Posts tagged with 'General Motors'
Weekly Audit: EFCA Vital for Recovery
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It’s official: The U.S. economy has been in a recession for a year and a half and many of the economic troubles worrying progressives in 2007 have yet to be addressed. While the Obama administration has taken steps to relieve some problems, a series of counterproductive bailouts, woefully inadequate labor laws and rampant inequality are still in urgent need of attention.
Severe economic inequality has persisted for decades in the U.S., but the current crisis is bringing things into focus. Unfortunately, while Wall Street excess and the corporate jet-setting of Detroit executives have dominated headlines and garnered plenty of justified outrage, the other side of the inequality coin has been largely neglected. As Katrina vanden Heuvel explains in The Nation, the routine exploitation of day laborers and domestic workers has grown even more pervasive since the recession began. Workers who managed to survive by laboring for predatory wages under abusive conditions now see those wages stolen with increasing regularity, as contractors simply refuse to pay up when the work is done. Huge portions of domestic workers are not only living below the poverty line, but subject to verbal and physical abuse. And as jobs have grown increasingly scarce, vanden Heuvel writes, speaking out against employer mistreatment has become a thoroughly daunting prospect for workers with no savings to help them endure unemployment. For the millions undocumented workers who are not protected by U.S. labor laws, an abusive work situation leaves them without any legal recourse.
Our labor laws desperately need to be revamped. Currently, Capitol Hill’s biggest battle for workers rights is the Employee Free Choice Act (EFCA), which would make it easier for workers to form a union without fear of employer reprisals or intimidation. The corporate executive class is lobbying hard against EFCA by claiming it revokes workers’ rights to a secret ballot in union elections, but the bill would do no such thing. As the law currently stands, employers can force workers who want to unionize to hold an election in order to actually establish a union. EFCA would require that a union be legally recognized as soon as a majority of workers sign cards saying they want to unionize. Union leaders are still elected by a secret ballot, but the election is permitted to take place later on, preventing employers from using the election period to bully their workers out of unionizing at all.
Writing for In These Times, David Moberg illustrates the commonplace peril of employer intimidation under the current organizing process:
“In 2005 [electrician Dan Luevano] and most of his fellow workers at Ries Electric near Denver asked their boss to recognize the Electrical Workers as their union to help resolve problems. The boss called everyone in and threatened to fire them if they voted for a union. Luevano said he would, and the next workday he was fired. Though the National Labor Relations Board reinstated him, his boss isolated him and cut his hours while continuing to violate labor laws by fighting the union.”
Workers and unions have pushed for EFCA for years, but when it comes to the economy, the federal government reacts fastest to problems on Wall Street. In Salon, Andy Kroll outlines the generous subsidies the government has paid to companies that drove themselves into the ground, effectively rewarding the economically destructive behaviors that caused the current crisis, while neglecting the workers whose hours and wages have been slashed as business credit tightens ups.
The bailout isn’t just unfair—it seriously risks delaying economic recovery. If the government refuses to take over failed institutions, wipe out their shareholders and fire their executives, the U.S. economy will likely be burdened with a constantly faltering financial sector for years. The Wall Street CEOs who caused the problem have every incentive to cover up for their mistakes and resort to complex accounting tricks to hide losses. But until those bank losses are recognized, the government will not be able to fill the hole and get credit flowing again. As Robert Kuttner argues in a column for The American Prospect, “We still face a prolonged Great Stagnation, one that could be far worse than necessary because of the administration’s circuitous, Wall Street–friendly approach to reviving the banks.”
Just as bad, whenever the economy actually recovers, executives at the surviving banks will have learned that they can score huge bonuses virtually risk-free by gorging themselves on risky loans and letting taxpayers clean up after them. This sets the stage for another catastrophe. So far, Obama’s decision to extend the bank bailout plan enacted under George W. Bush is the single greatest single blunder of his presidency, and as Kuttner argues, it’s a mistake that jeopardizes both the economy and the political sustainability of progressive ideas.
Beyond Wall Street, the administration has also faltered with it’s handling of General Motors, which finally filed for bankruptcy Monday morning after steadily disintegrating since the 1980s. After pouring in money to keep the ailing car manufacturer afloat, the government watched the company lay off tens of thousands of workers without overhauling its failed business model. Under the bankruptcy arrangement, U.S. taxpayers will emerge with a 60% stake in the company, but rehabilitating the company remains an enormous task. GM’s primary business is making cars that people do not want to buy. Without GM, the U.S. manufacturing sector would all but disappear, but turning the company around will require a huge long-term investment. So far, the government has settled for keeping the company on life support. Kevin Drum puts it succinctly for Mother Jones: “This whole deal just keeps getting worse and worse.”
The U.S. economy broke down for a reason: It was heavily dependent on a booming financial sector and failed to adequately protect or reward the workers who actually built the economy up. Both Congress and Obama have the power to give workers families the same economic leverage that corporate executives currently enjoy. It’s up to progressives to convince them to take action.
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Weekly Audit: Why Accountability Matters
by Zach Carter, Media Consortium MediaWire Blogger
With workers all over the globe trudging through a catastrophic recession, it’s almost a given that governments will be battling the economic slide for a long time. Part of the effort to rebuild must involve new rules and regulations, but meaningful systems for economic accountability will be just as essential. If we do not hold the reckless executives who caused this crisis accountable for their actions, we risk regressing into similar turmoil in the near future.
We all know that times are tough, and almost all of us agree on the cause: A massive Wall Street risk-binge combined with an almost total failure of regulatory oversight. It’s surprising that few meaningful criminal charges have been filed amid what may very well be the worst financial crisis in history. Bernie Madoff will likely spend the rest of his life behind bars, but the subprime mortgage brokers who specialized in predatory loans–and the Wall Street banks that bought them–have yet to face consequences in court.
In The American Prospect, Tim Fernholz details the efforts of some state-level officials to investigate and punish white-collar crime at the nation’s largest financial firms. Much of the problem, Fernholz explains, results from an insane legal landscape at the federal level. Active deregulation of the financial sector, which began in the 1980s, is shielding the irresponsible risk-taking that caused the current crisis from legal penalties.
Despite these obstacles, Massachusetts Attorney General Martha Coakley and other key officials are going after some of the worst offenders, and have successfully taken action against some of the predatory profiteers, including subprime mortgage lender Fremont Investment & Loan and Wall Street icon Goldman Sachs. Coakley secured an injunction against Fremont to prevent the company from foreclosing on its borrowers, and Goldman agreed to modify $50 million in predatory mortgages.
But while Coakley’s investigations may bring some much-needed relief to troubled homeowners, they’re only part of the solution. If executives that approved their companies’ subprime policies go through this crisis unscathed, it will be difficult to deter similar behavior in the future.
Fremont had to be sold off last year at fire-sale prices to avoid bankruptcy, but Goldman has weathered the economic downturn better than many of its Wall Street brethren. Much of the company’s resiliency, however, stems from its ability to secure billions upon billions of dollars of bailout financing from the U.S. government. Over at AlterNet, Jim Hightower blasts Goldman for its multiple avenues of taxpayer support and emphasizes that only the notorious Troubled Asset Relief Program (TARP) comes with any strings attached whatsoever. While Congress attached some very modest restrictions on executive compensation to the TARP bailout, the FDIC and the Federal Reserve have provided big banks with trillions in loans and guarantees completely free of restrictions on how these perks are deployed.
Goldman received $10 billion under TARP, which the company hopes to repay soon to shrug off those CEO pay limits. When the government bailed out AIG, $12 billion of the funds were directed Goldman’s way. But perhaps the greatest and lowest-profile outrage comes in the form of the FDIC’s Temporary Liquidity Guarantee Program. Hightower notes that the FDIC has guaranteed $28 billion of Goldman’s recently issued corporate debt without imposing any restrictions on the Wall Street giant. In short, if Goldman were to default, the government would pay off its investors. This taxpayer guarantee has allowed Goldman and many of its banking peers to secure capital at exceptionally low rates, helping the firms survive during a time when any financing is hard to come by.
Even if Goldman is able to repay its TARP money, the company remains thoroughly dependent on taxpayer assistance. Once the TARP funds are paid off, Goldman will be free to pay its executives whatever it wants—even when that salary is subsidized by American tax dollars. That’s a pretty perverse definition of accountability.
Of course, botched bailouts are not unique to the financial sector. As John Nichols explains in The Nation, the terms of automaker Chrysler’s bankruptcy proceeding include plans to close down manufacturing plants across the Midwest, a strategy that undermines the entire economic justification for bailout: Sparing investors pain in order to save jobs.
“Tens of billions of taxpayer dollars are being poured into Chrysler and General Motors, ostensibly to ’save’ the U.S. auto industry,” Nichols writes. “Yet, the companies have acknowledged that they plan to use the money to shutter factories, lay-off tens of thousands of factory workers and dramatically downsize dealership networks–at the cost of as many as 100,000 additional jobs.”
Still worse, it appears that both Chrysler executives and officials from the Obama administration mislead Congress on the implications of the bankruptcy. Nichols cites a letter from Rep. Dennis Kucinich, D-Ohio, in which the lawmaker says Congress was told there would be no permanent job losses a result of the Chrysler bankruptcy filing. The very next day, plant closings were announced in Michigan, Missouri, Wisconsin, and Ohio.
Even the economic stimulus package rewarded companies with a history of recklessness. In a piece for Salon, ProPublica journalists Michael Grabell and David Epstein reveal how contractors that have paid substantial fines for violating environmental regulations, federal safety rules and laws against racism have been able to score new business with the federal government. The worst offender? A contractor known as CACI International, which has been awarded three contracts worth $1.5 million under the stimulus package, despite ties to abuses at Abu Ghraib prison in Iraq.
CACI helped hire interrogators at Abu Ghraib, but an Army investigation found that the contractor ended up employing people with “little or no interrogator experience.” Abuses committed by CACI employees included dragging a handcuffed prisoner on the ground, placing a prisoner in an “unauthorized stress position,” dressing a prisoner in women’s underwear and lying to investigators about using dogs in interrogations, according to Grabell and Epstein.
If the government relies on criminals to build the recovery, the public is not going to get the results it needs. But the recovery is only part of the solution to the current economic crisis. If we fail to prosecute executives whose active scheming and criminal negligence brought down the global economy, we are inviting more of the same behavior in the future.