Bain’s Pagliuca Tackles Financial Reform - And His Background

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By Russell Garland

Associated Press

Who wants whose autograph? Stephen Pagliuca (L) and actor/former New Kids On The Block member Donnie Wahlberg

With the private equity industry under scrutiny, U.S. Senate candidate and Bain Capital Managing Director Steve Pagliuca has decided to tackle financial regulation head-on.

He’s come up with a plan that calls for a regulatory czar to control risks across the financial system as well as registration for advisers to hedge funds and other private capital pools. And when he and the other three Democratic candidates for Ted Kennedy’s Senate seat faced a crowd recently at a Greater Boston Chamber of Commerce forum, Pagliuca included strengthening central controls over the financial system right up there with jobs and health care reform as his top priorities.

“We’ve got to fix the financial system. That’s broken,” he told the Chamber breakfast. “We need strong, national regulation and national regulation by a central control to stop systemic risk from ever happening again.”

Some doubt the effectiveness of this tactic. “Coming from a background in private equity gives him expertise in the subject of financial regulation, but voters may not believe he has their best interests at heart,” Darrell West, vice president and director of governance studies at the Brookings Institution, said in an email. “Right now, private equity ranks down with car salesmen in the voter’s eyes.”

Pagliuca, whose co-ownership of the Boston Celtics is probably a bigger draw with voters, asserts that his private equity background is an asset, not a handicap. “People want someone that gets into details and understands relationships, makes fact-based decisions and will not make political decisions,” he said in an interview. Pagliuca also cited his middle-class upbringing and his pledge not to accept campaign contributions from special interests. “I have those progressive values along with a fact-based approach and they see me as someone who can really bring jobs back here,” he said.

Still, Pagliuca prefers to talk about “venture capital” in describing his job. “I started as a venture capitalist,” he said. “I’ve probably done more venture capital deals and expansion financings than I have done private equity deals. But both are the same. Private equity companies have also built jobs.”

The candidate’s bigger problem is setting himself apart from the rest of the pack, which includes Congressman Michael Capuano and Massachusetts Attorney General Martha Coakley, the putative frontrunner and only statewide elected office-holder in the race. Pagliuca has criticized Coakley for suggesting that states need to play a significant role in financial regulation. But differences on the issues among the candidates are few.

Pagliuca said he is the only candidate “who has been on the ground building businesses, understands health care, understands the financial system and has come up from jobs like moving furniture and being the son of a teacher and an Italian immigrant family that understands the working-class people and what we need to do to get jobs back in Massachusetts.”

In pledging not to accept money from political action committees, Pagliuca joins the fourth candidate in the Democratic primary contest, City Year founder Alan Khazei. Khazei praised Pagliuca’s decision, but said, “Steve’s also self-financing his campaign. I’m financing my campaign with citizens.”

Pagliuca said he’s raising money but declined to say how much he expects to spend. “We’ll spend a reasonable amount to get the message out.”

He doesn’t have long. The Democratic primary is Dec. 8.