When Bank of America stockholders gather in Charlotte, N.C. on April 29 they will probably breathe a sigh of relief when, after they make their way past the thousands of protesters outside, they finally get to sit down in their meeting hall. The relief won’t last too long, however, because inside the room they will also face lots of angry union members – ones who own one or more shares of stock in the bank.
The protests against bank misuse of taxpayer bailout funds are being planned by the Service Employees International Union and other unions and community organizations angry because “the massive bailout is helping the wrong people, the bankers, and not the people who need the benefit of those funds,” according to Anna Burger, secretary-treasurer of the SEIU and chair of the Change to Win coalition.
Burger, who was part of an April 8 panel discussion on bank bailouts in Washington D.C., also serves as a member of President Obama’s economic advisory board. She told the panel that she intends to take the message that “the banks are not using the bailout money they took the way they are supposed to be using it” to the president’s economic panel.
Bank of America has taken more than $45 billion in Troubled Assets Relief Program money (TARP, as the bailout is called). The funds have been used to continue paying Ken Lewis, the CEO, a multi-million dollar a year salary. In addition, Lewis raised a firestorm in the ranks of labor when he organized a conference call among bankers and other tycoons to lobby against the Employee Free Choice Act.
The anger about this was particularly fierce because employee free choice, unions say, would put more money into the hands of workers and help spur a bottom-up recovery from the current economic crash.
Panelists participating in the April 8 discussion said the economic disaster was caused by Lewis and other bankers who, essentially, bet the economy on “troubled assets” (the sub-prime mortgages and other financial instruments those loans were bundled into).The result, they said, was that mortgage defaults increased sharply in 2007, loans began to fail all over the place, and the banks crashed.
Panelists, who also included Bob Kuttner of “The American Prospect,” James Carr of the national Community Reinvestment Coalition, and AFL-CIO investment chief Damon Silver, said that when the banks got the bailout money it was supposed to benefit the mortgage holders, but did not. “We’ve had 2.2 million mortgage foreclosures in the last 18 months and expect millions more this year,” Carr said.
He also complained that a realistic evaluation of the finances of both Bank of America and Citigroup shows that both, “because of their massive investments and losses in failed assets and phony paper, are essentially broke.” Panelists questioned the wisdom of pumping federal tax dollars into failed financial institutions.
While all the panelists support the Obama administration’s efforts toward economic recovery, they called themselves a “loyal opposition on the issue of bank bailouts” that does not want to see prior mistakes repeated.
Carr noted that at the beginning of the crisis, when banks “re-set” the sub-prime mortgage holders’ rates, the predictable result was a jump in the number of foreclosures. He said things are even worse now because “when the crisis began more mortgage holders had jobs. Now they don’t. For every 100 new unemployed, 40 foreclosures will occur because people out of work can’t pay mortgages. That means that with 663,000 more unemployed just last month, we’ll have another 150,000 foreclosures from that increase alone.”
Carr’s group advocates massive investment in communities and neighborhoods where there are large minority populations. He called for the creation of a “new Reconstruction Finance Corp.” that would buy up and refinance mortgages to affordable levels. The creation of an RFC was a key part of the recovery effort during the New Deal.
Carr said that protection for renters also needs to be included. Many mortgages now defaulting are on multi-level rental buildings whose tenants have lost jobs and can’t pay rent.
Kuttner said, “We need to break up the big banks and other large financial enterprises. There should be no institution too big to fail.”
Silver, speaking for the AFL-CIO, said the labor federation supports, if needed, a temporary nationalization of the big banks. He said that this had been done several years ago in Sweden, followed by restructuring and re-selling the smaller and more-regulated institutions back to private investors.
Burger said, “We need to make the banks better managers of risks by imposing further, tighter and universal regulation and by having them do their part to contribute to lifting up the workers.” She said that this includes a reversal by the banks of their opposition to the Employee Free Choice Act, “a position, among others that we intend to take to the Bank of America Shareholders’ meeting.”
Burger also said that “having financial workers in unions would enable them to become whistleblowers and prevent abuses that got the banks, and the rest of us, into this mess.”