Saturday, December 13, 2008

Bailout/handout

Photo credit: NYT

OK, so the drama at Republic Windows and Doors in Chicago is well documented (e.g. see links below). Somehow this relatively small operation hit the country's current zeitgeist and became emblematic of a number of concerns, including the economic downturn, possible loss of jobs, hints of outsourcing, bailing out the big vs. bailing out the small, etc., etc. And of course the usual suspects piled on - the unions, Rainbow/PUSH and Jesse Jackson; soon followed by a horde of politicians e.g. Representative Luis V. Gutierrez (D-IL), State Attorney General Lisa Madigan, and Governor Rod Blagojevich (thought these last two ended up being distracted by another, unrelated small matter i.e. the arrest/indictment of the Governor).

What this blogger is interested in is the role of Bank of America. The company had a line of credit from this lender, which it had maxed out. Apparently the business was not viable - it had been shrinking, etc. and the owner discussed shuttering the factory. Faced with this prospect the bank refused to extend further credit to the company. After closing the factory (perhaps in violation of a rule requiring a 60-day notice to workers) the owners told the workers they would not pay them severance, for their accrued time off, etc. The owner craftily attempted to shift responsibility, blaming BofA.

The workers readily bit on this - most coverage has copious quotes from effected workers re how they weren't getting the severance they were due because of the bank! And, having daily seen news re the TARP and the "bank bailout" for the past couple of months, it wasn't long before the "billions for the banks, nothing for the workers," and "you got bailed out, we got sold out" placards, sound bites, and remonstrations started. BofA finally caved under the political pressure and "loaned" Republic USD 1.35 million to make the severance payments to its workers, who have claimed "victory"...

OK, so these folks are in a very hard spot, not surprising that they would clutch at any and all straws available. However, this blogger would like to know what the politicians' excuse is for their stupidity... The moneys received by the banks are "ostensibly "loans," and the politicians insist that these be paid back so that the people/government eventually are made whole. One might suppose that this implies that the banks should use these monies wisely (or at least more wisely than they did in the run up to the crisis). Making a USD 1.35 million "loan" to a shuttered company knowing that the money will not be paid back (in fact they are unlikely to get back the USD 5 million loaned earlier!) hardly fits the definition of wise! So, we arrive at the non-sequitir pushed by some politicians that since the banks received billions they should blithely do the equivalent of pouring the money down a rat hole! Great, these are the folks that the public is counting on to turn around the current financial crisis!

Republic Doors and Windows Shuts Down Operations
Statement from Republic Windows and Doors
The 1930s Really Are Here Again: Workers Occupy Chicago Window Plant
Workers at Republic Windows continue sit-in after company closes
Even Workers Surprised by Success of Factory Sit-In - NYT Dcc 12th
Talks Fail to End Sit-In at Closed Factory - NYT Dec 8th
In Factory Sit-In, an Anger Spread Wide - NYT Dec 7th
After Layoffs, Workers Stay at a Factory in Protest - NYT Dec 6th

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