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What’s Private Equity?
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- Duration 8:08
- Date May 24, 2012
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It made as much money off it as they -- and they closed today on the file for bankruptcy without any concern for the families and community.
-- -- -- Can -- them.
It causes company.
I'm able to do that -- -- -- -- I have that's not the American dream I don't know what this.
Those are two very different views about what exactly private equity firms do in the American economy -- one is a now famous or infamous depending on where you're sitting -- from the Obama campaign accusing Mitt Romney when he was -- Bain Capital of being a big empire.
And sucking the life out of the old Kansas City bolt.
Steel firm in Kansas City.
And the other one is a -- had that says wait a minute this guy helped launch the steel company that today employs thousands of people in Fort Wayne, Indiana -- -- Steel Dynamics so.
Which is it and what the heck are we supposed to think about it -- -- she will help us talk about this -- you and I.
I sure will engage in the crass practice of political calculation and will help determine that's.
But I think we had better find somebody very Smart who can straighten out what the heck -- private equity is.
How it works what it does in the economy so Internet we give you none other.
That Lou Dobbs who you watch every night on the Fox Business Network mr.
dobbs it is our pleasure.
Well it's.
Delightful -- be with you for our our biweekly.
Cross examination -- -- That's right it's my turn to have you in the interview -- because usually.
Mr.
dobbs I greeted with a question -- appear on your telecast.
That we get something like this what is wrong with these people or what in the heck are they doing down there.
Well I'm still not getting a satisfy -- gonna get your little errors by the way epic because there are not now so here's the question.
Private equity is something that in the business community is the common knowledge -- well understood for thirty years but for the general population for the other 98% of the country this is still kind of a mystery and there's a fight going on between the parties to define.
What it is and what it does so what is it what does it do.
Like many fights Chris that this is a any silly stupid and truly irrelevant fight it has nothing to do with the president's record.
Which is the subject of this election will be the focus of this election and it's a diversion.
And -- you.
Does -- displayed and exhibited perfect -- there are two views in any instance one when private equity is successful -- its investments.
People are thrilled.
With private equity in when private equity.
Fails.
They are not happy with private equity and you put up two examples of ball by the way that it.
Follows a very similar pattern across every kind of investment bond or vehicle are firm in the in the world.
In the case to bring camp a capital it's extraordinarily.
Successful under governor Romney extraordinarily successful.
And what some people should be asking is -- worried about what did Bain Capital do different in the instance in which.
In several instances in which.
It was not successful in saving the company are.
Taking it to the next level and its growth.
And the answer is we'll -- is.
-- President Obama is he held accountable by the national media for the tens of thousands of jobs that were lost in the bailout of Detroit.
Has this president been held accountable.
For the bailout of -- Fannie Mae Freddie Mac.
You know AIG.
What in the world are we to make of a company like Hewlett-Packard which announced yesterday it was cutting 27000.
Jobs and his stock moves out.
Time for people to understand.
How the system works and the only people who down for those who contrived.
And work so very hard to pretend that they're utterly ignorant of the way in which this.
This economic system of ours works.
And if I this is by the way I think an effort on the part of the Obama campaign.
That is already blowing up in their faces and the longer they persist the more painful their experience will be in this campaign as a result.
Now the question.
On my mind is this.
Four Bain.
As you say Democrats and Republicans alike now say yes -- -- is very good and this.
And of these firms they're very good.
But private equity acts differently than things like hedge funds and other things because they actually take a hand in running the company there's -- -- -- The right there's a merger between.
The -- of -- consulting arm in an investment arms -- -- -- hedge fund that comes in and -- money and then get seats on the board.
It's if it comes in and actually helps run the company.
How does that work.
-- when they take an equity position in the company they're buying and literally.
The assets that they're going to manage and Iraq.
In in nearly every instance obviously.
All of those assets and certainly at the very least the majority.
Of the the control of that company.
It's a direct investment rather than in direct -- by that I mean they're not buying the stock of the company per say they are buying the assets themselves -- The the organization.
And to that end they have.
Of course -- greater ratio of success.
Because.
They have they actually have their hands on the levers they are not sitting back saying they're being passive investors.
And it's and it's good stop -- point of fact if you're an investor.
You know if you're an investor like a major labor unions the pension funds in the country.
All of those.
Those folks who are by the way many of whom.
We may have had on camera their protest today on capitol.
Benefit well investment.
In -- Through their pension funds there -- unions.
Or whatever it may be.
Last thing before we let you go I want I want to regardless -- marched through the congress that much too fast quite so.
But there I want to give you two figures this and this is from a USA -- study that they -- on the federal debt when they said that if the federal debt were calculated.
The same way that businesses are required by the SEC to calculate their obligations.
It would not be one point three trillion dollars it would be five trillion dollars not the debt the deficit would be not one point three trillion dollars but five trillion.
Please give us your reaction to that -- You mean there was they would include the social safety net they were all they often off budget I -- how unfair.
To actually answering rigorous accounting.
And finally I think it should be the subject of a presidential debate I really do.
Are just didn't get a -- but just a debt debate because we should just.
Aside from the fact it would -- -- Dickens out of people.
The fact is that we've always had a role in this -- if if if their politicians.
Of any strive for party and their lips are moving you can -- on the fact they're lying in some fashion.
And we knew it would when you bring up a budget.
And there and the deficits through which we've been settled for lo these many years.
You can just I would say take that -- an order of magnitude deserves a baby.
Two to three times.
That they're going to distort the reality we have got and -- a situation in which Chris as you know.
Paul Ryan is the hero of -- out of the fiscal hawks.
And because he would balance the budget and -- and 2040.
That's how bad things are god bless Paul Ryan he's doing his very best and the Republican Party and the house -- I have to tell you I mean that's not going to end up a full chapter in profiles in courage.
Without or -- offense to friends -- -- -- -- -- world exactly as it goes Lou Dobbs we thank you very much for being with us today.
Great to be --
