Barbarians at the Gate? No, Just Bain Capital

Newt's now-notorious film airing in South Carolina about the predatory practices of Bain Capital is, of course, way over the top (and point him up to be, yet again, the consummate hypocrite, since he inveighed righteously in Iowa against negative Super PAC ads). Bain is, like all private equity firms, a tamer descendant of the barbarians-at-the-gate era, the swashbuckling predators of the leveraged-buyout '80s. Bain does big bad takeovers, and fires people, but make no mistake: Bain is no KKR, and Mitt Romney is no T. Boone Pickens, as Mark Maremont of the WSJ pointed out the other day.

Gingrich and Rick Perry--he of the "vulture" accusations--are as usual fairly clueless about the charges they are making (both still think Fannie and Freddie were to blame for the subprime disaster, and Perry even believes that our troubles would end if only we "free up" Wall Street). Firms like Bain often do destroy companies but that is not the real problem, because when a Bain fails at a venture, at least it pays its dues, or sometimes goes bankrupt.  The more important point is that this is not true of others on Wall Street, especially the biggest banks that got us into this mess. Indeed, the reason that what Gingrich and Perry are saying resonates somewhat--and that they are so tempted to take this populist, anti-Wall Street message to South Carolina -- goes back to the Street's offenses over the last decade with subprime mortgage securitization.

No, the issue here is not really about "the rough and tumble of market capitalism," as the Wall Street Journal wrote today. This is about the CORRUPTION of market capitalism. It is an issue that in fact unites conservatives and liberals, OWS protesters and tea partiers alike. As I wrote in Capital Offense, both the Left and the Right were justifiably offended by the way the American system and capitalism itself---real capitalism, that is, the way it's supposed to work --- were subverted by the institutionalized fraud of the subprime era as well as the no-questions-asked bailout that followed. Liberals were appalled by the rampant destruction of social equity, and the rigged way so much wealth was amassed in the hands of the 1 percent; conservatives were outraged that the system didn't work the way it was supposed to: if you fail, you die.

And that is why the anti-Bain diatribes may gain some traction.