bankrupt]. But, do you know what the net is? Because Governor Romney said during his campaign against Ted Kennedy the net was 10,000. And now he’s saying the net was 100,000. Do we know what the net is?

STEELE: That is something that the campaign has put out and the campaign has updated that information and they’ve been very clear about the specifics on that, and they’re saying, they’re standing behind their number.

SHARPTON: The campaign is saying “thousands” now. They started with 100,000. And we—Governor Rendell is asking what I’m asking. I gave a chart of facts. If you have a chart of facts where he created jobs, then we would have a chart of facts. Then fine. But let’s not say we have something we don’t have.

STEELE: Well no, Reverend. I don’t have a chart of facts with me. But I think—

(CROSSTALK)

RENDELL: But Michael, don’t you think that’s an obligation of the Romney campaign to put out each deal, how many jobs were created, how many jobs were lost?

STEELE: No. My view is, no. I don’t think that’s an obligation to put out each deal and to get into specifics—

(CROSSTALK)

RENDELL: Go ahead. Go ahead.

STEELE: Thank you. I don’t think that that is necessarily, you can maybe cite one or two jobs, just like the reverend had four companies up there, yes, cite two, three, four companies as an example. The facts are already out there that a vast majority of the companies that Bain helped and assisted over the years that, during Romney’s tenure, 78 percent or more survived, went on, were very prosperous and productive, and jobs were created and people kept their jobs.

(CROSSTALK)

SHARPTON: We can agree with that, Michael, that he should give examples, if he’s going to call himself a job creator? Let’s not get away from the fact the president, Mr. Rendell, me—he called himself a job creator. All we ask—

(CROSSTALK)

STEELE: So let me ask you this. Is the president a job destroyer because of the fact that we still have 23 million Americans who don’t have their jobs? About 3.5 million of whom lost their jobs during his tenure? Yes, three million have got their jobs back, but—

SHARPTON: The answer is the president—

(CROSSTALK)

STEELE: You want to play with the facts, let’s play with the acts.

SHARPTON: Let me answer you. The specifics is, for 26 consecutive months jobs have been created.

STEELE: Yeah. For some, not all.

SHARPTON: I ask you to show me where Romney created jobs.

STEELE: For some, not all. And I said yes he did, for a lot of folks out there he has created jobs.

SHARPTON: Where? Where?

RENDELL: In fairness—and Rev, let me make this point. In fairness, you say 78 percent of those companies survived, and they did, and I’m sure that’s true.

SHARPTON: But we don’t know if they did more jobs, less jobs. We don’t know what that means.

RENDELL: They may have survived taking them down from 380 jobs to 175 jobs. So we need to know the facts.

Good God. On and on these burnouts went, arguing on the narrowest possible terms about the number of jobs which were lost versus the number of jobs which were gained. At some places, Bain may have survived by going from 380 jobs to 175, Rendell finally noted.

At this point, angels threw themselves off the heads of those pins, hoping to kill themselves in the fall. Question: Do you think voters will be moved this way?

Sorry. We do not.

Can we talk? Everyone knows that companies sometimes go out of business. In the standard example, very few people are still employed by buggy-whip manufacturers. To our ear, it’s unlikely that voters will be moved by the claim that some of the companies Bain took over may have lost 205 jobs. They may have started with 380 jobs, ended with 175!

Especially in the wake of our recent disasters, voters know that companies sometimes lose jobs. They know that companies sometimes go under. By way of contrast:

How about the fact that Bain was underfunding (“looting”) those pension funds, even as it was taking large profits and fees from those looted companies? How about the fact that Bain made the federal government bail them out, restoring part of these looted pensions? Just a guess: Knowing the yokels as we do, we would guess that the average voter would be surprised and very displeased to hear something like that.

But good God! The one time Rendell mentioned the looting, he said it was legal and proper!

RENDELL: When you look at the deals, the deals where the two that have been described in these commercials were companies were eventually put into bankruptcy, workers lost a substantial portion of their pension and health care. And investors took out millions of dollars, in some cases tens of millions of dollars in some cases.

We have to try to determine if that is an ethical way for businesses to proceed. I know it’s legal, it’s proper, and nobody is knocking private equity. We need private equity. But private equity has got one goal and that is to make the greatest return for your investors.

Really? It’s “legal and proper” to underfund pensions? We have to “try to determine” if that is an "ethical" way to proceed? Four months after the Reuters report, Rendell still seems to be in the weeds concerning this part of the tale.

He and Sharpton spent the whole segment arguing in very narrow terms about jobs lost versus against jobs gained. But they still had no clue how to proceed about this apparent “looting.”

By the way, everyone knows where Romney got that large, and increasing, jobs number. Whatever one may think of his claims, he is counting jobs produced at companies like Staples (89,000 jobs right there)—and the number of jobs at Staples has grown in the years since he fought his losing battle with Kennedy. Is something gained when players like Sharpton and Rendell build a whole segment around this non-mystery? Or maybe the Rev has been so busy spreading bogus facts that he doesn’t know the real facts about this.

For ourselves, we will only say this:

We think it’s unlikely that voters will be moved by narrow debates about numbers of jobs. Voters don’t have any idea what “private equity” is—and they assume that some companies fail. Last night’s discussion may have felt good to us liberals, safely ensconced in our tribal cocoon. But we don’t think it got the overall project real far.

For ourselves, we’d like to see someone fully explain the apparent looting of those pensions. To us, that sounds like very bad conduct—and we think it would sound the same way to the average voter. Will liberals get off the heads of those pins and start to meet average folk where they live? This leads to a larger question:

Do liberals understand the rubes, the yokels, the yahoos, the crackers, the great unwashed? It’s clear that some of us enjoy mocking this lesser breed.

But do we understand the voters? And how hard do we try?

Tomorrow: Dionne does (somewhat) better on Bain