Not In The Welfare Business
When Rush Limbaugh says something untrue- roughly speaking, when his lips move- he is not always lying, manipulating arguments, or even distorting the truth. Sometimes he is simply misinformed.
The latter may have been the case on Wednesday when Limbaugh repeated Something Everyone Knows Is True but is not. Complaining about Christine Romans responding to the Bain Capital controversy, Rush stated
Christine, I'm gonna tell you: If it keeps up, CNN's gonna need a private equity firm to come in and bail it out and save it. Your job, Christine, may depend on a private equity firm down the road. You never know. But, by definition, private equity comes in and buys failing companies. Why? Not to hammer the final nail in the coffin. They want to save them.
Although it is clear that private equity firms are not in business to create jobs or even to save companies but to enrich investors and themselves, that is a judgement call. Much of the defense of their anti-social behavior hinges on the truism "private equity comes in and buys failing companies" or, as Limbaugh oddly puts it, "by definition, private equity comes in and buys failing companies." And that is simply not true.
Don't take it from me. Josh Kosman, author of "The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis," was interviewed on January 18 by Judy Woodruff of PBS News Hour and asserted
there's just one thing that I needed to jump in and say. I think it's a fallacy -- and it's what the Mitt Romney defenders are trying to throw up in the air -- that private equity firms buy troubled companies. They're almost always buying profitable businesses, not troubled businesses.
But don't take it from Kosman. Take it from Stewart Kohl, interviewed simultaneously by Woodruff and whom she describes as "co-CEO of The Riverside Company, a private equity firm that manages more than $3 billion in assets." Kohl, who generally defends the business, a moment later remarked "We collect money from pension funds and endowments for colleges and foundations and the like. And firms like The Riverside Company invest that into, as Josh says, mostly healthy companies..."
Woodruff, recognizing the critical concession being made, followed up by asking "But you agree it's mostly healthy companies that are invested in?" Kohl replied
Yes. There's a subset, a segment of private equity they focuses on troubled companies, companies that are struggling. I have a lot of respect for those firms. That's hard work, and it is not something that The Riverside Company does. But it is a small, but important part of private equity.
If people are left to believe, as most have, that the companies buy only troubled or failing companies, they might buy the line, as Limbaugh seems to, "if not for the private equity firm moving in, everybody would lose their job." And most of the media, Judy Woodruff and a few others excepted, are content to leave that impression.
HAPPY MEMORIAL DAY
(or at least a reverent one)