The Wall Street Journal’s Holmen W. Jenkins Jr. explains “private equity,” which GOP presidential candidate Newt Gingrich calls “vulture capital”:

As a rule, private equity takes on the most troubled companies because turning them around offers the biggest profit opportunities. That’s why private equity tends to generate more than its share of traumatic headlines. Look no further than Ripplewood Holdings’ decision to put the maker of Twinkies into bankruptcy this week. It’s the kind of decision that, were Ripplewood’s principals ever to run for office, would get them savaged in an ad.

But guess what? Ripplewood also bought the company, Hostess Brands, out of bankruptcy three years ago, when it was called Interstate Bakeries. Ripplewood is just the latest manager to wrestle unsuccessfully with the company’s fundamental problem, a unionized workforce in an industry where competitors aren’t unionized. …

But the best antidote to foolish thinking about job creation is the work of economists Steven J. Davis and John Haltiwanger. Their painstaking research has revealed a side of America’s dynamism that isn’t always pretty. Between 1977 and 2005, years roughly overlapping Mr. Romney’s business career, some 15% of all jobs were destroyed every year, even as total jobs grew by an average of 2% a year. Job creation and destruction are both relentless, the authors showed in paper after paper. The small difference between the two is what we call prosperity.

But now Republicans are worried. To fault Mr. Romney for being involved with businesses that both grew and shrank, that created jobs and destroyed them, may be to fault him for having eaten from the tree of knowledge in a way that, say, President Obama has not. But how will his story fare in November against Mr. Obama’s simpler story, in which ravenous capitalists destroy jobs and government creates them with things like the Detroit/UAW bailout, solar subsidies and health-care mandates? …

[Romney] put his talent for calm, careful analysis to work helping American businesses adapt to the onrushing challenges of globalization and technological change. Looking back, it may even be true that his ratio of jobs created to jobs destroyed was better than the economy’s as a whole.

What does this have to do with the presidency? Perhaps not much, but one thing he didn’t learn at Bain Capital was to twiddle his thumbs because taking action might make somebody mad at him. That’s not the worst qualification to bring to the Oval Office right now.

Patrick Brennan provides an example of “vulture capital”:

Since the 1960s, only one American corporation has independently begun to produce steel on a large scale, and Bain Capital deserves a good deal of the credit for its success. … Though it’s impossible to say what effect Mitt Romney’s work at Bain Capital has had on American industry overall, he can point to at least one success story in an ailing American industry: Steel Dynamics. …

Keith Busse, now chairman of SDI, made his reputation in the 1980s as an executive at Nucor, one of the largest steel firms in the U.S., pioneering a new type of steel mill, “mini-mills,” which use electric-arc furnaces instead of blast furnaces, an innovation that giants such as Bethlehem Steel had not embraced. After he was passed over for promotion in 1993, he and two of his colleagues began discussing the possibility of striking out on their own. They saw potential in mini-mill technology, which had typically been used for applications such as automobile manufacturing, as a way to produce higher-grade steel at a much lower cost. …

Just 19 months after the initial funding was raised, in January 1996, SDI began production. Seven months later, it managed to turn a profit, and the company held an initial public offering in November of that year. Bain held on to all of its shares as the company continued to grow, using the capital raised to open two new mills of different types in 1997 and 1998. …

In 1999, Bain Capital sold its stake in SDI for $104 million, generating an internal rate of return for investors of 55.4 percent (my calculation, without dividends and consulting fees). Since then, SDI has continued to grow, and it generated $6.3 billion in revenue in 2011 while employing more than 6,000 American workers. … SDI’s technology has provided a way for American steel producers to compete. The success of SDI has even helped fuel a virtuous cycle — a true job creator, Busse has used some of his wealth to endow a range of engineering professorships and entrepreneurial-studies centers at Indiana universities.

Larry Kudlow sees a troubled “company” that needs a Bain-style revamp:

There’s a very troubled company out there called U.S. Government, Inc. It’s teetering on the edge of bankruptcy. And it badly needs to be taken over and turned around. It probably even needs the services of a good private-equity firm, with plenty of experience and a reasonably good track record in downsizing, modernizing, shrinking staff, and making substantial changes in management. Yes, layoffs will be a necessary part of the restructuring.

A quick look at the income statement of this troubled firm tells the story. Just in the past year (FY 2011) the firm spent $3.7 trillion, but took in only $2.2 trillion in sales revenues. Hence its deficit came to $1.5 trillion.

Just in the first three months of the new year (FY 2012), the firm’s troubles continued. Outlays for all purposes came in at $874 billion, but income was only $554 billion.  So the shortfall was $320 billion. No hope of a self-imposed turnaround here. Indeed, both the senior management and the board of directors show no signs of making major changes to their business strategy. …

In fact, the total debt of this firm now equals its total income — an unsustainable position that suggests to many observers that future financing needs will not be met. …

Anyone operating in business knows full well that even the smartest reorganizing firms are prone to failure as well as success in our free-market capitalist system. But the customer base of the troubled U.S. Government, Inc. seems like it is desperate enough to go the takeover route.