The Bain of Mitt Romney's life?

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Was this the moment Mitt Romney lost the election? At a campaign stop, he was assailed by workers from an office supplies manufacturer owned by Bain Capital, the private equity group where he made his $250m fortune. The workers, from a firm called Ampad in Indiana, had been stripped of their old contracts and told to work for lower pay and fewer health benefits.

Theirs was the human story behind the “restructuring” that makes Bain’s takeovers so lucrative. At the campaign stop, the workers handed out leaflets depicting Romney as the “Grim Reaper” of jobs and as “Gordon Gekko”. In a ropey economy where job security topped the list of election issues, Romney’s background at Bain cost him dear. The elected office he had prized for so long slipped away.

This isn’t a scene from the campaign trail today, by the way. It is a scene from Massachusetts, 1994, when the man from Bain went from running neck-and-neck in the fight for Ted Kennedy’s Senate seat to losing against the Liberal Lion by almost 20 percentage points, after the Ampad workers showed up.

It could be a scene that is repeated soon enough, though. In the intervening years, private equity deals, Bain-style, have not become any less controversial, and President Barack Obama is already using Romney’s record at Bain to hammer his opponent. He is also using Ampad.

“You can tell by the way he acts, the way he talks,” one former employee says of Romney in a new Obama ad, “he doesn't care anything about the middle-class or the lower-class people.”

The personal attacks are not without controversy. Cory Booker, the Mayor of Newark and a loyal Obama ally, referenced the assault on private equity when, speaking on NBC’s Meet The Press at the weekend, he said that negative campaigning from both left and right was “nauseating”.

But the President is not backing down. “This is what this campaign is going to be about,” he said. “If your main argument for how to grow the economy is, 'I knew how to make a lot of money for investors', then you are missing what this job is about. It doesn't mean you weren't good at private equity. But that's not what my job is as President. My job is to take into account everybody, not just some.”

And other Democrats are upping the rhetoric against private equity. Congressman Jim Clyburn said yesterday: “There’s something about that enterprise that I have a problem with. And there’s something about raping companies and leaving them in debt and setting up Swiss bank accounts and corporate businesses in the Grand Caymans. I have a real serious problem with that.”

Willard Mitt Romney was the first chief executive of Bain Capital, and ran it from its foundation in 1984 until 1999. Bain Capital was set up by Bain & Co, where Romney had been a management consultant advising other companies on how to cut costs. By creating a private equity sister firm, Bain was able to borrow money, buy a company and pocket the profits from cost savings all for itself.

Within five years, Bain would typically be gone, selling the company on to new investors - and often leaving the company burdened with all that borrowed money.

Bain was not the only firm to set out on this lucrative path in the mid-Eighties, but it was one of the masters of the financial art. A Wall Street Journal study of 77 companies that Bain bought under Romney’s leadership found that 22 per cent of them had gone bust or closed their doors within eight years. That high failure rate was no obstacle to Bain Capital making large returns, however, and it made an estimated $2.5bn on the $1.1bn it invested in the 77 deals.

Private equity’s gains are taxed at a lower rate than income - a fact that is benefiting Romney, still a major investor in Bain, even today. His tax rate in 2010 was 14 per cent, far below that of the average American. The White House has pushed, sporadically, to have the private equity tax rate changed to the same level as ordinary income tax; President Obama will no doubt enjoy making his opponent squirm trying to defend the status quo in the debates. For a president pinning his re-election hopes on a populist message of taxing the rich to bolster the middle class, Romney could not be a more useful opponent.

The Romney campaign line is that Bain Capital rescued many companies that were teetering, and grew many more through the quality of its management. Staples, the stationery chain, Domino’s Pizza and the Sports Authority sports equipment retailer, three companies Bain either started or grew from tiny beginnings, now employ more than 100,000 people. And regardless of the exact tally of jobs lost or gained, Bain contributes to the kind of efficient economy that, while brutish in some respects, none the less creates jobs over the long run.

Or as Gordon Gekko might have said in Wall Street, Oliver Stone’s critique of the industry: “Greed, for lack of a better word, is good.”

This electoral season, it was Newt Gingrich who first sought to define Romney as a man whose fortune was made on the backs of impoverished workers, massive job cuts and bankrupted companies. During the New Hampshire primary campaign, Gingrich described private equity as "rich people figuring out clever legal ways to loot a company".

A Gingrich-supporting campaign group went as far as to produce a half-hour documentary called “When Mitt Romney Came To Town”, which purports to show the job cuts that Bain pushed through at a string of acquired companies, and which is still circulating on the internet.

When Senator John McCain, now a Romney backer, was running against him for the Republican nomination four years ago, there was a prominent section on the Bain years in the McCain campaign dossier of “attack lines” against him. The dossier, recently posted in its entirety online, mentioned the Ampad incident and the fact that another investee company, a steel company called GS Industries, went bankrupt in 2001, taking down a giant plant in Kansas City with the loss of 700 jobs.

For every Staples there is a Stage Stores of Houston, a department store chain that crashed shortly after Bain Capital sold it on to investors on the stock market, or an Alliance Laundry Systems, which laid off hundreds of workers while Bain itself made a 230 per cent return on its investment.

And what happened to Ampad? Just a few months after the defeated Romney returned to Bain, the company shut the Indiana factory entirely. The private equity firm then made $100m when Romney floated Ampad on the stock market in 1996, but the company was still loaded with debt. Four years later it was bust.