Tag: economic meltdown

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Bail Outs Revisited

In previous posts, I have supported bail outs for our banking system and auto makers because of the fried economy. I still think government intervention is a good emergency tool to use to prevent a complete collapse, but because of politics, the bail outs turned out to be a bad idea. It reminds me of a panhandler asking for a couple of bucks to “get something to eat” but you know he or she is just going to use to buy a 40 oz. At some point you have to say no.

I think the factors that play into a decision for government intervention should be based on the national interest. It’s like the old moral situation that if you knew something bad was going to happen and could prevent it, but it might lead to your death, would you still act?

There really is no debate that the economy is a foundation of a peaceable livable society. Look at all the countries that have poor economies – they tend to have bad political and social situations.

The banks need some infusion of cash to keep them open because it might have led to a domino effect – one fails then they take others with them. Part of that is confidence. The reason the Great Depression was so “great” was because of a lack of confidence and government intervention at the time helped restore some confidence.

The auto industry is a different interest based on the number of people employed not only making the cars but those who supply the makers and the subsidiary economy dependent on the industry. For 2 or more of those companies to fail would hurt big time. Probably as bad as the rust belt era of the 1970’s when dozens of steel makers and other heavy industries went bust putting millions out of work.

The problem I see is that once the money came in nobody seemed to work on changing or saving their business. AIG and the banks still paid their bonuses, had their lavish parties, and held on to the money for mergers. The auto makers just kept up their business as usual while Senators and Congress critters insisted that Unions take all the lumps.

So while I still think the bail outs were a good idea – I admit they didn’t work out like they were sold to us. But that’s what happens when you give away money without strings attached.

What should have happened was the large banks and AIG who were failing should have been broken up and those struggling with toxic assets should have had those assets taken off the books at their current value – why should the bank profit from their own bad decision. Bonuses should have been stopped as well as any spending not directly connected to doing their core business – like office redecoration, parties, or lobbying.

Then there would be a follow up with a review and changes, if needed, in government banking regulations to try and prevent this problem from happening again.

The auto makers should have presented a plan about how they will change their product mix and business model to reduce expenses while moving toward more energy efficient cars and trucks, as well as those that use alternative fuels. The goal is moving to a leaner business and one that will be able to compete and contribute to the move off our oil dependency.

It’s not any different than when a person asks for a business loan – you have to show a viable business plan – or you have investors who can kick you to the curb if you endanger their return on their investment through bad decisions.

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Tough Love for Auto Makers but not for the Banks

On Monday President Obama basically threw two of the three US auto makers under a bus when he announced that GM and Chrysler were at the end of their credit line from the US Treasury. It just seemed off to me that the Wall Street con-men who fried the economy, still got billions in bonuses, and whose CEOs hardly got shoved around, got better treatment than the auto makers. Maybe I am not understanding this “tough love” concept I keep hearing about.

I do understand that there needs to be a systematic change in how the auto makers operate as a condition for help but I also believe there needs to be the same kind of changes to the banking industry that actually got us into this mess – like a return to some form of The Glass-Steagall Act and reform in the bank regulatory agencies to enforce existing laws. Also the leadership of the banks that approved the actions that led to the bust should be removed and in some cases the bad banks and AIG need to be wind down and broken up.

Instead we get the removal of the GM CEO and calls for Unions to trash their contracts in an effort to reduce their wages to the same level as workers at foreign owned factories in the US. GM was given 60 days to change and Chrysler was given 30 days to merge with another company.

I just don’t see the fairness of the treatment and yes I know the businesses aren’t the same, but seems to me to be like the guy who held and fired the gun is getting a special deal while the guy driving the get away car is getting the death sentence.

I subscribe to the John Rawls concept of justice – “According to Rawls, ignorance of these details about oneself will lead to principles that are fair to all. If an individual does not know how he will end up in his own conceived society, he is likely not going to privilege any one class of people, but rather develop a scheme of justice that treats all fairly.”

As Eugene Robinson wrote in his column:

Both the credit crunch and the reluctance of consumers to spend what money they have left are the direct result of Wall Street’s atrocious misbehavior. Yet the administration’s plan for rescuing the banking sector involves generous inducements, big subsidies and the opportunity for wealthy investors to become much wealthier while assuming very little risk. There are reasons for structuring the bank bailout this way, and there are reasons to take a get-tough attitude with the auto companies. But the juxtaposition is galling — and, for many autoworkers, potentially devastating. 

Detroit Dissonance

So where is the fairness in treatment? Where is the justice? 

Maybe I’m missing something?

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There really are two Americas

While writing about the current economic melt down, I’ve mentioned that the douchebags on Wall Street that ran the economy into the ground operated under different rules than what we regular Americans do. The fact that the bankers want the taxpayer to pay for their toxic assets for a value more than the paper they are written on should be a clue. Columnist David Sirota points out even a more obvious example and one that seems to have removed the rose colored glasses from the masses, who have acted like they’ve never noticed this before. His column talks about the foundation of business – the contract.

Last month, the same government that says it “cannot just abrogate” executives’ bonus contracts used its leverage to cancel unions’ wage contracts. As The Wall Street Journal reported, federal loans to GM and Chrysler were made contingent on those manufacturers shredding their existing labor pacts and “extract(ing) financial concessions from workers.” In other words, our government asks us to believe that it possesses total authority to adjust contracts at car companies it lends to, and yet has zero power to modify contracts at financial firms it owns. This, even though the latter set of covenants might be easily abolished.

A government of men, not laws

That’s right. Contracts to pay bonuses to the douchebags who ran the economy into the ground were off limits while there is nothing wrong in throwing out labor contracts as a condition for automakers to get a loan.

Sirota also mentioned this double standard applied to mortgages:

Congressional Republicans have long supported the laws letting bankruptcy courts annul mortgage contracts for vacation homes. Those statutes help the shower-before-work clique at least retain their beachside villas, no matter how many of their speculative Ponzi schemes go bad. But for those who shower after work, it’s Adams-esque bromides against “absolving borrowers of their personal responsibility,” as the GOP announced it will oppose legislation permitting bankruptcy judges to revise mortgage contracts for primary residences.

It was equally unfunny when some talking head on CNBC recently noted that you couldn’t get anyone to run the financial industry for less than $250,000 a year. He forgot that the ones making that cash didn’t do a good job of it either. That’s why they are trying to snooker us into a bad deal on those toxic assets.

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Unions and free choice

A current issue being debated in Congress is about the Employee Free Choice Act (EFCA) which would allow workers who want to form a union to decide if they want a secret ballot election or to accept union representation just based on a majority of signatures gathered. The debate has brought out the usual arguments both for and against unions and in some cases the people against EFCA simply mislead in their arguments. One such anti EFCA effort was expressed on the editorial pages of my boyhood hometown newspaper The Findlay Courier. It made me write a letter to the editor.

The editorial starts out:

An election would happen only if union organizers submitted cards from fewer than 50 percent of company workers. But unions know they lose most elections under such circumstances. Several have stated that their policy now is to seek an election only when 65-75 percent of workers have signed a card.

Un-free choice

Yes, Unions do lose elections even after getting more than 50% of cards signed. Why would that be? I mean if the person signed a card and then voted against a union in an election, what would make them change their mind?

Too many people have been brainwashed by the focus on mobbed up unions back in the day like the Teamsters even though the mob was driven out because of the work of FBI investigations and resulting prosecutions.

Yes, Unions are only as good as its leadership and like all organizations it can be stuffed with people on power trips but a majority of Unions do work for the members and do what they are intended to do – protect the worker from arbitrary actions of an employer.

From my experience the reason most people vote against a Union is after heavy intimidation by management. How would you feel if your boss told you that if a Union was voted in, that you would lose your job. People barely existing from paycheck to paycheck end up backing down because of fear.

As I said in my letter, my mom tried to unionize a place she worked at for several years. As much as her coworkers complained about unfair wages and dangerous working conditions – when elections came up they were too scared to risk their jobs for a Union. It happened time and time again. Her coworkers would complain, a Union would come in gathering signatures, the company would get nasty, the workers would back down. It was a vicious cycle.

The truth is you can lose your job whether you have a Union or not. Most employers include a clause in employment applications that you can lose your job for any reason. It’s called “at-will” employment for a reason. The company could decide one day “Tom we need to let you go. Sorry…” and that would be it. There is no law requiring them to have a reason. As long as they weren’t stupid enough to make it look like they were doing it for racial, gender, or age reasons they can do it and there is no recourse for you at all.

A Union helps in getting a contract with an employer for certain wage and working conditions – it can’t prevent an employer from closing down or laying off people. At least with a Union if a job loss happens, the contract has provisions to help ease the damage. Also Union contracts allow for a certain progressive discipline and grievance procedures that a non-union shop doesn’t have to have. The Union’s job is to enforce the contract.

Union contracts are a compromise between the workers and management. While the company agrees to certain work rules, the Union allows the company to decide who to hire – for example. One place I worked at used temporary employees during peak business periods. The Union contract allowed this but also had a clause that if the workers worked more than certain number of total hours they had be made permanent. Also this contract wouldn’t let a worker officially join the Union unless they had been there at least 2 years. A Union contract, for most unionized places, is unique to that business.

Another misleading argument from the editorial:

Most significantly, it would almost certainly result in job losses. How far can employers be pushed, especially in the current economy, before they fall, or give up, or move to Mexico or China? There are companies that, if “card check” passes, will simply shut down any of their facilities that unionize this way.

Just as Unions fight and get pay raises and other expanded benefits during the good times, they have also given back some benefits in order to save the employer. Rarely has a Union refused to renegotiate a contract if the contract might lead to a business closing. The UAW just gave back a lot during the current economic melt down effecting the auto makers. The Union representing Cooper Tire workers in Findlay gave back some previous gains so the company would keep the Findlay plant open.

What most people seem to forget is that Unions are always asked first to give back even while management doesn’t give up anything in return. Again no matter the Union status, companies have closed or moved production out of the country.

Unions are there to protect workers and they would be insane if they didn’t make an effort to help a struggling company where possible. Again management isn’t a victim. They have to agree to all contracts or there is a strike so when they agree to the expanded contracts during the good times they are a willing party. They can always walk away.

A Courier reader commented about my letter and expressed another false argument about Unions. They wondered why they are forced to join a Union and complained their freedom not be in one is being taken away when a Union comes in.

There are 22 states that are Right-to-work states where you can’t be forced to join a Union or pay dues but are still covered any Union contract.

I agree you should have the freedom to join or not, the Union should also have the option not cover you under the contract. Since federal law prohibits a Union from doing that then Right-to-work laws are unfair. Is it really ok to get the benefit of a contract without paying for it through joining the Union or paying dues?

Here is the full text of my March 18th letter to the editor as published:

Employers harass pro-union workers

The March 12 Courier editorial, “Un-free choice,” about the Employee Free Choice Act currently being considered in Congress, was misleading.

Currently, if employees wish to form a union they have to gain signatures of at least 50 percent of their workmates and then have a secret ballot election a month or so later. In that time between the collecting of the cards and the election, management hires a consulting firm to help them scare employees into voting against a union, harassing the organizers, and looking the other way when there are illegal activities to keep a union out.

Letters to employee homes, postings on bulletin boards, and face-to-face meetings are used to threaten anyone who votes for a union. Employees are told the place will be shut down or layoffs may happen. They are told that union organizers are crooks who will steal their union dues and don’t work for the employees, etc. Organizers at work are constantly watched, and any infraction, real or made up, is documented and used to fire them or to get them to quit.

If you don’t think that happens, then you don’t have farther to look then the efforts to unionize Consolidated Biscuit in McComb. My mother tried at least three times to unionize the place in the late 1980s before she was fired. Her case went through the NLRB process for a couple of years, and like all legal cases the company wore her out and she dropped the case so she could collect her pension.

EFCA would allow the workers a choice to avoid an election so it would lessen the thuggery management is allowed to do now. I support each side being given the chance to convince workers of their position, but the current laws and rules favor management and allow them to lie and intimidate without fear of punishment. EFCA would include stronger penalties for such actions.

Forcing arbitration would lessen another stalling tactic management uses to keep out a union by not bargaining in good faith, just to drag out negotiations as long as possible.

Having or not having a union doesn’t prevent a business from moving jobs or closing plants. Just ask Cooper Tire.

Douglas Berger

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Why Cramer vs Stewart matters?

The recent spat between Jon Stewart, host of The Daily Show, and Jim Cramer, host of Mad Money on CNBC has been entertaining. It started with a scathing 8 minute video clip of the incestuous relationship between the talking heads on CNBC and the CEOs and climaxed with a face to face discussion between Stewart and Cramer on The Daily Show Thursday night. But why should we care about two TV hosts bantering back and forth like enemies on the junior high play ground? It’s because it shows a light on the problems we have in our so called free press.

As I’ve written before, the classic idea of the press is to be advocate of the people who are suppose to be objective and ask our leaders the tough questions, we, the public either would like to ask ourselves or need an answer. When the press fails to do that, as all too often happens in the corporate media of today, their reporting becomes more like propaganda than journalism.

Jon Stewart and his Daily Show staff – which by the way is a comedy show – showed in their 8 minute clip that CNBC missed the recent financial melt down even as the red flags marched down Wall Street and instead they continued to have a parade of CEOs on claiming “don’t panic”. CNBC was so caught up in having the access to all these rich guys they failed to report about the storm clouds and problems that started in the housing market in 2007.

Financial news shows are not the place to be passing off press releases from CEOs as reporting. People who trusted the network got hurt if they didn’t take action before the market melt down. As Stewart told Cramer last night on his show “This is not a game…”

As James Moore wrote on Huffington Post:

Nonetheless, reporters at the big TV networks and the major publications have no excuse. Minute by minute people like Jim Cramer are feeding crap into our culture and public perceptions and it has nothing to do with reality and everything to do with their egos. How is it that a comedian is the first person to hold accountable these cheerleaders who are promoting a team that has no chance to win and, in some cases, isn’t even in the damned game?

Analysts doing the autopsy on newspaper reporting and the corpse of mainstream journalism are constantly lamenting the fact that so many young people and an increasing number of others are getting their news from Jon Stewart and Comedy Central. Where else is there left to look for thoughtful, analytical, and insightful analysis of the issues of our day? The yuks are just a bonus. Cable news shows can proclaim “no bias, no bull” all they want but every story is framed for a purpose, which is drama and conflict. The viewers and the readers aren’t there without the dramatic tension. You might as well be watching Law and Order: Special News Unit.

And a Comic Shall Lead Them

Yes, negative press can hurt a business but journalists have a responsibility to report the truth even if that means negative reports about a business or market. An uninformed public is a powerless public and they get hurt far worse than these CEOs who stole our money. As Stewart pointed out our 401k’s capitalized their adventures.

Here is part 3 of the Stewart vs Cramer interview on the Thursday Daily Show

*Update*

Saw this bit in a column by Glenn Greenwald on Salon’s website and thought it makes the same point I was making but includes the entire press establishment:

That’s the heart of the (completely justifiable) attack on Cramer and CNBC by Stewart. They would continuously put scheming CEOs on their shows, conduct completely uncritical “interviews” and allow them to spout wholesale falsehoods. And now that they’re being called upon to explain why they did this, their excuse is: Well, we were lied to. What could we have done? And the obvious answer, which Stewart repeatedly expressed, is that people who claim to be “reporters” are obligated not only to provide a forum for powerful people to make claims, but also to then investigate those claims and then to inform the public if the claims are true. That’s about as basic as it gets.

Today, everyone — including media stars everywhere — is going to take Stewart’s side and all join in the easy mockery of Cramer and CNBC, as though what Stewart is saying is so self-evidently true and what Cramer/CNBC did is so self-evidently wrong. But there’s absolutely nothing about Cramer that is unique when it comes to our press corps. The behavior that Jon Stewart so expertly dissected last night is exactly what our press corps in general does — and, when compelled to do so, they say so and are proud of it.

There’s nothing unique about Jim Cramer

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