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Venture Capital Versus Freddie Mac

The opinions expressed by columnists are their own and do not necessarily represent the views of

WASHINGTON - Newt Gingrich's sharp counter attack against Mitt Romney for "laying off employes" during his years as a venture capital investor was taken right out of Sen. Edward M. Kennedy's liberal campaign playbook.

Stung by the former governor's criticism for earning a small fortune from the government's bailed-out mortgage giant, Freddie Mac, Gingrich shot back that his rival had bankrupted businesses during his years with Bain Capital, the successful private investment firm Romney founded before going into politics.

The volley of charges and counter-charges began this week when Romney said in a television interview that the former House speaker should give back the more than $1.6 million he earned from federally- backed Freddie Mac.

Gingrich fired back that he'd consider returning the money "if Governor Romney would like to give back all the money he'd earned bankrupting companies and laying off employes over his years" in the private sector.

That was the same line of attack Kennedy used against Romney with deadly effect to blunt his strong Republican challenge in the 1994 Senate race.

It was pure demagoguery then and its demagoguery now.

Kennedy's strategists dug up some cases where Bain took over troubled but promising businesses that had to be slimmed down to make them more efficient and ready for expansion. That sometimes means payroll cuts.

In many cases, these investments paid off handsomely and built start up companies into major corporations. One of Romney's biggest successes was a small enterprise called Staples that grew into 2,000 stores in 26 countries and created jobs for thousands of Americans. In others, the investments failed to turn the company around.

The Kennedy campaign found workers who had been laid off under Bain's fix-it strategy who told their stories in TV attack ads with devastating effect.

Venture capital investment is a tough, risky business and not all enterprises take off, and, in the business community as a whole, many fail. But many also succeed, and in the free market, that's what contributes to new job creation and a growing economy.

Gingrich, a free market enthusiast, knows this but when he found himself under fire for his high-paying, lobby-like arrangement at Freddie Mac, he reached for Kennedy's demogogic tactic and fired.

"There's a big difference between working in the private economy and working on (Washington's) K Street and working as a lobbyist or working as a legislator or working to connect businesses with government," Romney said.

When it was first revealed that Gingrich was paid huge sums by Freddie Mac which was at the center of the sub-prime mortgage collapse, he falsely maintained his work there was as a historian.

"That would make him the highest-paid historian in history," Romney replied.

In fact, his work was much more than that, including strategic advice and counsel, bringing influential people together from the housing housing industry and at some point connecting Freddie Mac with conservative leaders in Congress. Which sounds a lot like lobbying.

In a statement his campaign issued when the Freddie Mac story surfaced last month, it said, "In addition, Freddie Mac was interested in advice on how to reach out to more conservatives."

The Washington Post's Fact Checker Glenn Kessler observed, "While Gingrich takes great pains to stress he was never registered as a lobbyist, he clearly appears to have provided advice on how to influence the thinking of conservative members of Congress."

It is worth pointing out, as Bloomberg News has done, that Gingrich's "primary contact inside the organization was Mitchell Delk, Freddie Mac's chief lobbyist..."

Gingrich, as an influential leader in Congress and now a private citizen, had become well known as a skilled idea man who offered a wide range of "solutions" to the nation's problems, and people were willing to pay him big money to give them his best advice. Nothing wrong with that.

At the same time, he was handsomely profiting from Freddie Mac, a multi-billion dollar "government assisted enterprise" or GSE, that played a pivotal role in the costly subprime mortgage debacle which sowed the seeds of the housing industry's collapse and the Great Recession.

Freddie Mac, Gingrich's employer, was taken over by the government in 2008 and has received more than $151 billion in government bail-out funds.It still retains an infinite line of credit from the taxpayers. Gringrich was on their payroll between 1999 and 2008.

Fellow Republican Ron Paul, who has a blistering new attack video on the web that is titled "Selling Access," charges that Gingrich was effectively being paid with taxpayer bailout money.

Most conservatives have long believed that Freddie Mac and Fannie Mae should be privatized and that the federal government shouldn't be in the home mortgage business.

But in an interview on April 24, 2007 for Freddie Mac's web site, Gingrich stoutly defended the GSEs and their work -- just months before they declared bankruptcy.

"We have a much more liquid and stable housing finance system than we would have without the GSEs... These are the results I think conservatives should embrace and want to extend as widely as possible," he said.

Thus you have the ultimate irony of Gingrich attacking Romney, a businessman who was channeling investment capital into the private economy and creating jobs, while the former House speaker was advising and cheering a government-run enterprise that went bankrupt. And the taxpayers are footing the bill.

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