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Tuesday, December 09, 2008

Banks Buy Banks, Workers Get Screwed

The signs say it all. At a nondescript industrial building, sided with corrugated metal, workers display signs that read "Respect Federal WARN Act Law," "You got bailed out. We got sold out," and "$Billion$ for Bank of America, $0 for workers."

The building is the Republic Windows & Doors plant in Chicago and the signs are held by former workers, let go after the company lost its line of credit with Bank of America. The company gave them three days' notice and no severance -- federal law requires 60 days notice and severance. That's the WARN act referred to on the signs. The workers, clearly getting screwed illegally, staged a sit-in and effectively took over the building.

What happened next was unexpected, at least for the workers. "We never expected this," factory worker and union VP Melvin Maclin told the New York Daily News. "We expected to go to jail."

What Maclin and the rest of the Republic workers didn't expect was strong political and governmental support. Political realities in America are quickly correcting themselves after years -- perhaps decades -- of wrongheaded top-down economic theory. The economic crisis is making realists of us all.

"When it comes to the situation here in Chicago with the workers who are asking for their benefits and payments they have earned, I think they are absolutely right," President-elect Barack Obama said sunday at a press conference. "What’s happening to them is reflective of what’s happening across this economy." He went on:

When you have a financial system that is shaky, credit contracts. Businesses large and small start cutting back on their plants and equipment and their workforces. That’s why it’s so important for us to maintain a strong financial system. But it’s also important for us to make sure that the plans and programs that we design aren’t just targeted at maintaining the solvency of banks, but they are designed to get money out the doors and to help people on Main Street. So, number one, I think that these workers, if they have earned their benefits and their pay, then these companies need to follow through on those commitments.

And it's those current "plans and programs" which are the problem here. Not only are they solely "targeted at maintaining the solvency of banks," but they're a multi-billion dollar giveaway without strings. Out of $350 billion handed out in the first round of a $700 billion total bank bailout, only $15 billion is left. According to the Associated Press, "Treasury Secretary Henry Paulson, who is overseeing the program, is weighing tapping the second $350 billion. The main goal of the program is aimed at getting financial institutions to lend money more freely again, which would help revive the economy."

But they aren't lending money. They're using the bailout funds to buy other banks. When "too big to fail" is basically the heart of the problem, allowing them to become even bigger seems stupid beyond words. "[B]anks, both privately and publicly, aren’t talking about helping the economy," reported the investigative jounalism site ProPublica. "They’re talking about helping themselves... The government's investment in the banks, of course, comes with few strings attached and no requirement on how the money can be used." It's a simple calculation; "too big to fail" today may not be "too big to fail" tomorrow. Corporate growth is an insurance policy. Monopolies won't be allowed to go under.

With companies struggling as it is, the absence of available credit is unbearable for many -- like the construction dependent Republic Windows & Doors. Since the idea of the bailout was to increase available credit, we can trace the closing of the Chicago plant directly to the credit crunch. After cutting off Republic's line of credit, Bank of America approved a $50 billion takeover of Merrill Lynch. It had previously acquired LaSalle Bank and Countrywide. Bank of America received $15 billion in bailout funds in November. With the acquisition of Merrill Lynch, they got $10 billion of their bailout bucks -- call it a rebate.

Republic Windows & Doors would've needed somewhere in the neighborhood of $10 million to continue operations. That's chump change to BoA at this point.

Where the feds under Bush wouldn't act, the State of Illinois did. Gov. Rod Blagojevich -- arrested this morning on unrelated charges -- suspended all state business with BoA, Chicago's second-largest bank. Illinois Attorney General Lisa Madigan announced an investigation into the plant closure.

Even after such disastrous consequences for working families, the Treasury seems unlikely to change the merger-mania that their bailout has inspired. In November, they all but announced they were all for it.

Associated Press:

The Treasury official overseeing the federal $700 billion financial bailout plan yesterday defended banks that want to use the government's money to buy competitors.

One of the first deals announced was last month's acquisition of National City Corp. by PNC.

Treasury doesn't want to "micromanage" banks that receive capital infusions under the bailout, Assistant Treasury Secretary Neel Kashkari said at the Wharton Finance Conference in New York.

"Prudent mergers and acquisitions can be good for our financial system and our communities," Kashkari said.

How good was it for the community of Chicago, Illinois? Those people with those signs would probably tell Kashkari "not very." As things are, they're considering spending Christmas occupying the plant.

But wait, there's more. This story may have a happy ending -- at least, for the family who owns Republic.

Chi-Town Daily News:

A company managed by the wife of Republic Windows and Doors owner Richard Gillman recently purchased an Iowa plant that manufactures similar products, according to public records.

Gillman has come under fire in recent days for abruptly closing Republic's Goose Island plant and refusing to provide workers there with the 60 days notice and pay required by federal labor law.

Echo Windows and Doors was created two weeks ago and lists Sharon Gillman as its manager, according copies of records obtained by the Daily News from the Iowa Secretary of the State. According to Cook County property tax records, Sharon Gillman is Richard Gillman's wife.

It's a Christmas miracle! Warms your heart, doesn't it?