“Victory for the Sit-in Strikers,”
exulted the AFL-CIO blog. “Three Cheers for Workers Who Waged
the Sit-In,”
shouted another blog headline. Let’s hear it for economic
extortion!
The indictment of Gov. Rod Blagojevich wasn’t the only thing
happening in Illinois last week. Bank of America was the victim
of a concerted shake-down operation that could be replicated
around the country. Banks apparently now are expected to give
money away to failed borrowers. This could become federal policy
when Barack Obama, who supported this new example of Chicago
blackmail, becomes president.
One of the casualties of the faltering housing market is
Chicago’s Republic Windows and Doors. Bank of America cut off the
company’s line of credit in response to falling demand. “If the
bank saw some light at the end of the tunnel, maybe the bank
would have extended a line of credit,”
admitted Amy Zimmerman, Republic’s vice president of sales
and marketing. “Banks are in the business to make money and at
some point they have to make a business decision and that’s what
this is,” Zimmerman added.
In the first week of December Republic laid off its workers and
closed its doors. Under state law the company was supposed to
give two months notice, with continued pay and benefits. So the
employees launched a sit-in: “We’re going to stay here until we
win justice,” said one.
Getting laid-off a couple weeks before Christmas isn’t any fun —
I know that from personal experience. But no one was obviously to
blame for Republic’s failure: the company simply disappeared into
the vortex of a collapsing housing market. Unfortunately, these
days Republic employees aren’t alone in their economic distress.
But there was a handy scapegoat: Bank of America. Since the
institution collected $15 billion (with perhaps $10 billion more
to come) from the taxpayers, Republic’s employees argued that BoA
had an obligation to bail out Republic. “Taxpayers would like to
see that bailout money go toward saving jobs, not saving
C.E.O.’s,”
said Leah Fried, an organizer with the United Electrical,
Radio and Machine Workers of America (UE), which represented the
Republic workers. “Frankly,
it’s shameful that a bank that got $25 billion in bailout money
turns around and shuts down a factory by cutting off their
credit.” Picketers targeted BoA’s Chicago offices, chanting, “You
got bailed out, we got sold out!”
The sit-in provided an irresistible photo-op, drawing the usual
suspects, rather like a light attracts moths. Gov. “Appointments
for Sale” Blagojevich showed up before his indictment, as did
both the “Rev.” Jesse Jackson and Rep. Jesse Jackson, Jr.,
“Senate Candidate No. 5” in the Blagojevich case. Rep. Luis
Gutierrez, another Senate contender, also visited, and demanded
that the U.S. Departments of Justice and Labor investigate.
Another senator-wannabe, Rep. Jan Schakowsky, made an appearance,
while State Attorney General Lisa Madigan, yet another would-be
senator, announced that she was opening an investigation of
Republic’s labor practices. President-elect Obama said of the
workers, “I think they’re absolutely right,” adding that “these
companies need to follow through on those commitments.”
Fifteen Chicago aldermen proposed an ordinance cutting off
business with the bank and limiting any zoning changes for its
properties. Alderman Joe Moore contended that “It is outrageous
for Bank of America to cut off credit, a company’s lifeblood,”
after being bailed out. Moreover, Gov. Blagojevich announced that
the state would withhold its business from the bank: “We hope
that this kind of leverage and pressure will encourage Bank of
America to do the right thing for this business.” Cook County
Commissioner Michael Quigley promised to introduce similar
legislation.
The fact that Republic was going under didn’t matter to advocates
of this new form of financial slavery — once a lender, always a
lender. Thomas Balanoff, president of the Service Employees
International Union Illinois Council, argued that the
bank was “thumbing its nose at Congress by taking federal
recovery funds while refusing to extend credit to a small
manufacturing company with a long history of profitability.” (A
long history just like, oh, AIG, Lehman Brothers, and Bear
Stearns!) UE’s president, Carl Rosen, said, “There is always a
demand for windows and doors. But with Barack Obama’s stimulus
proposal, there will be even greater demand for the products made
by Republic’s workers. It doesn’t make sense to close this plant
when the need is so obvious.” (So obvious that lenders who would
make money in such a case don’t see it.)
Balanoff went even further. BoA’s action “contradicts and
undercuts President-elect Barack Obama’s plan to stimulate the
depressed economy by investing in weatherization of existing
homes and buildings and in other infrastructure and energy-saving
construction.” (Then why doesn’t the President-elect, or the
Treasury at his direction, write Republic a check?)
Naturally, journalists and cameramen flocked to the scene,
helping to turn the bank into the symbol of corporate
wrong-doing. Washington Times columnist Adrienne
Washington
wrote that ” a small band of factory workers refused to be
disrespected and dismissed without due compensation.” Balanoff
claimed that “what’s happening there at Republic is a much bigger
story than just these workers getting what they deserve.…Are we
gonna give billions of dollars to the bankers who put us in this
mess already? Or are we gonna use that money to have a recovery
that lifts up working families?”
ALL IN ALL, it was quite a show. Not only was Bank of America
supposedly victimizing helpless workers, but it was sabotaging
the president-elect’s yet-to-be announced recovery program. Not
bad for a day’s work. But how did Bank of America’s become
responsible for Republic’s failure?
Republic’s faltering sales caused the bank to cut the line of
credit. The latter had no control over the company’s decisions to
lay off the workers, close the plant, and fail to pay promised
benefits. Loans are just that — loans, which are supposed to be
paid back. BoA can’t remain in business very long if it gives
away cash with no expectation of repayment. After all, the fact
that so many banks made so many loans that have gone bad is one
reason the financial system is in so much trouble. As for the
bank bailout: stupid policy it might have been, but it was no
gift. The government received stock in return. If Bank of America
just gives away its new billions, it, and the financial system,
will end up in worse financial shape than before.
But the facts didn’t matter. The only question was how long it
would take BoA to give in. And surrender the bank did, agreeing
to provide Republic with a $1.35 million from the Bank of America
in the form of a “loan” that will never be repaid. “Yes we did!”,
chanted the workers as they left the plant.
BoA presumably believes that it has bought off the shake-down
artists. What, however, of Bank of America’s shareholders and
workers? Shortly after announcing its pay-off to Republic, the
bank announced plans to cut 35,000 jobs over the next three
years, roughly a tenth of its entire workforce. Who is going to
help them?
Even worse, the Republic case may trigger a new and dangerous
campaign of financial extortion across the U.S. The Community
Reinvestment Act pushed banks to make more bad home mortgages in
poor neighborhoods for political purposes. With all of the major
banks and many smaller ones receiving — in many cases over their
protests — federal funds, political hacks and union activists
now have a tool to demand that financial institutions give away
money to failing companies around the nation. Nor can more
federal bailouts be far behind. AFL-CIO President John Sweeney
lauded the workers,
saying that “Our nation cannot afford to bail out banks and
investment firms while leaving workers behind,” including not
just those at Republic but, he added, also the auto industry.
The were many good arguments against turning the Treasury and
Federal Reserve into one vast corporate soup kitchen. Indeed, it
has become sadly apparent that the administration had no idea
what it was doing in tossing hundreds of billions of dollars
hither and yon. But the Republic case demonstrates yet another
danger: inviting the government to direct where banks should
lend. If the federal bailout requires Bank of America to “lend”
money to an insolvent company ready to close its doors, then we
are descending to banana republic status. The economic ride is
likely to become much bumpier.
