(CBS News) The private equity industry might need another name change. The financiers formerly known as leveraged buyout folks are having a bad couple of weeks as the industry finds itself in the center of the 2012 presidential campaign and the target of attacks from Democrats and supporters of President Obama.
Priorities USA, the outside group started by former Obama spokesman Bill Burton, unveiled a new ad this week attacking rival Mitt Romney for his record at Bain Capital, the private equity firm he founded in Boston in 1984. The ad tells the story of Loris Hoffman, a worker in Indiana who lost her job and her health care a few years before she was set to retire from Ampad, a paper company that Bain purchased and later went bankrupt.
"When Mitt Romney did that," Hoffman says in the ad, "he made me sick."
And the Obama campaign itself has its own ads against Bain's investments in both Ampad and another company, GST Steel, which also later went bankrupt.
But private equity is fighting back.
A Washington based trade association representing financiers who typically borrow large sums of money to buy struggling firms in the hopes of turning them around and selling them for a sizeable profit unveiled a new web video on Wednesday that aims to show how its investments can breathe new life into struggling firms and create jobs.
Watch the video here:
The Private Equity Growth Capital Council released a video showing how $10 million from Washington-based Carlyle Group in 2005 transformed a Michigan company, AxleTech International, from a regional manufacturer into a leading contractor to the Pentagon. The firm was sold in 2008 to General Dynamics for undisclosed amount. The video notes that AxleTech added more than 500 workers in those three years, more than doubling its workforce.
Founded in the late 1980s by billionaire David Rubenstein and others, Carlyle Group is now one of the country's leading private equity firms. It made its early money using high-profile advisers, including former President George H.W. Bush and former British Prime Minister John Major, to buy defense contractors.
And the trade group's website, Private Equity At Work, notes that private equity invested $144 billion in 1,702 U.S. companies in 2011.
But another high-level government official who served under Republican President Ronald Reagan in the 1980s has a different view of private equity.
"I don't think that Mitt Romney can legitimately say that he learned anything about how to create jobs in the (leveraged buyout) business. The LBO business is about how to strip cash out of old, long-in-the-tooth companies and how to make short-term profits," former White House budget director David Stockman said in an interview with Fox Business on Tuesday.
"You know the LBO business is legitimate, free enterprise business just like running a brothel if that is what you want to do or a house of gambling. But it is not a good model for how we rebuild an economy or grow jobs. It is irrelevant," said Stockman.
That's essentially the argument that Mr. Obama is making about private equity, as he tries to undercut Romney's argument that he knows how to rebuild the economy because of his business experience while simultaneously not attacking capitalism itself.
"If your main argument for how to grow the economy is 'I knew how to make a lot of money for investors' than you're missing what this job is about," Mr. Obama said Monday.
Some of his advisers have not been as deft.
Aware that voters do not like attacks on free market capitalism, some of private equity's best defenders have come from Mr. Obama's side of the aisle.
Newark Mayor Cory Booker, a prominent Democrat and Obama backer, said Sunday on NBC'S "Meet the Press" that he found it "nauseating" to hear attacks against Bain and Romney, comparing them to unfounded attacks against Mr. Obama for his former ties to the controversial Rev. Jeremiah Wright.
Meanwhile, Steven Rattner, a private equity financier and prominent Obama backer, was actually hitting Romney for his argument that his Bain experience qualifies him to rebuild the entire economy when he told his fellow pundits last week on MSNBC's "Morning Joe" that he does not "think there's anything Bain Capital did that they need to feel bad about."
Like Booker, Rattner found his words being used in a Romney campaign ad and went on a damage control tour.
"In fact, Bain Capital -- like other private equity firms -- was founded and managed for profit: ideally, huge amounts of gain earned legally and legitimately. Any job creation was a welcome but secondary byproduct," Rattner wrote in Wednesday's New York Times.