Exclusive - The Vetting - Obama Praised Private Equity When He Needed Cash
President Barack Obama has attacked Gov. Mitt Romney's record in the private equity industry as CEO of Bain Capital. But ten years ago, as he struggled to raise funds for his long-shot U.S. Senate campaign, then-State Senator Obama decided to embrace the private equity industry and its wealthy Chicago political donors. At one point, Obama even sponsored a resolution in the Illinois Senate calling calling private equity firms like Bain "the best opportunity for long-term economic vitality" and for "the creation of jobs."
Obama's campaign ads dismissively compare Romney's work at Bain to that of a "vampire" draining jobs and money from vulnerable companies and workers. After
from a handful of pro-free market Democrats in late May, the President himself publicly defended his campaign's attacks on private equity firms like Bain.
But records from Obama's time as a state senator in Illinois, along
with recollections of those who worked with him, present a very different stance. They indicate that Obama worked hard to position himself as a strong supporter of the venture
capital industry. Obama attended industry social functions and used his
position in the state senate to propose bills consistent
with the legislative goals of the venture capital industry in the state.
"The Barack Obama I knew in Springfield was very pro-private equity,
private capital, and high technology" Republican State Senator Kirk Dillard, who served
with Obama in the Illinois State Senate, said in a telephone
interview with Breitbart News about Obama's record last week. "Mr. Obama clearly had many friends in the private equity
business when he was a legislator," Dillard added.
Maura O'Hara, the Executive Director of the Illinois Venture Capitalist Association,
concurred with Dillard's assessment: "When he was in the State Senate I would describe him as a supporter of our industry." She recalls
meeting Obama in 2002 at the IVCA's annual award dinner. That year, the
IVCA's lifetime achievement award for "service to the private
community" was given to Jack Levin of Kirkland & Ellis
Law Firm. State Senator Obama was asked to deliver the award because
both he and Mr. Levin had attended Harvard Law School, albeit several
decades apart. A photo from the event shows Obama grinning as he stands
with his arm around Mr.
Levin. Both men hold the award up between them.
In 2000, Obama had run as a reformer against incumbent U.S. Representative Bobby Rush (D-IL)--and lost by a wide margin. A few years later, when he began contemplating a run for the U.S. Senate under the tutelage of political consultant David Axelrod, Obama faced a rich primary opponent from the financial world in Blair Hull, and a daunting fundraising task. And so he began to court the wealthy elite himself--a tactical shift that the far-left Obama worried might compromise him. As Obama recalled in his second memoir, The Audacity of Hope:
I worry that there was also another change at work. Increasingly I found myself spending time with people of means--law firm partners and investment bankers, hedge fund managers and venture capitalists...And although my own worldview and theirs corresponded in many ways--I had gone to the same schools, after all, had read the same books, and worried about my kids in many of the same ways--I found myself avoiding certain topics during conversations with them, papering over possible differences, anticipating their expectations. (136-7)
Obama's effort to show support for private equity went beyond socializing. Between
2001 and 2003, State Senator Obama introduced two bills and one resolution
designed to boost the private equity business in Illinois. The first bill,
introduced by Obama in early 2001, created a tax credit of up to 20 percent for anyone who invested in a
"qualified venture capital fund in Illinois." The bill was never adopted
by the full Senate.
The following year, Obama introduced a bill titled the "Venture Investment Fund-Repeal." The bill itself is somewhat cryptic,
but its purpose was to repeal the "Illinois Venture Investment Fund." (Ironically, this was a public venture capital fund similar to the Department of Energy program under Obama that funded Solyndra, the failed solar panel company which has
dogged Obama's campaign for nearly a year.) At the time Obama introduced
the bill, the Illinois Venture Capital
Association had issued a legislative position paper
which made four recommendations. Point one was the elimination of
public venture capital managed by bureaucrats rather than professionals. According to the position paper, "The role of Illinois'
government is to create a positive investment and entrepreneurial
environment, but not to attempt to manage these funds [emphasis added]." The IVCA recommended investing the public money with private equity funds instead (i.e. with its members).
Obama's attempt to repeal the public venture funds died in committee,
though the fund was eliminated in a consolidation move by the Illinois General
Assembly about a year later.
In March 2003, Obama introduced a State Senate Resolution to set up a "Private Equity Task Force."
The language of the resolution can fairly be described as offering a glowing assessment of the importance of private equity and
is starkly at odds with the Obama campaigns recent attacks on Bain Capital:
WHEREAS, Private equity is a vital aspect of the Illinois
economy providing needed private capital to early and late stage
companies in various industries, including but not limited to:
retail, restaurant, manufacturing, biotechnology,
pharmaceutical, medical devices, homeland security, software, wireless
communications, transportation, and agriculture; and
WHEREAS, The development of the private equity sector of
the Illinois economy offers the best opportunity for
long-term economic vitality, for the expansion of jobs, for
the improvement of productivity and a quality standard of living,
and for providing the greatest number of citizens with genuine
Compare the last paragraph with Obama's May defense of attacks on Bain Capital, in which he said:
"My view of private equity is that it is set up to maximize profits,
that’s a healthy part of the free market, [but]...that’s not always
going to be good for businesses or communities or
Of course, not every investment is going to work out, but Obama's 2002 resolution specifically stated that private equity is "the best opportunity for
long-term economic vitality...and for providing the greatest number of citizens with genuine
opportunity." In other words, it is the best thing for communities and workers.
The message that Obama's prospective campaign donors received was that Obama was no longer positioning himself as the political reformer who would shake up Chicago and Washington--and that there was little daylight in between his own attitude towards private equity and the likely approach of rival Blair Hull.
It not certain that Obama wrote the task force resolution himself. People
familiar with the legislative process in Illinois say that such a resolution would normally by written by a senator or his/her staff. But
when asked about the tone of the resolution, those who served with Obama
had little doubt it sounded like something he might have said at the time. Retired State Senator Dave Sullivan said, "This Senate resolution is the
Barack that I know." Senator Dillard, another co-sponsor of
the resolution, was equally firm: "My memory is that Senator Obama was a
champion of private equity and his creation of a Senate Resolution to
create a task force proves it."
When the Task Force resolution was adopted on May 30, 2003, Obama made a brief speech [pdf, page 161] in which he indicated that he had put it forward on behalf of "various persons in the industry":
This bill forms a Private Equity Task Force. As many of you know,
venture capital and private equity is one of the key mechanisms by which
we finance new businesses in the State of Illinois. For a variety of
reasons, Illinois has been lagging behind some of our competitor states
in the formation of venture capital and its deployment in terms of
seeding and funding new companies. This is an issue which has peaked [sic] the
interest of various persons in the industry and so they have asked that
we form this Private Equity Task Force to examine these issues.
Obama's attempt to court private equity in the early 2000s
was such that
several people who knew him at the time believe he is still, at heart, a
fan. "In my mind, he still believes in the industry," Maura O'Hara
of the IVCA said. Others who worked for the Obama campaign in 2008, and
who did not want to be quoted on the record agreed with her assessment.
Republicans who knew him were less circumspect about the reasons for his
current campaign rhetoric. "The President has private equity
amnesia from his days as a University of Chicago professor, legislator,
and he and the First Lady's days working at the prestigious Sidley
Austin Law Firm," said Dillard. Former senator Sullivan offered a curt explanation for
Obama's switch in tone: "I imagine it polls well."
A story published Saturday by the New York Times notes that "Obama commercials painting [Romney] as a ruthless executive who pursued
profits at the expense of jobs are starting to make an impact on some
undecided voters." The mainstream media has coordinated its attacks with the Obama campaign, though many of those attacks, including a Washington Post investigation into outsourcing at Bain, have been debunked.
Given Obama's record in Illinois, it is fair to ask
when his own effusive admiration for private equity equity flip-flopped into his
current disdain for "vampire" capitalism. When did he stop believing
that private equity was the best chance for creating economic vitality,
jobs, and genuine opportunity? And did he ever, in fact, believe it?