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Congress Bails out Those Who Shower Before Work, but not Those who Shower After Work
Congress drove the Big Three CEOs out of Washington, D.C. last week, ordering them not to return with their tin cups until they could guarantee their companies would be viable after a $25 billion bailout.
Just days later, Citigroup, a bank that had already received a $25 billion bailout in October, held its hands out for more. Within 48 hours, federal officials approved giving the bank another $20 billion and providing backing for $306 billion in its risky loans and securities. Even though Citigroup was failing just weeks after getting its first government bailout, Congress didn't subject its CEO to the public lecturing and demands for business plans that it did the Big Three.
The message here could not be more clear: Washington will bailout out those who shower before work but not those who shower afterwards.
Washington, D.C. is a white collar town. President Bush and members of Congress understand their suited counterparts on Wall Street. In fact, several prominent figures in the banking industry - including Citigroup's Robert Rubin, a former Secretary of the Treasury, and UBS Investment Bank's Phil Gramm, a former Texas Senator, - worked in Washington first, aiding and abetting the current crisis by de-regulating the financial markets and everything else they could.
Detroit, by contrast, is a blue collar town. It's a place where workers at the Big Three earn thousands of dollars -- the average production employee making $67,480 last year -- not hundreds of thousands, and certainly not Wall Street's millions. The Citigroup CEO credited with overseeing the bank's ill-fated investments, Charles O. Prince III, was forced out a year ago as the bank's massive sub-prime losses began mounting but the board of directors still gave him a $12.5 million bonus, $68 million in salary and accumulated stockholdings, a $1.7 million pension, an office, and a car and driver for up to five years. Heading the board executive committee at that time was Rubin, who would briefly serve as chairman and receive $17 million in compensation as the bank declined further into financial ruin.
Detroit is a place where workers are unionized; Wall Street is not. And right-wing Republicans and conservative pundits have made it clear they want the union workers to suffer. They want federal aid denied to the Big Three so that the firms go bankrupt. Then the companies can renege on pensions they guaranteed to retirees and can break salary and benefit promises to workers in current contracts.
Senate Minority Whip Jon Kyl writes on his web site that Chapter 11 bankruptcy would be best for the Big Three because it would enable them to break their pledges to retirees receiving health care and other benefits earned over decades of service, what he calls "legacy debts": "Like many other industries, including the airlines, the goal under Chapter 11 is to gain temporary protection, reorganize in a way to reduce legacy debts, and emerge as a more viable and competitive company."
Conservative columnist George Will, similarly, wrote: "Do nothing that will delay bankrupt companies from filing for bankruptcy protection, so that improvident labor contracts can be unraveled. . ." Will's fellow Washington Post Columnist Martin Feldstein blamed all of Detroit's problems on the unions, writing that the basic reason the Big Three can't compete: "is labor costs imposed by union contracts." He said if Congress gives the Big Three a loan, it must require "that the unions accept reductions in wages and benefits to levels that allow the firms to compete with imports and with non-union U.S. auto firms. The trustees of retiree benefits should be required to accept reductions in those benefits."
They want the unions broken. They want retirees' benefits slashed and union workers' wages and benefits cut, which, of course, will enable the foreign auto makers - whose U.S. plants are non-union - to reduce their wages. It'll be an all-American race to the bottom, rather than the preferable opposite, where workers and retirees are treated with dignity and respect for their hard labor.
None of those conservatives, however, is calling for Citigroup's Charles O. Prince III, who took down Citigroup at a cost of untold billions to taxpayers, to return his $1.7 million pension, office and car and driver.
Unlike Citigroup and the other Wall Street banks, which have their very own inside-the-beltway apologists in the form of Federal Reserve Chairman Ben Bernanke and Treasury Secretary Hank Paulson to argue their case before Congress, the Big Three CEOs had to appear before Congress to plead for themselves.
There, legitimately, lawmakers grilled them about flying to the hearings in expensive private jets and about their multi-million dollar compensation packages. Still, none of the lawmakers has asked Citigroup's CEO, Vikram S. Pandit, to take $1 for next year's compensation, as they did the auto executives. Nor have they asked any of the CEOs from the nine banks that shared $125 billion in bailout money in October to sell their private jets, as they did the auto executives.
Conservatives also argued that the Big Three should be left to die because in a free market, that's what happens to poorly operated companies offering inferior products.
Sen. Richard Shelby, the ranking Republican on the Senate Banking Committee, said, for example, "I do not support the use of U.S. taxpayer dollars to reward the mismanagement of Detroit-based auto manufacturers."
Shelby made this accusation while part of the Congress that ran up the largest federal deficits known to man and allowed Paulson to broker a deal to sell troubled Wachovia bank to troubled Citigroup -- a bank that so far got two bailouts, the first of which arriving within weeks of the failed Wachovia marriage.
Shelby, of course, has a lot to lose if Michigan does well. His home state of Alabama gave tax breaks to foreign car companies Mercedes-Benz, Honda and Hyundai to locate factories there - hardly a free market approach.
So, like many conservatives, he twists reality to suit his circumstances. He's right that American car companies made mistakes. In October, GM's sales were off 45 percent from the year before, Chrysler 35 percent and Ford 30. But he's wrong about that being a result of mismanagement alone, well, unless he thinks his precious foreign car companies made the same mistakes. Toyota was down 23 percent, Honda 25 and Nissan 33 for the same month.
And if aid denial is based on bad products, Wall Street definitely should be the first refused. Its firms built and sold what are now being called "toxic securities," products so defective that they took down banks, the U.S. economy and international financial stability -- creating the deepest economic crisis since the Great Depression. Now that's mismanagement for you!
When the representatives of blue collars went to Congress hat in hand, lawmakers insisted that to get loans automakers would have to present viable business plans. Congress didn't impose similar conditions, however, when Bernanke and Paulson went to Congress seeking grants for reckless white collar firms.
In fact, they gave $125 billion to nine big Wall Street banks in October, contending the direct infusion of money would melt frozen credit. It didn't. The firms apparently didn't lend the money, and the deal didn't require them to. There's a viable business plan for you!
Paulson and Bernanke gave insurance giant AIG $85 billion. And when that didn't work, they forked over more until it all added up to $150 billion. Now, it's not clear that will be enough to resolve AIG's problems. Sen. Jon Kyl, the Republican from Arizona who voted for the Wall Street bailout, didn't demand a viable business plan for AIG or Citigroup, yet said this about the auto industry request: "There's no reason to throw money at a problem that's not going to get solved."
This year, as Wall Street's recklessness destroyed the American economy, a million Americans lost their jobs. It's no wonder no one is buying cars. It's not just that they can't get credit. It's also that they don't have money to spend or they're afraid to spend the money they have.
Some of those furloughed had been on Wall Street. Citigroup announced recently it would cut 52,000 jobs by early next year. But of the million jobs lost so far, 100,000, or one in ten, have been auto workers or employees of auto suppliers. Unemployment in Michigan is 9.3 percent -- while in the rest of the nation it is 6.5.
Just like Paulson who couldn't see that Citigroup was too weak to buy Wachovia, the conservatives intent on denying the Big Three loans are shortsighted. They don't see that 2.3 million jobs in and dependent on the auto industry could be lost. They don't see the effect of slashing the wages and benefits of people who get their hands dirty for a living.
It would mean even more mortgage foreclosures and even more credit card debt unpaid to those struggling banks. It would mean the Big Three defaulting on the $100 billion they owe to those weak banks and bondholders, some of which is secured, some not.
It's the big circle of economic life. If Congress spits on the autoworkers and the millions whose jobs depend on the Big Three, the lawmakers may find themselves using more and more taxpayer dollars to scrub new blood off Wall Street.
Should the Government Bail Out the Big Three U.S. Automakers? HuffPost Bloggers Weigh In
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Union bashing is so very easy to pin on the bill's opponents. Look at this problem in perspective, please. I'll be the first to state that NO CEO or similar high-level executive deserves million dollar salaries, no matter what company they manage. But by the same token, an assembly line worker making more than twenty five bucks an hour is equally ludicrous. Especially note that the almighty union gets it's exorbitant cut out of the deal.
The system in Detroit has long been broken. Most, (not all) workers just want to do their eight and skate, while management's top priority is to make the numbers look good on paper. Mediocrity is rewarded while malfeasance is not subject to disciplinary action.
The result has been nothing but crap coming out of Michigan, the fault of designers, engineers and management. The fact that the crap costs more than it's worth is the fault of the UAW.
My family has been driving Toyotas and Hondas since the eighties, because prior to that our Fords and Chevys were falling apart soon after warranty expiration.
Save the Big three? Not in this corner. As a taxpayer, I have already thrown good money after bad towards the crooks that artificially conned me at the gas pump and scalped my 401k. I can give no more. Not one more dime.
This is North v. South, in every imaginable way. Something tells me that the citizens of Alabama don't want Michiganders moving down South and taking their jobs. That's exactly what would happen if the Big 3 are allowed to die.
The bailout money was to go to BRAZIL, not Detroit. I tried to post a link to the Latin American Herald article but it got caught in moderation. Bottom line: the bailout would not have helped the workers here.
Nice attempt to spin it, but the money GM was asking for was going to BRAZIL, not Detroit:
http://www.laht.com/article.asp?CategoryId=14090&ArticleId=320903
So how would this have helped OUR workers, again?
We're beginning to see that this is regionalism gone very wrong. Bail out NYC (finance) but to hell with Detroit (industry). Or just more union bashing. We should be writing headlines such as "Non-union workers destroy America" (unless there is a hedge-fund mangers local I am unaware of).
Very good article. I couldn't have said it better myself. How much will the American people put up with from this government? When is the breaking point? Too many people sitting around watching their big screen tvs when they should be standing up and shouting ENOUGH is ENOUGH for Wall Street. It's long past time to help MAIN Street.
I would think that our economy requires consumers as much as providers. Union employees make enough money to pay their mortgage, buy a new car and provide a good life for their families. Will having a servitude society bereft of spending money help our economy? People can't pay their bills, right now. Ir's that simple. Insurance, utilities, food rent, anything that you can name has risen dramatically in the last 8 yrs. Wages, even union wages have lagged in this same time. Our economy requires that someone buy the stuff. Middle class is just surviving now. When the unions get busted, wages will come down more drastically.
I can completely understand the argument that pensions and benefits and such should be stripped from CURRENT workers in any industry, unionized or non unionized.
What I don't understand is how ANYONE can justify taking away these benefits and pensions from retired workers. These workers had an agreement with the companies they worked for, they held up their end, and now people are advocating that we just leave them i the lurch. What the heck is an 85 year old man who relies on his pension supposed to DO if that just disappears? Who out there thinks this country would be better served by driving untold thousands of elderly retirees into poverty and homelessness?
Don't any of these conservatives have grandparents, or, you know, at least a SOUL? It's DIFFERENT for us younger generations. We KNOW not to depend on post retirement pensions and benefits. We realize that we probably won't get them, or that even if they are promised to us, they can be taken away. The older generations come from a time in which pensions were protected, they couldn't envision a world in which this financial promise to them would just be renegged. A young worker today is just irresponsible if they fail to save for retirement and just rely on the hope of pensions and benefits, but I think it is abhorant to hold our grandparents generation to the same standards, and just leave them out on the street.
"I can completely understand the argument that pensions and benefits and such should be stripped from CURRENT workers in any industry, unionized or non unionized."
REALLY?????? I CAN"T.
Why are democrats following along on this nonsense? Where is the demand for a plan from Wall-Street?
This all just stinks, and I wish the democrats would call the repuli-cons on it, because they would win this arguement. All the democrats have to do is to say that republi-cons want to take away seniors retirement benefits and healthcare, and they would win the arguement. This would also help with a national healthcare platform, because the automakers would be in a much better financial shape if they didn't have to worry about legacy cost.
One last thing, the foreign automakers are fairly new and do not have legacy cost such as healthcare or retirement for most of these companies, but, those that have been here long enough to have retirees, just do not have that many. Why? These companies find ways of getting rid of people before they can have enough time to retire, why? No unions. They fire at will with no protection for the worker.
The Democrats bought into voodoo economics too -- all of these people Obama is appointing were Clinton deregulators and thieves -- elevating deregulation to a religion to justify removing the regulatory scheme that protected us from this kind of collapse as those regulations were in their way when they tried to pillage the economy and become fabulously wealthy. Both parties cooperated in the whole scheme. Borrow, spend and pyramidding schemes.
Just listen to them, including Obama, and think about what they're saying. They don't have the slightest idea of how to fix this because they won't scrap deregulation or unbridled free trade. They are right on infrastructure spending, but not on giving trillions to financial institutions with no enforced accountability, no enforced transparency, no reregulation and no renegotiation of the free trade agreements. They all got so wealthy from this, they simply don't want to fix the problem.
I agree with you, both parties are responsible for this mess, but, the republi-cons have ran the ship aground. There has been too much deregulation, and we need to reverse this course, and have people be accountable for their actions. I say let those who engineered this mess go down, and save those who just got caught up in it all.
If we were to re-engineer our trade agreements that would help our economy out greatly. Let's get rid of free-trade, and have fair-trade instead.
I may be wrong on this, but, here is any idea I've had. Why not raise tariffs on products produced overseas to the point whereas their price would almost be equivalent to producing here in the U.S.? Or, in our trade agreements, insure that workers overseas are to be paid the same as those here in the U.S., this would help out everyone's economy and allow citizens of other nations to afford products made here. Just a thought for everyone. Oh, and one last thing, we should make the demands on wall-street the same as we do on the autoworkers, or main-street.
I would love to see Wall-Street take a 50% reduction in pay just like the autoworkers have done. But, we all know that is not going to happen, this is class warfare, plain and simple. The upper class are still waging a war on the working class, why is it that the little guy always has to give up something, but yet the upperclass does not?
And of course the Republicans are going to lead this charge to kill off the unions, they do not want the working class to be too "uppity" and demand a good living and benefits. They want corporate free-rein.
Why are blue-collar workers expected to compete with third-world wages? Oh, and of course the republicans in the non-union states want to see Detroit go down, it's better for them, not their constituencies, because as soon as unions go down, watch wages and benefits go down, but of course no one can see that. As always, a double-standard for blue verses white collar.
It's important for Labor to be aggressive at this moment and stop attempting to act as if it's already given up too much and will make an effort to compete on the terms the deregulatory vermin are attempting to force.
Social Security -- as a result of US policy -- is only designed to be a supplemental pension, not an adequate pension for a retiree to live on. Health care is not provided until you reach 65 and even at that time is very expensive for someone living on Social Security. Long standing US Labor Policy has been for US workers to obtain from their employers, through collective bargaining, pensions and health care. In the rest of the industrialized world, adequate pensions and free health care are provided through broad based taxes, so the companies who compete with Detroit in the industrialized world don't pay for workers' health care and pensions. So of course US workers get paid more per hour (when those broad tax benefits are factored into dollars per hour) than their counterparts at other auto companies. So if they want to declare bankruptcy to get out of the agreements and take away pensions and health care for "competitive" reasons, then a broad based tax must be applied so that all workers get adequate pensions and health care.
Obama's voodoo economics crowd removed regulations designed to prevent the current calamity so they became fabulously wealthy. Labor must make Obama and the media listen and create a social democracy.
The reason they are saving the banks but not the car makers is that everyone needs a bank, especially employers, and banks are dependent on each other. But not everyone needs a car. 50% of the working population commutes five miles or less to work. http://1world2wheels.org/get-involved
Conservatives don't like unions, but that's a separate issue.
I could not disagree with you more. And I think you are missing the point. If you bank which is a historically unscrupulous industry, you create wealth by loaning money. You produce nothing to add no value. You simply facilitate the financing of other ‘Real’ projects. I will agree that this is important but it is not the only important thing.
I work for a major manufacturing company. We have plants all over the world but the plants in the states continue to dwindle. In 10 years my division has closed 6 or 8 US plants while expanding or opening 5 or 6 in Mexico and China. The corporate office is still in the states and our corporate campus, once the site of a plant, has nothing but pencil pushers, myself included. There is a real feeling from the people at the plants that we add no real value and that Corporate especially only spends money.
Perhaps it is time we start outsourcing Executive jobs overseas for pennies on the dollar. We could pay an Indian CEO 1 million a year in total compensation and the remaining 19 million could go to the actual workers.
You make one heck'uva point, and I agree.
Something I don't think people are seeing, is that corporations want us to work for third-world wages, because that is who we are competing with, it is a race to the bottom. If, we in America, continue to stand for this, we will continue to see our standards of life diminished until we become a third-world nation.
We have to draw a line of what we are willing to accept for the American populace, and ensuring a strong unionized America should be the start, because, the union is nothing more than average Americans being able to stand up for themselves, and we shouldn't allow corporations/republi-cons to destroy that.
"You simply facilitate the financing of other 'Real' projects." Simple, yes, and pretty much indispensable. Cars are not indispensable, at least not the way they are used today.
I think you're skirting the issue on outsourcing jobs. If you want higher wages than they have in Mexico, China and India, you need to add more value than they do in those countries. A bailout for car companies won't help with that. What the government can do is to provide better education. The unions could play a role with that.
So what happens when "legacy costs" are cut out? How do these retirees maintain any level of support? Many pension plans include employee contributions with an employer matching contribution. Renege on the pension plan, and it's literally stealing from the employee.
I guess we've just opened up a new class of the working poor.
Agree 100%.
Members of the Bush administration (and would-be Obama administration) lined up to "solve the crisis on Wall Street," but became fiscally conservative and market-acolytes when it came to the Big Three! Folks who make millions (billions!) are in trouble, so let's help 'em out. Carmakers in the North -- who cares?!? Let's lecture them on good business practices! NICE!
1. Actions by banks and other financial institutions are not just "bad business practices" (as in something to be included in an economics textbook), but examples of greed and often illegality -- faciliated by deregulation and friends in Washington -- that merit prosecution under civil and/or criminal law because they destroy Americans' lives.
2. Americans must understand that their choices as consumers have real consequences for their country. Buy cheap with no consideration of what that means -- and there are real effects on this country.
3. We have to end two auto industries in the United States. The Big Three have to clean up their act, but so do Southern states that do everything to lure European and Asian automakers to their union-hostile states.
4. It's time to stop embracing free-trade-that-is-not-fair-trade. If a country has national/free health insurance, its companies are not on a level playing field with American competitors who shoulder that cost.
5. Union-bashing (arising from real problems) has to stop.
With all due respect, to Senator Shelby, Alabama offered a stunning $253 million incentive package to Mercedes. Additionally, the State also offered to buy 2,500 Mercedes Benz vehicles. All told, it is estimated that the incentive package totaled anywhere from $153,000 to $220,000 per created job. On top of all this, the State gave the foreign automaker a large parcel of land worth between $250 and $300 million, which was coincidentally how much the company expected to invest in building the plant.
Where was his outrage when all this was going on? I certainly don’t recall him going in front of the nation (as he did this past Sunday) to discuss what a big mistake Alabama was making in providing subsidies to Mercedes Benz. If he had, however, he could have talked about how, applying free market principles, Alabama shouldn’t have had to resort to subsidies to land Mercedes Benz. Competitively speaking, if Alabama had been the strongest candidate under consideration (i.e. highest quality infrastructure, workforce, research and development facilities, business climate, etc.), then subsidies shouldn’t have been required.
Wow!
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