Whether you are on the political left or the right or somewhere in between, I’m betting you already know that political ads can be misleading. Some may be true, some may be false, and some may be a bit of both. One set of new ads focuses on Mitt Romney’s tenure with Bain Capital. Let’s take a look at both ads:
From the Obama campaign ad:
- Romney and Bain led GST Steel into bankruptcy
- GST Steel jobs were lost because of Romney/Bain
- GST Steel pensions were lost because of Romney/Bain
Is this true? Technically, it’s true. However, it’s not the whole truth; GST Steel was already a cash-poor, failing company before Bain got involved (a small detail left out of the Obama campaign video). The entire steel industry was declining at the time due to cheap foreign steel, mainly from China. The fault cannot be placed squarely on Romney or Bain’s shoulders.
From the Romney campaign ad:
- Romney and Bain helped grow Steel Dynamics, another steel company
- Romney/Bain created jobs at the company
- Romney/Bain helped the workers “achieve the American dream”
Is this true? Technically, it’s partially true. However, Bain contributed less than 5% of initial equity to the startup, and held only one board position out of ten. These translate into Bain having little to no control over Steel Dynamics, so I don’t think they can take full credit for creating jobs and growing the company.
Both these ads highlight a general misunderstanding of what private equity is and what Bain Capital actually does.
Bain Capital is a global investment firm made up of approximately 400 individuals, including 88 Managing Directors. Over the past 28 years, they’ve made over 250 private equity investments. Its job is to take investors’ money and produce high investment returns. At this, Bain is widely considered one of the best in the business. Its job isn’t to save or bankrupt companies or create or destroy jobs—it’s to make money with high-risk, high-return investments.
Bain currently has a few open positions on its career site, so it would seem the political back-and-forth isn’t negatively affecting hiring at the firm at this time. It will be interesting to see how both presidential campaigns continue to play out over the next several months. Will Mitt Romney be seen as an evil capitalist or a creator of American jobs? Only time will tell.
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