THE BLOG

Deregulation Defrauds Americans

07/27/2008 05:12 am ET | Updated May 25, 2011

The Government Accountability Office reported to Congress this week that, under the Bush administration, the Labor Department determined that what amounted to a 21st century case of slavery was just fine with the U.S. government.

A Labor Department investigator told the slave, a night attendant at an assisted living facility in Ohio, to file a civil suit to seek redress if she was aggrieved by her lot. And then he closed the case. With no action against the employer who had neglected to pay the woman any wages for an entire year.

Yep, that's your U.S. Labor Department working for you, the very Labor Department charged with the duty of protecting 100 million workers, the very Labor Department responsible for ensuring employers pay workers, at the very least, the federal minimum wage, and for overtime hours, under the provisions of the Fair Labor Standards Act.

The GAO report arrived in Congress in the midst of high unemployment and inflation, the subprime mortgage crisis spreading like, well, just like fear of bank failure, taking down homeowners; the former global investment bank Bear Stearns, and now IndyMac Bancorp, the second largest financial institution to fail in U.S. history. Meanwhile, the nation's two largest mortgage finance companies, Fannie Mae and Freddie Mac, are stumbling, causing havoc on the stock market. The dollar's value continues to fall, which, of course, forces the price of gasoline in the opposite direction.

This disparate collection of grim news has an important common thread: much of it could have been prevented by regulation and oversight. Even the likes of Federal Reserve Chairman Ben S. Bernanke admits that now.

Let's go back to the Labor Department report and the slave worker, for example. The nursing home conceded it didn't pay the night attendant any wages. But, it claimed, it didn't have money to give her a salary and considered her room and board at the facility to be compensation.

Yes, that's what southern plantation owners always said too: "Well, we provided our slaves with real nice room and board."

Reporting on that case and others to Congress this week, Gregory D. Kutz, GAO managing director of forensic audits and special investigations, said people who work for minimum wage, such as this woman, simply do not have the means to file suit to attempt to recover withheld wages, and precious few attorneys would take their cases for the small amount of money involved. In her case, for example, the GAO calculated the wages owed to be about $4,000.

It's completely unacceptable for the Labor Department to attempt to shift its duty to protect onto these low-wage people themselves by telling them to file suit. What Labor is saying, then, is each worker in America must fend for himself or herself because the department has no intention of performing its mandated duty.

The worker left the assisted living facility. It's still in business. It never had to pay a cent. Our government let it get away with this egregious violation. For all we know, the assisted living facility is doing the same thing to another worker. Why not? There was no enforcement last time.

That has been the policy of Republican administrations since Ronald Reagan, who announced in his inaugural, "Government is not the solution to our problems. Government is the problem."

One Republican president after the next has scraped away at every regulatory agency that could protect American citizens from abuses like corporate slavery. For example, at Labor, the number of investigations of complaints decreased from 1997, during a Democratic administration, to 2007, during Bush's second term, by a third. This was not surprising because Labor slashed the number of investigators by 21 percent. As a result, the GAO report says its six month inquiry found the Labor Department "inappropriately rejected complaints, failed to adequately investigate complaints or neglected to investigate until it was too late."

These include cases where the employer confessed to the wrongdoing. In one, for example, an employer withheld a final paycheck from a swimming pool worker in Florida. The employer admitted doing it when the Labor investigator called, and told the investigator to call back. When the investigator was unable to reach the employer after a couple of calls, he simply dropped the case and advised the $7.50-an-hour worker to sue for the money.

In other cases, the investigators just let cases sit around past the two-year statute of limitations, so the worker couldn't collect.

For decades now, Republicans and conservatives have vilified the word regulation. Look where that has gotten us: corporate slavery approved by the U.S. government while panic lines of depositors form outside banks and tens of thousands lose their homes to foreclosure.

Even the Federal Reserve has acknowledged that lenders aggressively sold deceptive loans and has now proposed that in the future, mortgage companies demonstrate that their customers could realistically afford to borrow. That, actually, sounds like regulation from a Federal Reserve that still is controlled by Republicans.

Perhaps they've gotten the message after two huge bank failures, and the wobbly condition of Freddie Mac and Fannie Mae, that regulation can prevent problems.

Maybe they should have listened to the likes of Congressman George Miller, the Democrat from California who chairs the House Education and Labor Committee, and who sought the GAO investigation of Labor, and Congressman Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee.

Frank told Washington Post columnist E. J. Dionne Jr. earlier this week, "We are in a worldwide crisis now because of excessive deregulation."

Looks like maybe he's right. The Federal Reserve adopted sweeping rules this week to stop abusive and deceptive mortgage lending practices that analysts say led to the subprime mortgage crisis. So they'll regulate today. That may prevent a future crisis.

But we're in a crisis now because of the denigration of regulation and the refusal to recognize that "free markets" are a myth created by corporations to line their pockets while making those who actually do the work less free -- like that Ohio woman who never got her $4,000 for her labor at the assisted living facility.