Pardon the inflammatory title, but it's literally true (so long as I include the quotes) and I need to draw people in to understand a point.
My colleague and compatriot TomP gives a trenchant and rousing critique of Newark Mayor Cory Booker's Sunday pundit show comments on private equity, asking people to lay off. Those comments were poorly stated at best, and pretty rotten at worst -- but I think that TomP misunderstands them.
We have to understand his point because it's the next line of defense of Bain Capital and it is in some ways the most dangerous because it contains a kernel of truth. (On the positive side, Booker's argument when property understood is not one that exculpates the sorts of acts of commercial vampirism that will sink Mitt Romney.)
Booker's argument is "don't paint with a broad brush." My answer is: "OK, we can paint this particular portrait of Mitt Romney really well with a finer brush."
"Private equity" is a broad term, like "Christianity," "capitalism," "farmers" -- and, for that matter, "Occupy protesters." As you read through the rest of the diary, you may decide that you truly don't agree with Booker's argument against "broad brush" criticism of private equity. That's fine, but it's a secondary concern. The primary concern for us as activists in the world, rather than as a rarefied debating society, is this: "is this sort of defense of private equity going to work"?
It might work -- but it doesn't have to. Part of countering it will be conceding the points that Booker makes that have merit -- and then tossing them aside to get back to the real critique. He's saying that not all private equity is evil -- just like, despite the bad practices of Monsanto and big agribusiness, not all farming is evil, and much farming is in fact necessary. What Romney wants to do is the equivalent of defending agribusiness by describing them as "farmers" and then showing pictures of small family farmers and ask why it is that you have a problem with farmers. We need to be able to say "yes, there are different sorts of farmers and farming practices -- and you represented the worst.
Cory Booker's response is literally true: "private equity" is not the problem. However, people in private equity doing what Mitt Romney's Bain Capital did -- at least much of the time -- is the problem. To understand this, you have to know how broad a category "private equity" is -- it's broad like "farmers" and "Christianity" and "protesting."
Wikipedia's definition of the term is serviceable; go there for the supporting links:
Private equity, in finance, is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange.
A private equity investment will generally be made by a private equity firm, a venture capital firm or an angel investor. Each of these categories of investor has its own set of goals, preferences and investment strategies; each however providing working capital to a target company to nurture expansion, new product development, or restructuring of the company’s operations, management, or ownership.
Bloomberg BusinessWeek has called private equity a rebranding of leveraged buyout firms after the 1980s. Among the most common investment strategies in private equity are: leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital. In a typical leveraged buyout transaction, a private equity firm buys majority control of an existing or mature firm. This is distinct from a venture capital or growth capital investment, in which the investors (typically venture capital firms or angel investors) invest in young or emerging companies, and rarely obtain majority control.
Private equity is also often grouped into a broader category called private capital, generally used to describe capital supporting any long-term, illiquid investment strategy.
Anytime you have an organized effort for private investors to take partial ownership in a company
that does not use a stock exchange, that's "private equity." It's a
tool. It's a tool for allocating capital -- or if you want to use "normal people" words, "getting funding" -- from people that want to invest into companies that want funding. Is it going to shock anyone here that "private equity" can be good or bad or in-between?
For people who offer a broad-brush critique of "capitalism" -- a term that after all includes a peasant woman selling produce from her home garden in a public market -- "private equity" is always going to be a bad term, and you're going to disagree with me. That's fine -- but the argument about whether we want capitalism to be constrained from evil and harnessed for good versus extirpated from the world is a large one that I'm not going to address here. For those who care about terrible practices within capitalism, though, we need to make the distinctions.
What we need is, yes, for Cory Booker to "walk it back" -- not dishonestly, but when we acknowledge that some private equity is not the target of our criticism, he has to acknowledge that some private equity is a proper target of criticism -- and that Mitt Romney practically bathed in that slime.
When Booker says:
I have to say from a very personal level I'm not about to sit here and indict private equity. To me, it's just, we're getting to a ridiculous point in America.
it's fine if this is demanding that we make distinctions within the large category. But that means that
he has to make those distinctions too. I can easily accept that Bain did some good things for some companies and did some bad things that luckily ended up not having some bad effects. But look at the examples we're seeing on the front pages today -- we're attacking
those practices, those practices that Mitt Romney keeps saying
are not wrong because, in essence,
he made money for himself and his investors using them. And
that amorality is immoral as a national policy.
And you're damn right that I would like Cory Booker to stand up and make that point today -- and every day for the rest of the election. He doesn't want us to use a broad brush? That's fine -- then he can pull out the fine brush and get painting.
The part of what TomP quoted that almost set me into a frenzy was this:
Enough is enough. Stop attacking private equity. Stop attacking Jeremiah Wright.
This makes me want to scream, because as written it is indeed a false equivalency. Then it occurred to me: does Booker really care about people attacking Jeremiah Wright? I'd say "no"; if he could have a genie transport Rev. Wright to a distant island for the next few years, I'll be that he would.
I'd punctuate and annotate the statement like this:
Enough is enough. Stop attacking [Mitt Romney over the issue of] "private equity." Stop attacking [Barack Obama over the issue of] "Jeremiah Wright."
There, at least it's an actual
equivalency -- not between one man and an industry, but between campaign issues. Jeremiah Wright
at his worst, if he were a thousand men, could not match the perfidy of Mitt Romney's vampire squiddism. The legitimate part of the equivalency is that candidates should only be attacked not as symbols of a larger phenomenon, but
for what they actually did wrong.
I'm cool with that. So let's talk about what Mitt Romney actually did wrong. That's OK, right, Cory?
.
Disclosure: When I worked as a corporate litigator in Manhattan for three years, I was on the litigation side and was only vaguely aware of what was happening on the corporate side of our practice. My firm was a leader in private equity, but it wasn't until after I left in 2006 that I really had much idea what that was, and not until after the financial collapse in 2008 that I started reading about the corrosive effects of some practices within private equity. I knew people who were close to Cory Booker, one friend in particular, although I never met him. These people were largely within W.E.B. DuBois's "Talented Tenth" of African Americans whom he hoped would help lead the country towards racial equality (and who to an important degree did so.)
So, knowing how important Booker is to many people I respect, despite his being more moderate than I am, I'm hesitant to toss him entirely overboard over these comments. He is steeped in a mindset from his financial services industry suppoters across the Hudson that "they do good things too"; I'd just as soon acknowledge that and get to the meat of the critique. We don't have to attack "private equity" overall (though people like Booker should understand our natural tendency to use that term as convenient shorthand), just as an attack on right-wing ministers dabbling in politics neither requires nor justifies a broad-brush attack on Christianity or religion generally. We can attack -- and should attack -- what some knaves and sociopaths have done with it, and the official privileges and protections they have arranged to received in doing so.