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Making it

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A commentator looking to take down a Wall Street macher could do worse than setting his sights on Steven Rattner. The former New York Times reporter, investment banker, private equity investor, Obama car czar and general big-man-around-town has reportedly been in settlement talks with the Securities and Exchange Commission over his role in a pay-to-play scandal involving New York state's pension fund. Rattner's buyout firm, Quadrangle Group LLC, not only allegedly paid kickbacks to secure investments from the fund, but Rattner himself allegedly helped distribute a movie named "Chooch" produced by the brother of a pension fund official.

That's right, "Chooch." As in blockhead.

All of that should be fodder enough to nail Rattner, who was busy promoting "Overhaul," his book on the auto bailout, when news of the settlement talks broke. But while stones were certainly thrown, they were provoked less by Rattner's entanglement in a very real pay-for-pay scandal than by the amorphous fact that he lives in what big-cheese Time magazine columnist Joe Klein dubbed "Private Equity World."

That world, in case you're wondering, is "a particularly shady and opaque precinct of Wall Street where gazillions have been made through leveraged buyouts that have caused nothing but pain in the middle-class neighborhoods of America." Klein provides no examples, of course. That private equity is a near-criminal enterprise is an idea much of the media accepts on faith. Indeed, Klein rolls out Rattner and "Private Equity World" as one of the reasons voters are "rebelling against expertise this year." (Don't ask.) He explains that too many recent presidents have populated Treasury with people like Rattner -- "financiers who gained fame by making deals rather than by making products" -- and "disastrous chicanery" has ensued. Hank Paulson and Bob Rubin are his two big examples, but he throws in Tim Geithner too, noting, that "he never was a Wall Street dealmaker, but he comes from that world."

How so, Klein never explains. But he praises George W. Bush's hiring of Paul O'Neill as his Treasury secretary because O'Neill "came from the world of manufacturing." (He was Alcoa's CEO.) Geithner's sin is that he never made anything or worked for a company that has. The message: Making is good; dealmaking, bad.

It's not surprising that during a recession the media would romanticize manufacturing, with its imagery of ordinary people earning a livable wage as they produce something useful at the local plant. But the notion that Wall Street somehow has a monopoly on "disastrous chicanery" is laughable, as big corporate scandals from a few years ago -- Tyco, Adelphia, Enron, WorldCom -- make clear. The media's memory, however, is short. Indeed, the same sort of reverence for manufacturing CEOs in which Klein indulges runs through a takedown of Rattner by yet another big-cheese columnist, The New Yorker's Malcolm Gladwell.

In his review of "Overhaul," Gladwell is incensed that Rattner had the temerity to fire Rick Wagoner, CEO of General Motors. From where Gladwell sees it, Wagoner saved GM, not Rattner and his paper-pushing cohorts. While Wagoner reached a historic agreement with the United Auto Workers and improved GM's cars, Rattner's Team Auto "engaged in an act of financial engineering: It used the power of the bankruptcy process to rid GM of some of the liabilities that had been holding it back." How hard is that? "At the end of the day, cleaning up a balance sheet is cleaning up a balance sheet."

Gladwell insists Rattner offed Wagoner because private equity types "see themselves as smarter than the managers of the companies they are buying." To that end, Rattner wanted to think of himself as more than just "a mere financial engineer." He wanted GM to be seen as "his" (emphasis Gladwell's).

But Gladwell ignores two salient facts: Despite Wagoner's accomplishments, there was a political imperative to oust the private plane-flying CEO of a company seeking a giant government bailout. And Wagoner, who was ultimately fired by the White House as much as by Rattner, was on record as fiercely opposing a bankruptcy filing.

In the end, bankruptcy saved GM. Maybe it was just financial engineering, but it worked. So why skewer Rattner for that? Getting involved in "Chooch" was a far dumber idea.

Yvette Kantrow is executive editor of The Deal magazine.