MIAMI — The nation’s largest labor federation has called for nationalization of the nation’s major banks.
In a detailed statement, the AFL-CIO, at its executive council meeting here, called on the Obama administration to intervene when significant financial institutions are on the brink of collapse. But those interventions must “protect the public interest, and not merely rescue executives or wealthy investors,” the labor group declared.
“This is an issue of both fairness and our national interest,” the federation said. “It makes no sense for the public to borrow trillions of dollars to rescue investors who can afford the losses associated with failed banks.”
Government takeover should “force a cleanup” of bank balance sheets, and “the result should be banks that can either be turned over to bondholders in exchange for bondholder concessions or sold back into the public markets,” the labor federation said.
“We believe that the debate over nationalization is delaying the inevitable bank restructuring, which is something our economy cannot afford,” the statement said.
“The consequences of crippled megabanks are extraordinarily serious. The resulting credit paralysis affects every segment of our economy and society and destroys jobs. We urge President Obama and his team to bring the same bold leadership to bear on this problem as they have to the problems of the economic stimulus and the mortgage crisis.”
The move puts the AFL-CIO on record as perhaps the most influential national organization thus far to back the concept of nationalization. Such action has already been endorsed by leading economists including Nouriel Roubini, Joseph Stiglitz and Paul Krugman. The labor federation notes that even former Federal Reserve chairman Alan Greenspan has said some form of nationalization will probably be necessary.
Union leaders here note that there has been a dangerous concentration of banking power since the 1999 Gramm-Leach-Bliley Act repealed New Deal bank regulation. More than 43 percent of U.S. bank assets are held by just four institutions: Citigroup, Bank of America, Wells Fargo and JPMorgan Chase.
“Free market rules that workers must live by do not apply to these banks,” the AFL-CIO said, noting that the government has stepped in to bail out banks repeatedly since September.
Since Congress passed financial bailout legislation in October, workers have seen their tax dollars spent in secret ways to prop up banks. The Congressional Oversight Panel, charged with overseeing the bailout, recently found that the federal government overpaid by $78 billion in acquiring bank stock.
Now labor is calling for the government to stop the bailouts and take direct control, in the workers’ interest, through nationalization.
jwojcik @ pww.org