Obama begins anti-Bain campaign


FORTUNE — President Obama’s reelection campaign today took its most pointed shots at Mitt Romney’s business career, launching a website that focuses on select Bain Capital deals from Romney’s time running the private equity firm.

Stephanie Cutter, Obama’s deputy campaign manager, said the following in an email announcing the site:

Romney and his partners bought companies across the United States, often loading them up with debt in the process. Too often, they slashed pensions, benefits, and jobs, while paying themselves and their shareholders straight from the debt they’d accumulated.

Because of that debt, several of these businesses went bankrupt, leaving workers without jobs, without pensions, and without health care — all while Romney and his partners walked away with millions.

Everyone understands that businesses rise and fall — and sometimes fail — and no one is challenging Romney’s right to run his business as he saw fit or questioning private equity as a whole.

But when a handful of people make a fortune by putting thousands out of work and bankrupting once-healthy businesses, it’s legitimate to question whether those are the values America needs in a president — and whether those are the values that will create an economy built to last, with a strong, secure middle class.

The website currently focuses on three Bain Capital transations: GST Steel, Dade Industries and Stage Stores.

Unfortunately, somewhat like the “documentary” distributed earlier this year by a SuperPAC supporting Newt Gingrich, the Obama campaign gets a bit bedeviled by certain details.

For example, look at what it says about Dade Behring:

With Dade Behring, Mitt Romney and his investors took over a healthy company and loaded it with debt. Rather than sell the company, they then had Dade take out even more loans to buy out their shares, driving the company into bankruptcy. Nearly 3,000 workers lost their jobs, while Romney and his partners made more than $250 million in profit.

I have no idea where the “healthy company” characterization is coming from. Bain originally created Dade International in 2004, by purchasing the medical diagnostics business of Baxter International (BAX) for $448 million. At the time, it was a failing unit. For example, MLA had just canceled a large blood analyzer/reagents supply contract with Dade. Not only did this cost Dade a large chunk of high-profit, recurring revenue, but it also set MLA up as a viable competitor (Bain ultimately found a replacement supplier in Japan).

All I can think is that the Obama campaign cleverly used the name Dade Behring, which is what Dade International was renamed two years later once Bain had acquired both a German company (Behring) and a diagnostics unit from DuPont. One could argue that, by that point, Dade was a “healthy company” — but only thanks to Bain’s efforts. Moreover, some of those “profits” were cash tied to the Behring acquisition.

To be clear, I’m not a big fan of what Bain did with Dade, as I’ve previously written. But there is no reason for the Obama campaign to embellish on the history.

As for GS T Steel, the campaign writes:

Kansas City’s GST Steel was a successful company that had been making steel rods for 103 years when Mitt Romney and his partners took control in 1993. They cut corners and extracted profit from the business at every turn, placing it deeply in debt. When the company eventually declared bankruptcy, workers were denied their full pensions and health insurance, and the federal government was forced to step in and bail out the pension fund.

All mostly true — although GS Steel had already cut down its product line due to budget constraints — except for what is omitted: Mitt Romney was no longer at Bain when GST Steel bust. Would seem to be a fairly salient fact.

On the other hand, Romney’s campaign today recycled its candidate’s absurd claim that while he made the GST investment, he didn’t actually run the company. If you own the company, which Bain did, you’re in charge (including of picking managers). There is no such thing as an arm’s-length leveraged buyouts.

Finally, there is Stage Stores. From RomneyEconomy.com:

In the late 1980s, Mitt Romney and his partners bought up hundreds of successful small clothing stores and combined them to form Stage Stores. Romney and his team loaded up the company with debt, and then, when the company was at its height, sold nearly all their shares at an enormous profit. In less than three years, the stock had collapsed and Stage was forced to declare bankruptcy.

All true, but I don’t quite see what Romney and Bain are being accused of here. The Obama campaign acknowledges that Bain had been out of Stage Stores for nearly three years when it went bankrupt. Bain may have heaped debt on the company, but institutional investors knew that when they bought the company’s shares from Bain — and apparently thought it was a solvent bet. Unless there is some claim of fraud (i.e., Bain somehow hiding the debt), then Stage’s bankruptcy is hard to pin on Romney and Bain.

Moreover, if Bain is going to be blamed for what happened after selling its stake, should it also get credit for the current thriving businesses of both Dade (now owned by Siemens) and Stage Stores (SSI)? Or can Romney claim credit for all those Staples (SPLS) jobs created long after he and Bain were involved with the company?

As a broader point, it’s interesting that the Stephanie Cutter went out of her way to say that no one “is questioning private equity as a whole.” Kind of mirroring a similar message from campaign boss Jim Messina said back in February. But it’s not really true, is it?

Bain is being accused here of taking actions that are commonplace in private equity. So if it’s “legitimate to question whether those are the values America needs in a president,” then it’s apparently legitimate to question whether private equity is consistent with American values. Pretty sure that’s a broad brush masquerading as a razor blade.

I’ve reached out to Obama spokespeople, and will update this post if they reply. Romney’s team already has issued a couple pages of talking points, but most of it is simply attacking Obama for the Solyndra loans (proving that both sides can make silly arguments).

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