Yesterday Newt Gingrich went for Mitt Romney’s jugular on the private equity issue and it seemed like everyone on the internet was watching the trailer for a documentary about Romney’s Bain Capital, a soul-less corporate raiding holding company.
After all of that, we get what Newt Gingrich’s strategy could mean for Wall Street —a nice solid tongue lashing.
But not so fast. The New York Times reports that Gingrich has his own ties to the private equity industry, through storied firm Forstmann Little, no less. Gingrich sat on the firm’s advisory board and met with executives and other board members twice a year to advise the company on the health care industry.
You may recall that Forstmann Little was one of the players in the legendary RJR Nabisco deal. RJR’s board decided to take the company private, and it was, at the time, the largest private equity deal of all time. It set all of Wall Street off on a ruthless race that inspired the book, Barbarians at the Gate.
That phrase (“barbarians at the gate”) comes from Ted Forstmann, the man who founded Forstmann Little in 1978. The barbarians he was referring to were the corporate raiders knocking at RJR Nabisco’s door. Forstmann remained critical of his industry until he died last year.
That said though, there’s no denying the firms prominence in the industry. Forstmann was friends with lots of Republican politicians (Donald Rumsfeld even ran General Instruments while it was owned by Forstmann Little) and owned companies in industries from entertainment to technology.
Bottom line: The Romney/PE tie has already been solidified, and though this attack may not make Gingrich the front-runner, he seems happy to use it just to take Romney down. Or, as he put it in New Hampshire yesterday… this is a test (via Politico’s Mike Allen):
“[I]f somebody is going to crumble, they better crumble before the nomination. You don’t want to end up in September with a nominee who has been untested and can’t stand it. And it’s pretty clear to me that at some point in the next week or so, Governor Romney is going to have to have a fairly long press conference and he’s going to have to answer a lot of questions. I mean, it’s not complicated. Read The Wall Street Journal [on Bain Capital] this morning. … [T]he fact is there are legitimate questions. Those legitimate questions have been surfacing in places likes The Wall Street Journal and Reuters and what have you. There are going to be more of those questions, and at some point Governor Romney is going to have to answer them.”
As for Gingrich’s tie to private equity, it remains to be seen if anyone will pay attention, but it might be hard for Gingrich to explain this connection while bashing Mitt Romney for Bain Capital at the same time.
Then again, stranger things have happened.