Perhaps no industry in our lifetime has disintegrated as fast as
American banking. In the last year, we have seen that playing with
money in a virtual world of finance has real, tangible results. The
consequences in housing and other sectors continue to unfold. And now,
the jefes of banking are taking it out on their lower-level
employees.
The number of financial jobs in the East Bay has dropped by 3,500 in
the past year. Wells Fargo, which in April recorded a record
first-quarter profit, just announced the layoffs of about 150 in San
Leandro and a cut in pension benefits for the employees that remain. Of
course, many honest people who worked in the mortgage industry are
suffering, too.
Surprisingly, in his recent book A Failure of Capitalism: The
Crisis of ’08 and the Descent into Depression, one of the leading
lights of conservative business ideology, Judge Richard A. Posner of
the Seventh Circuit Court of Appeals, indicts the system. This
free-marketer now believes in — horrors — financial
regulation. “We are learning,” Posner writes, “that we need a more
active and intelligent government to keep our model of a capitalist
economy from running off the rails.” Milton Friedman, who is probably
hanging out in the Buddhist realm of the “hungry ghosts,” must be
livid.
Posner absolves the individuals involved in the virtual banking
collapse. “I do not think they can be blamed for it — implying
moral censure — any more than one can blame a lion for eating a
zebra,” he states. Economist John Kenneth Galbraith once argued the
opposite, maintaining that the financiers are motivated by personal
selfishness. “A person’s highest duty, it holds, is to his own income.
This attitude is a powerful attack on the least fortunate of our
citizens.” I think that both are right; there is systemic and personal
greed at work.
The dialectic of the personal and the systemic can be seen in the
current Chrysler bankruptcy. A number of Posner’s lions, led by a
39-year-old hedge-fund manager, George Schultze, thought they could
make quick money by speculating on Chrysler’s debt. Using other
people’s money, Schultze and his fellow “vulture” investors tried to
extract money from Chrysler by buying impaired company bonds, thinking
they could flip them for a king’s ransom. Naming themselves the
“Committee of Chrysler Non-Tarp Lenders,” they hired lawyers to
represent them in bankruptcy court but cowardly refused to divulge
their identities. Their move was so bold, however, that not even the
bankruptcy judge could go for it. Appropriately, they then got named,
shamed, and blamed.
Due to the multitude of financial claims from many sources including
retired autoworkers and local dealers, it soon became obvious that
Schultze and his committee had miscalculated. The lions were outraged
and started roaring. “Coincidentally,” at the same time, an unsourced
article with no byline appeared in the Wall Street Journal
claiming that in the future bankers were going to be unwilling to loan
any money to unionized companies or companies who had any commitments
to retirees. The obvious message was that zebras had better keep their
mouths shut or the lions would pounce. However, when his committee
crumbled, Schultze had to come clean. In an article on Bloomberg.com, he openly made his greedy
claims, blaming the retired assembly-line workers for his travails.
I am continually startled to hear people from an industry that
collapsed so spectacularly through its own avarice blame everyone
around them. Given the billions in bailout money to the financial
industry and the pain and misery that is cascading throughout society,
you would think that these guys would have some shame. But this is not
the case. A couple months ago, the head of one of the largest financial
entities, the Carlyle Group, tried to put some responsibility on all of
us for the financial meltdown, exclaiming that “there are six billion
people on the face of the earth, and probably about five billion
participated in what went on.” Huh?!
The maneuvering in the current Chrysler bankruptcy shows that the
financial class still thinks regular Americans are their zebras. To
blame the assembly-line workers at Chrysler for the ills of their
company is outrageous. And to denigrate health care for these retirees
is inhuman. For decades, Chrysler workers literally fought to force the
company to pay them wages and benefits that would bring them into the
middle class. They succeeded. As health-care costs began to rise, the
workers, through their union, traded wage increases and other benefits
for a promise that the company would pay health costs for them when
they retired.
Isn’t keeping one’s promise a part of American values? But each time
Chrysler was sold, the financiers who took money out of the company
left inadequate reserves to fulfill the promise. It appears that, for a
variety of mostly political reasons, the retirees may be able to keep
some of these promises, but only a fraction. And East Bay Chrysler
dealers in Oakland and Livermore will be completely forced out of
business.
Activists are starting to put the heat on bankers, as they should.
In Chicago recently, two hundred mostly Hispanic workers at the
Republic window factory occupied their plant and put the heat squarely
on Bank of America when the company closed due to the bank restricting
credit. The bank was unable to hide behind company management and a
campaign of political pressure forced the bankers to back up. It now
appears that the plant is going to reopen as a green window factory. A
similar struggle is underway at Hart Schaffner Marx, the preferred suit
provider of President Obama. And in spite of the support that
California’s big public pension funds still give to Schulzte’s
industry, a number of pension and health and welfare funds are starting
to take on the raw greed of the financiers, arguing that a sustainable
long-term investment strategy must be developed that does not rely on
financial exotica.
Like Posner says, beasts cannot be housebroken. I guess lions should
never be let out of their cages.
