• With: Kim Strassel, James Freeman, Dan Henninger, Matt Kaminski, Bret Stephens, Joel Kotkin

    This is a rush transcript from "Journal Editorial Report," May 19, 2012. This copy may not be in its final form and may be updated.

    PAUL GIGOT, HOST: This week on the "Journal Editorial Report," fresh from a high-dollar private equity fundraiser, President Obama attacks Mitt Romney for his ties to private equity. When will Romney fight back?

    Plus, Greece on the brink. What its exit from the Euro would mean for the U.S. economy.

    And as California's deficit woes broke, can Governor Jerry Brown tax his way back to fiscal health?

    Welcome to the "Journal Editorial Report." I'm Paul Gigot.

    Fresh from a fundraising swing through Manhattan, which included a stop at Part Avenue apartment of private equity big wig, Tony James, President Obama rolled out a long expected attack on Republican rival Mitt Romney's ties to, well, private equity. The campaign released an ad blaming Romney and his former firm, Bain Capital, for the 2001 closing of GST Steel in Kansas City.

    (BEGIN VIDEO CLIP)

    MITT ROMNEY, R-PRESIDENTIAL CANDIDATE: I know how business works. I know why jobs come and why they go?

    DAVID FOSTER, LOCAL NEGOTIATOR FOR GST STEEL WORKERS: Bain Capital was the majority owner. They were responsible. Mitt Romney was deeply involved in the influence that he exercised over these companies.

    UNIDENTIFIED MALE: They made as much money off it as they could and they closed it down and they filed for bankruptcy without any concerns to families or to the communities.

    JACK COBB, STEELWORKER: He was like a vampire. He came in a sucked the life out of us.

    (END VIDEOTAPE)

    GIGOT: Joining the panel this week, Wall Street columnist and deputy editor, Dan Henninger; assistant editorial page editor, James Freeman; and Washington columnist, Kim Strassel.

    Kim, you spent all week looking into the story, the closing of that steel plant in Kansas City. Why don't you tell us what the facts are? The reality of what really happened?

    KIM STRASSEL, WASHINGTON COLUMNIST: It's not really the ad. You have -- 1993, the steel industry is a wreck. Hundreds of thousands have been laid off. Companies losing billions of dollars. And you have this plant in Kansas City -- which I spoke to someone who was vice president at the business before and after the Bain acquisition. This plant was going to be closed back in 1993 unless they found a buyer. Bain came in. They felt there were some product lines that might give it a competitive edge. They invested more than $100 million. In the end, it didn't work out. This was a heavily unionized business and they could not compete on the world market when prices plunged again in the 1990's. They ultimately went bankrupt. What Bain did do was gave it an extra eight years of life.

    GIGOT: So this plant would have closed without the investment from Bain Capital?

    STRASSEL: That's the argument of the vice president, who was there, of the business, who was there before Bain came in. He said, the decision had already been made, if we couldn't sell it, we were going to closer.

    GIGOT: What about the larger story of Bain. You spent months looking into it, the overall portfolio and investment, how well they did. Is this a success story or a story of rapacious vulture vampire?

    (LAUGHTER)

    Pick your adjective of capitalism.

    JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: They are capitalists who want to make money. But it is a good story. This is kind of the story of the campaign. There is a good story for Romney if he wants to tell. You keep waiting for him to come out and --

    (CROSSTALK)

    GIGOT: What is the story?

    FREEMAN: The story is, by any measure, this is a wealth and a job creator over time. They backed Staples early on. 90,000 people work there now. Thousands work at a company called Bright Horizons, the child care center. Even the steel industry. Steel Dynamics, they basically created - - now employs thousands of people.

    GIGOT: Another steel company.

    FREEMAN: Another steel company. Even within the steel industry, Bain appears to be a net job creator, which -- how many people can say that in the steel industry?

    GIGOT: One of the things that private equity does, it investigates in companies that are down on their luck, that have maybe poor management, that aren't doing well, and tries to turn them around.

    FREEMAN: Right.

    GIGOT: Sometimes it works, sometimes it doesn't work.

    DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: So what does this ad tell us about the Obama campaign? That ad -- after listening to Kim describe what actually happened -- that ad is a piece of propaganda. OK? And he's talking about an event many years ago because he cannot talk about the economy we have in the here and now. The Obama campaign is essentially going to be five months of propaganda.

    Now, the thing about that, it can work. And if Mitt Romney doesn't provide the facts and answer to this, he's going to be spun in a way he will not realize is happening to him.

    GIGOT: Well, Kim, it's pretty clear that the Obama campaign is trying to define Romney right now, in this early stage of the general election campaign, and go after him on the strength that Romney claims for his campaign, which is, I know how to create private-sector jobs. This ad goes right to the heart of that claim. How -- how much impact could it have?

    STRASSEL: Well, it's huge. And you're right. He's invited it. What he's done is say, I can do this. And the Obama campaign is saying, actually, look at your experience and you've taken the wrong lessons from your experience. You know how to shut plants down and extract capital from them.

    The problem that Mr. Romney faces, he's not engaged on this. He seems to know they want to touch this issue and he's going to have to defend himself. The problem is he may not want to get into a back and forth about the details of GST Steel, but what he needs to do is talk about the value of private capital, the facts behind risk taking and how an economy works and makes the case. If he doesn't, it's a huge claim left unanswered and it goes to the heart of his credibility.

    GIGOT: Let's show the ad that Romney is running. This is their first big ad of the general election campaign. Let's watch.

    (BEGIN VIDEO CLIP)

    AD NARRATOR: What would a Romney presidency be like? Day one, President Romney immediately approves the Keystone Pipeline, creating thousands of jobs that Obama blocked. President Romney introduces tax cuts and reforms that will reward job creators, not punish them. President Romney issues an order to begin replacement of Obama-care with common-sense health care reform. That's what a Romney presidency will be like.

    ROMNEY: I'm Mitt Romney and I approve this message.

    (END VIDEO CLIP)