As the first significant snowfall of the year envelops the land in a shroud of white, I read that workers at Chicago’s Republic Windows and Doors have occupied the plant where they worked and were abruptly laid off last week. Leah Fried, an organizer for the United Electrical, Radio and Machine Workers of America Local 1110 said workers are occupying the plant in groups of 30. She explained:
They’re staying because the fact is that these workers feel they have nothing to lose at this point. Telling them they have three days before they are out on the street, penniless, is outrageous.
Company officials, of course, could not be reached–at least by the press. The union, however, maintains that Republic broke the law by not giving them 60 days notice and also owes them $3,500 in severance pay.
The snow was falling in Chicago also as a local television station ran a trailer announcing a winter storm warning above a report on the factory take-over. In the gray light, the flat-roofed, metal-sided factory became a giant backdrop for a group of workers protesting outside a factory door. Bundled in winter coats, sticking caps, scarves and blankets the steam of their breaths symbolized their anger. As reporters interviewed workers and speakers fired up the crowd, the printed signs they held pointed to the true culprit in the case:
Billions for Bank of America, $0 for workers.
Bank of America you got paid out we got sold out.
Workers zeroed in on the bank because they claimed it had cut off credit to the company. A Bank of America official issued a statement whose precisely vague language all but confirmed the charge:
Because of our client confidentiality obligations, we cannot comment on any individual clients’ situations. Neither Bank of America nor any other third party lender to the company has the right to control whether the company complies with applicable laws or honors its commitments to its employees.
Of course it did not take long for the facts to emerge, even if the bank wasn’t talking. It turns out Bank of America canceled a $5 million line of credit.
The workers found support in none other than Barack Obama, who issued one of his trademark eloquent orations in defense of the sit-in:
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. What’s happening to them is reflective of what’s happening across this economy. 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.
The Real Lawbreakers
What is interesting about this incident is that Bank of America already is a lawbreaker subject to federal prosecution as one of three banks who are violating a rule that prohibits banks from controlling more than 10% of the market. The canceled line of credit also pales beside the pay of top officials of the bank that had accepted government bailout money. The line of credit Republic needed represented just 5% of their annual salary of Bank of America’s top seven officials.
A search for background on Bank of America can turn up some interesting information. For example, this past summer it laid off 7,500 people after it gobbled up mortgage broker Countrywide (we’ll come back to Countrywide in a bit}. Then a few thousand more were laid off in October when BOA acquired Merrill Lynch. At that time CEO John Thain stated:
We haven’t mapped it out in terms of actual number of people, but we are committed to saving $7 billion across the combined platforms, and that will be a challenge. Between our two companies it will be clearly thousands of jobs.
That’s not the end of the story, in fact in circle back to Chicago because Bank of America bought Merrill Lynch using some of that bailout money. Even though BOA was already in violation of the law at the time, the Bush Administration did not stand in the way of the $28 billion deal. Let me repeat that’s twenty-eight BILLION–but they won’t extend a $5 million line of credit.
This was two months after the following story in Computerworld:
Bank of America Corp. plans to lay off 9,000 to 10,000 employees in the next 12 months, company executives said last week, but it will expand its investments in technology – including an additional $70 million for e-commerce projects.
Beginning to see a pattern here? That’s approximately 17,500 people laid off by BOA in the last year! But the big shots at the top continue to keep their jobs and rake in their unconscionable salaries.
The Connections
It is a truly American story that a few workers in a struggling window and door manufacturer should expose the systemic dimensions of this financial crisis–and in the middle of it all is America’s largest bank.
Among those workers on strike in Chicago there are probably a few who are sitting on mortgages that are close to the foreclosure stage. Given Bank of America’s size and its involvement in the mortgage market, it is possible their mortgages are with BOA, as are those of a lot of other Americans.
This leads us back into the thicket of the subprime crisis where all this started. Bank of America has been in the subprime market for some time. There are some other not-so nice names for subprime lenders like “loan sharks” and “predatory lenders.” Back in 1997 William J. Brennan, Jr., Director of the Home defense program of the Atlanta Legal Aid Society, stated:
We have financial apartheid in our country. We have low-income, often minority borrowers, who are charged unconscionably high interest rates, either directly or indirectly through the cover of added charges.
A 2003 report by the Georgia Legal Aid Society on the history of subprime lending explains why lure of this market:
Predatory mortgage lenders purposely engage in other abusive lending practices that effectively allow the lenders to collect hidden, indirect interest and thereby increase and enhance profits.
Predatory mortgage lenders purposely target vulnerable elderly, minority, low and moderate income, and women homeowners with high cost abusive mortgage loans.
Elderly homeowners, who tend to have substantial equity but live on fixed incomes (social security and retirement benefits), are perhaps the principal targets.
And guess who got into the subprime market in a big way?
The recent history of Bank of America is illustrative. NationsBank acquired C&S National Bank which owned C&S Family Credit. In November 1992, NationsBank Corporation purchased Chrysler First. NationsBank combined C&S Family Credit with Chrysler First and called the new company NationsCredit. Later NationsBank acquired Barnett Bank which owned a subsidiary, EquiCredit. NationsBank then merged with Bank of America and is now known as Bank of America. It engages in sub prime mortgage lending through NationsCredit and EquiCredit.
And guess when this floodgate opened? In 1999 with the repeal of the Depression Era Glass-Steagall Act, which sought to curb banking abuses. Interestingly a key piece in this puzzle comes from a 2000 Congressional hearing conducted by none other than James Leach, whose name is on the bill that repealed Glass Steagall. Brennan testified before Leach’s committee:
There is an article in the National Mortgage News, ”Banks Take Over Subprime. Banks now control five of the Nation’s top ten subprime lenders.” Among the top 25 subprime lenders in the third quarter of 1999, ten are owned by either a bank or a thrift. A year ago, just three of the top 25 were owned by depository institutions. Banks aren’t distancing themselves from these predatory practices, they are plunging in with both feet.
The next thread we all know–the collapse of the subprime market. But along with that collapse a dark side of the American economy has suddenly begun to see the light. In October the attorneys general in California, Florida and Illinois announced the largest settlement in predatory lending history, one that puts to shame a $484 million settlement with Household Finance Corp. in 2002. And guess who the settlement was against? Bank of America.
Bank of America has agreed to rework the terms of up to 400,000 distressed mortgages nationwide starting Dec. 1 to settle lawsuits and investigations pending against one of its subsidiaries.
The story hinted at what the settlement would cost BOA:
It could save $8.7 billion for customers of Countrywide Financial, the nation’s largest mortgage lender before it was hobbled by subprime loans and bought by Bank of America.
Remember that BOA had just acquired Countrywide this year. You have to ask what were they thinking when in the midst of the ballooning financial crisis the nation’s largest bank acquires one of the sleezier loan sharking operations around? The only answer is one word: greed.
A month after the settlement over loan sharking, BOA starts putting the muscle on operations like Republic. Can you connect the dots?
The Final Thread
So along come a bunch of factory workers who have been kicked out of their jobs because a window company cannot pay their salaries. The reason the window company is in trouble is because the housing boom that once served as the main market for all those windows has suddenly dried up. The workers at the window company are done in by the very bank whose predatory lending caused the problem in the first place.
What the Republic story illustrates is how the financial crisis is rippling through America. Banks get involved in predatory lending in a big way after the repeal of Glass-Steagall. They get in over their heads and then the bubble bursts, as happens to all such speculative schemes. Foreclosures increase, which in turn puts a glut of houses on the market, lowering the value of all homes. As an aside if you are like me you probably received your property tax statement recently or soon will. For the first time in my lifetime and during my parents’ home-owning lifetime, the value of my home dropped–by 6%. This gives you some idea of how much home values are decreasing.
Meanwhile with a glut of houses on the market and home values dropping the ripples threaten to become a tidal wave. One of the bedrocks of America’s economic boom–the home building industry–takes a big hit. In October the Commerce Department reported construction starts fell to the lowest rate since the Department began keeping statistics on them in 1959! Think of all the people impacted by that: carpenters, real estate agents, electricians, plumbers (yes, Joe your candidate’s own advisor, one Phil Gramm is responsible for your troubles not Barack Obama), and finally the sellers and producers of all the materials that go into those homes like Republic.
But the tidal wave does not end there. If property taxes go down that will impact one of the chief ways of financing local schools and governments. Schools and municipalities began raising property taxes awhile ago because of the great tax revolt which cut income taxes to the federal government and states thereby forcing them to cut aid to schools and local governments. In order to keep services at an acceptable level, property taxes began to rise.
Back in 2005, the Center on Budget and Policy Priorities noted:
Local policymakers have not been able to lower property tax rates as much as they might have desired as property values rose and incomes declined during the economic downturn because they faced underfunded mandates from the federal government and decreased state aid. For example, the cost to states and localities of underfunded federal mandates (such as the No Child Left Behind education law) exceeds the total amount of property tax increases over the past four years. Total property tax collections increased by $67 billion from 2000 to 2004, while unfunded mandates to state and local governments cost $73 billion from fiscal year 2002 through fiscal year 2005.
For awhile these rising property taxes produced just the impact that would gladden any right wing Republican: tax revolts spread like wildfire across the country as people put pressure on units of government to lower property taxes. If local government cannot provide essential services who can? Business. So we have the move toward privatization and proposals such as school vouchers.
It’s Starting
The sit-in at Republic is capturing so much public attention because suddenly Americans are waking up, as if from a long sleep, and realizing the where the ripples started. Instead of revolting against government they now are turning to government as their only hope in this crisis because, although they may not articulate it, they know government–not the market–is the only way to keep the playing field level.
Now we have a moment that cries out for some serious jawboning. If Bank of America or any other banks involved in the so-called bail-out should become involved in similar actions, the government should rescind any further bailout payments and threaten to prosecute those banks for misuse of federal funds. If bailouts are going to be used to finance layoffs, we should and tell them no more help unless you start helping the American people. It is also time to begin investigating some CEOs.
But those signs held up by angry workers show they are not happy with the way government has handled this crisis so far. The Bush strategy towards the crisis has been based on the same trickle-down economic premise that has governed his party for over a century, the premise that was shown to be wrong by the 1873, 1893 and 1933 Depressions. Unfortunately some “Democrats” bought into this and the crisis is increasingly showing the error of their heresy.
Those workers in Chicago won’t stand for any more trickle-down economics and neither will others. We forget that as the Great Depression worsened radical movements spread through America leading many to worry about the future of our democracy. The Republic sit-in is important because it should be a warning to the incoming administration that if top-down does not become bottom-up and a playing field that has become badly tilted is not put back on an even keel, we will see more similar events.
The Republic sit-in should tell us that the fuse has been lit and whether this country will explode into a wave of similar wildcat strikes is now an open question. Clearly George Bush, like Herbert Hoover, is determined to hold on to his discredited principles even as the country threatens to explode.
A handmade sign held by one of the workers says it all:
Bank of America=$25,000,000,000. Workers= 0. HELL NO! It’s time to stand together.
He wasn’t just speaking to his union brothers and sisters or the people of Chicago; he was speaking to all of us.
Postscript:
For more in this story check out Drinking Liberally in New Milford. This was my first knowledge of the Iowa deal that really made the workers angry.
The Ending:
As everyone knows, this crisis was settled. Here is the NY Times’ description of the terms:
Bank of America, which had cut off financing for the company, Republic Windows and Doors, said it would lend the company $1.35 million to help it meet the demands of the disgruntled workers. In addition,JPMorgan Chase, which owns 40 percent of the windows company, pledged an additional $400,000.
The money will enable the company to pay 60 days of severance to more than 200 laid-off workers, who had been occupying a warehouse on this city’s North Side, as well as vacation time they had accrued but which the company had previously said it would not pay, union officials representing the workers said.
The snow has stopped for awhile.
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