Steven Rattner knows a lot about politics, and he certainly knows a lot about private equity and Wall Street.
That’s why his defence of Mitt Romney’s days at Bain in Politico today is so interesting. Rattner was the lead Treasury Department auto czar under President Obama, but he’s spent most of his career on Wall Street. He founded private equity firm, Quadrangle Group, was an investment banker for Morgan Stanley and Lazard (among others), and is now the chairman of Willet Advisors.
That said, he knows what he’s talking about when he says that Romney’s tenure at Bain, while worth investigating, should not be used to attack the industry in general.
Not to say that Rattner has any love for Romney. He called Mitt a “come lately” conservative and bashed “the nonchalance with which he displays a dazzling shortage of principles by incessantly flip-flopping on issues, sometimes the same day.”
But Bain, he said “was a thoroughly respectable – nay, eminent – investment manager that successfully discharged its responsibility of earning high returns for its investors by deploying capital in companies privately rather than by buying shares in the public market. “
Yes, there were successes and failures, but that is the nature of a business that invests in companies that look ill. Yes, some people lost their jobs (and Rattner is particularly angry at Mitt’s attackers on this point), but it was to create a healthier companies:
While no one likes seeing jobs disappear, eliminating unnecessary overhead and even entire divisions if they cannot be made sufficiently profitable is at the heart of a successful economy — the process Joseph Schumpeter famously described as “creative destruction.” How strange for conservatives like Newt Gingrich and Perry to be questioning the core of free market economics.
Rattner concedes that it was “silly” for Romney to state that he created 100,000 jobs. Even more questionable, though, are four deals that Romney made in which companies were over-leveraged and ultimately went bankrupt as a result.
Attack those, says Rattner. Attack Romney as an unprincipled candidate. But do not attack an industry that makes American businesses healthier.