Republican presidential front-runner Mitt Romney has made his private sector experience a central part of his argument on the campaign trail. The former CEO of Bain Capital says his experience in “the real economy” demonstrates that he knows how to create jobs and is thus best qualified to lead the country during tough economic times. But with much of the public still seething at Wall Street for its role in the financial crisis, Romney’s experience earning millions running a private equity firm could turn out to be a liability.
Heading into Tuesday’s New Hampshire primary, several of Romney’s GOP rivals blasted him as a Wall Street-style fatcat who left a trail of failed companies and lost jobs in his wake. The fact that Republicans are using language straight out of the Occupy Wall Street playbook — Democrats have been making this argument for months — shows how desperate Romney’s rivals are to wound him.
Both Newt Gingrich and Rick Perry have seized on media reports detailing Romney’s record as co-founder and CEO of Bain Capital, where he worked from 1984 to 1999. Romney’s tenure running the company coincided with the growth of the private equity industry and the emergence of a new type of popular villain: the ruthless corporate raider as exemplified by Gordon Gekko in “Wall Street.” Private equity firms like Bain identify under-performing or struggling companies and use investors’ capital or borrowed money to acquire an ownership stake. Romney and his colleagues sought to apply management principles to cut costs and streamline operations in order to unlock value and make money for themselves and their investors.
Romney was an extremely successful private equity CEO, delivering $2.5 billion to Bain investors who had invested $1.1 billion, according to a survey of 77 deals under Romney’s tenure by The Wall Street Journal. Along the way, Romney built a personal fortune of as much as $250 million. But several of Bain’s investments went sour and led to significant job losses or bankruptcies at the target companies. In one example cited by Reuters, Bain acquired a majority stake in a struggling Kansas City steel mill. Although Bain made at least $12 million by merging the mill with another facility in South Carolina, the end result for the workers was bleak.
Less than a decade later, the mill was padlocked and some 750 people lost their jobs. Workers were denied the severance pay and health insurance they’d been promised, and their pension benefits were cut by as much as $400 a month.
What’s more, a federal government insurance agency had to pony up $44 million to bail out the company’s underfunded pension plan. Nevertheless, Bain profited on the deal, receiving $12 million on its $8 million initial investment and at least $4.5 million in consulting fees.
Campaigning in New Hampshire over the weekend, Gingrich blasted Romney as a corporate vulture more interested in extracting value for himself and his investors than building great businesses. “Those of us who believe in free markets and those of us who believe that, in fact, the whole goal of investment is entrepreneurship and job creation, would find it pretty hard to justify rich people figuring out clever, legal ways to loot out a company,” Gingrich told reporters, in comments cited by Bloomberg.
The attack presages a campaign ad set to air in South Carolina, the next primary state after New Hampshire, funded by wealthy Gingrich supporter and Las Vegas casino magnate Sheldon Adelson, in which Romney is portrayed as a Gordon Gekko-style corporate raider. The video is scathing, declaring Romney “more ruthless than Wall Street,” and accuses him of “a pattern exploiting dozens of businesses.”
Rick Tyler, a former Gingrich aide who is now advising the political action committee running the ad, “Winning Our Future,” piled on to Romney. “Mitt Romney is not a capitalist,” Tyler said in comments cited by Bloomberg. “He is a predatory corporate mugger. If you ever wonder why so many manufacturing jobs are overseas, you need to look no further than Mitt Romney. He can claim thousands of jobs created, only those jobs were created in Mexico and Southeast Asia.”
For his part, Romney has pointed to successful Bain investments under his watch, such as Staples, Domino’s Pizza and Sports Authority, each of which grew and added workers. Romney has acknowledged that some of Bain’s targets failed, but maintains that the firm’s investments led to a net increase of 100,000 new jobs. That claim is contested, however, in part because neither Romney nor Bain will release the number of layoffs at Bain investments. FactCheck.org looked at Romney’s 100,000 jobs-created claim and found it to be “unproven” and “highly debatable.”