Why Romney won’t defend private equity

July 31, 2012, 12:09 AM UTC

FORTUNE — Mitt Romney isn’t spending too much time defending private equity. And, as much as I’d like him to reconsider, it’s probably a wise political move.

The issue was raised earlier today on CNBC, during a conversation between Squawk Box anchor Andrew Ross Sorkin and David Rubenstein, co-founder and CEO of private equity powerhouse The Carlyle Group (CG). Here’s the relevant portion:

Sorkin: I’m curious whether you are frustrated, or not, by what feels to me like a lack of defense of the industry by Romney himself. He spent his whole career doing this, and very infrequently does he come out decisively and really push the virtues, if you will, of private equity. How do you feel about that right now?

Rubenstein: Anybody who works in any industry obviously takes some pride in it, so we take pride in what we’ve done. The private equity industry is designed to make companies better and economies more efficient and create jobs if we can… If I were running for president I would probably talk more about what I had done in my private equity career. But I’m not Mitt Romney, and I’ve been involved in presidential campaigns and I know what it’s like. It’s very difficult to say what you want and get the message through. I think he concluded, based on his work, that it’s better to talk about other things, I guess.

Sorkin pushed on the point a bit more, to which Rubenstein noted that presidential candidates usually talk more about what they want to do if elected than what they’ve actually done in the past (citing President Obama as an example).

I’m absolutely certain that Mitt Romney takes a lot of pride in his time running Bain Capital, as Rubenstein suggests. But I’m not so sure that he chose “to talk about other things” because of some future vs. past optics strategy. Instead, I think he chose to talk about other things because private equity does not lend itself well to sound bites.

Here’s how a Romney supporter recently put it to me: “Every minute he spends explaining what he did at Bain is a minute he spends confusing an undecided voter.”

This isn’t to say the electorate is dumb. It’s to say that top-level private equity is arcane stuff that takes serious study to understand, and that every underlying deal and portfolio company decision is predicated on multiple factors that can range from contemporaneous interest rates to unexpected competition to a senior line manager’s unfortunate cocaine habit. In other words, it’s a rabbit hole. And if Romney takes the jump, it’s unlikely that most voters would have the time or interest in the ensuing adventure.

For example, take the case of Dade Behring. It’s an old Bain Capital deal over which Romney has taken a beating, due to numerous layoffs and the fact that Bain made money even though the company went bankrupt on its watch. And I wouldn’t be surprised to see Obama mention it during a debate, if given the opportunity.

Here’s how Romney could respond, if he chose to engage as David Rubenstein would like:

“Dade was a failing medical device company when we bought it. Its primary machine was worst-in-class and losing market share, and one of its largest alternate revenue streams was being shut off because its blood analyzer supplier had decided to go with someone else. No one else even bothered to bid and, after buying Dade, we spent even more money by purchasing a diagnostics business from Dupont (they had the machine that was eating Dade’s lunch) and merging with Behring to supplement our flagging R&D efforts.

Yes, we did a dividend recap (that’s how we profited on the deal), but that was basically a trade whereby we got cash and gave up some equity in Dade to the company that was selling us Behring. Then the euro tanked, putting the company into a technical default because we had large European sales. Usually we could handle such situations, but a hedge fund bought up the debt and forced a 60-day prepackaged bankruptcy (which is what caused many of the layoffs). The banks were made whole and the company later went public, but we got washed out. Yes, the recap made us some money, but this was hardly a deal we got very rich on. But the company is now owned by Siemens and doing very well. So, in short, our private equity firm bought a troubled company and it is now thriving.”

Not exactly the sort of snappy reply that works best in politics. And, even at that length, it assumes enough financial sophistication to know terms like “dividend recap” and “prepackaged bankruptcy.” Does anyone really think Romney would be better off with that sort of explanation, rather than just avoiding the matter all together?

To be sure, Rubenstein is right to be frustrated. His reputation, and that of all private equity investors, is becoming collateral damage. But the solution is not for Romney to make a more passionate defense, because there is no pragmatic way to do so. Instead, private equity must simply grit its collective teeth until November 7, and then hope that it fades back into obscurity.

Sure that sounds unfair. But so is getting laid off because of currency fluctuations. Sometimes there are forces beyond your control.

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