With Walkback, Cory Booker Has It Right On Private Equity

A blog about business and economics.
May 21 2012 10:18 AM

With Walkback, Cory Booker Has It Right On Private Equity

Newark Mayor Corey Booker.

Photo by John Moore/Getty Images

Today's tempest in a teapot has to do with Newark Mayor Cory Booker's mixed feelings about attacks on Mitt Romney's record at Bain Capital. First on weekend television Booker, who's gotten a lot of financial backing from finance types, came out swinging against Obama:

But the last point I'll make is this kind of stuff is nauseating to me on both sides. It's nauseating to the American public. Enough is enough. Stop attacking private equity, stop attacking Jeremiah Wright. This stuff has got to stop because what it does is it undermines, to me, what this country should be focused on. It's a distraction from the real issues. It's either going to be a small campaign about this crap or it's going to be a big campaign, in my opinion, about the issues that the American public cares about.

Then Booker took a lot of crap for this and issued a video on YouTube walking the comments back:

Key excerpt:

Mitt Romney has made his business record a centerpiece of his campaign. He's talked about himself as a job creator. And therefore, it is reasonable, and in fact I encourage it, for the Obama campaign to examine that record and to discuss it.

Normally politicians' walkbacks make for an incoherent muddle, but Booker's back-and-forth on this lands him in what I think is the complete correct position. The private equity industry is a perfectly legitimate line of work that, like most industries, consists of a mixture of socially beneficial work and not-so-beneficial exploitation of pernicious lacuna in the tax and regulatory system. But if you don't like the way the tax code subsidizes corporate debt, then your complaint is with the U.S. Congress not with leveraged buyout guys.

All that said, it's not as if the Obama campaign hit on these Bain attacks at random. Mitt Romney has a very short career in elected office and has been running on the idea that his business experience is a key qualification for the presidency. There are lots of perfectly legitimate ways to make money that don't really suggest themselves as good preparation for high political office. Some folks make a living by driving a bus or working a cash register or dunking. I once met a guy who assesses the creditworthiness of potential restaurant franchisees. Very legitimate business. Nice guy. Not clear that he should be president. 

But to the extent that your idea of what Romney did at Bain is make investments in poorly managed firms and turn them into more successful ones, then you can see the case that business experience is relevant to political office.

Maybe Romney is a master turnaround man, and maybe a turnaround man is exactly what this country needs. But to the extent that Romney really made his money through financial engineering practices that are more about extracting value from enterprises than about fixing them, the argument is much less clear. I don't think there's anything necessarily wrong with the value-extracting model of corporate takeovers. People who do it shouldn't be locked away or anything. It's a big old world out there and there's room for lots of different business models. But that is a different business model from the turnaround model and it's different in a way that's clearly relevant to Romney's argument about himsel. We don't need to demonize the industry to see that when you take a clear-eyed look at what many private equity firms are all about, there's no reason to think that success in the industry is a great preparation for effective political leadership.



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