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Roger Bybee

By Roger Bybee
Milwaukee Freelance Writer

As rescue attempts go, the Obama administration and its Auto Task Force are pursuing a peculiar course: They seem intent on keeping General Motors and Chrysler afloat as corporate entities by tossing more U.S. workers overboard.

Even as unemployment rates soar in longtime GM-centered communities hit by shutdowns, such as Janesville, Wis. (14.7 percent), and Flint, Mich. (15.3 percent), Obama and his task force pressed GM and Chrysler for more cuts. GM plans to shut down at least 14 factories and discard some 21,000 workers. Chrysler is closing eight U.S. plants, though it claims that somehow its merger with Fiat will result in a new increase of 5,000 jobs. In a telling observation that carried unsettling echoes of Bill Clinton’s push for NAFTA, the New York Times called the job cuts and other worker sacrifices “steps that most analysts thought could never be pushed through by a Democratic president allied with organized labor.”

The most recent version of GM’s recovery plan-closely tailored to the demands of the task force-calls for a stunning 98 percent increase in autos produced in Mexico, China, South Korea and Japan for the U.S. market. In May, the United Auto Workers (UAW) and United Steelworkers launched a 36-city campaign to prevent GM “from importing small cars from China, a move that would have increased GM’s profits while very likely reducing the number of domestic automobile jobs,” the New York Times reported June 2. This last-minute drive was successful, but it’s still unclear exactly what modifications GM will make.

For its part, Chrysler announced May 1 (the day after it filed Chapter 11 bankruptcy) the closing of its Kenosha, Wis., engine plant and the transfer of many of the plant’s 850 jobs to Mexico. As recently as the day before, top Obama administration and Chrysler officials had assured Wisconsin legislators that the Kenosha plant would be preserved. Faced with a firestorm of protest for using federal dollars to transfer jobs to Mexico, Chrysler now says that Fiat will consider keeping the plant open.

On top of all that, job losses will balloon with the closing of more than 1,100 GM and 789 Chrysler dealerships, eliminating tens of thousands more jobs.

Although Obama hasn’t ordered auto industry cuts himself, “the revamping of the nation’s largest car company is being guided by the administration’s auto-industry task force, and it follows the president’s calls for a leaner, healthier industry,” DowJones.com reported on May 12. The Obama administration’s downsizing of the auto industry, established as a precondition for approximately $30.5 billion extended thus far in loans to GM and Chrysler (with another $20 billion in the pipeline), sharply contrasts with the lightly-conditioned, larger bailout of Wall Street. Nomi Prins, author of It Takes a Pillage, a forthcoming book on the Wall Street meltdown and its roots in Washington, estimated that Wall Street has received $12.5 trillion-nearly 400 times more-in loans, loan guarantees and taxpayer subsidies for the sale of risky loans.

Contradictory policies

Only three of the Auto Task Force’s members were notably pro-labor, despite protests from labor and auto-state lawmakers. “The Auto Task Force members are basically red-pencil types who looked at saving the auto industry on the cheap without much consideration to social costs, let alone generating green alternative jobs for auto,” says economist and author William K. Tabb. “They have the narrowest business criteria for auto, unlike the banks that got capital and loan guarantees worth trillions. So their focus was to save the auto companies but not the auto workers.” Essentially, Obama and the task force wanted a quick and cheap solution to the Big Three’s ailing finances rather than providing an endless flow of resources, as the government did to the “too-big-to-fail” financial sector.

Bizarrely, the Auto Task Force’s policy direction dramatically undercuts Obama’s $787 billion economic stimulus program. “The problem with GM’s new Washington-mandated restructuring plan is that it steps on the gas in the wrong direction,” UC Berkeley professor Harley Shaiken told NPR’s “Marketplace.” “The stimulus package spends $800 billion to create jobs, while billions in loans to GM are conditioned on eliminating them.”

In addition to the factory job and dealership cuts, GM will unload its Pontiac, Saturn and Hummer brands. By contrast, the Italian government provided $1.7 billion in aid to Fiat as long as Italian plants stay open, noted Robert L. Borosage of the progressive coalition Campaign for America’s Future. Also, France loaned $8.5 billion to its big three automakers, in exchange for pledges to keep jobs in France.

Labor advocates fight back

After months of the UAW trying to avoid a fight with Obama, in early May it began openly challenging the use of taxpayer loan money to finance the outsourcing of jobs. “We believe (GM) should have an obligation to build in this country the vehicles it will be selling in the U.S. market, thereby maintaining the maximum number of jobs in the United States,” UAW legislative director Alan Reuther wrote to the Senate.

Former Clinton Secretary of Labor Robert Reich blasted the notion of paying billions of taxpayer dollars to keep companies afloat while they cut tens of thousands of jobs and wages. “We’re transferring money from taxpayers to Big Three shareholders for no apparent reason other than the Big Three are headquartered in America,” he said. “Why should taxpayers foot any of this bill unless the Big Three agree to keep their workers employed while they try to turn themselves around?”

The full answer to that question remains unanswered at this moment, as the two corporations’ plans for future outsourcing are unavailable. But significantly, the Auto Task Force didn’t explicitly require that federal assistance be directed to renewing production in the United States. Furthermore, following conventional management wisdom, “the Obama administration structured the GM and Chrysler plans to lessen the union’s voice in management,” the New York Times stated.

But so far, the mainstream media hasn’t much noticed or criticized the contradictions between Obama’s plans to simultaneously stimulate job growth and shrink GM and Chrysler. With all the attention on unwarranted Wall Street bonuses, major media lump Wall Street brokers’ compensation and CEO pay with autoworkers wages as part of the same culture of “excess.” Reports that autoworkers were paid as much as $73 an hour quickly spread through the media.

Actually, the typical wage is $26 to $28 an hour, plus an additional $10 or so in benefits, according to the Center for Automotive Research. UAW’s agreement to accept a new starting wage of $14.20 an hour with vastly reduced benefits received little attention. Neither did the fact that UAW-represented plants ranked “very favorably” on quality and productivity compared to Japanese “transplants” in the United States, according to independent industry assessments.

Shielded by a lack of accurate and coherent media analysis, the Auto Task Force used a narrow and conventional single-firm turnaraound framework to create a strategy for GM and Chrysler. “A hedge fund wants to make money fast for its client-in this case, the taxpayer-without regard to social cost,” Shaiken says. “Unlike most clients, however, the taxpayer picks up the social cost. Longer unemployment lines and more foreclosures are devastating for the victims, not cheap for the rest of us.”

But the Auto Task Force seemed largely oblivious to the human costs of eliminating thousands of U.S. auto jobs. Obama and his task force withheld billions of dollars in new loans requested by GM until after the company came up with a more aggressive program of job cuts, plant closing and outsourcing. The Auto Task Force rapidly divorced the reinvigoration of GM and Chrysler from a longer-term shift to a fuel-efficient economy and production not just of high-mileage cars, but also of mass-transit equipment for buses and high-speed rail.

Ironically, GM’s ruthless downsizing of its U.S. workforce and outsourcing of jobs over the last 25 years diminished its leverage with the Obama team. GM has discarded 85 percent of its domestic production since 1990-and that was before it hit the current recession and the resultant nosedive in sales. It was no longer “too big to fail.”

So Obama and the Auto Task Force felt free to promote a recovery strategy for the two ailing auto firms that stands in appalling contrast to the generosity shown Wall Street. GM and Chrysler headquarters will remain intact, but thousands of U.S. workers will be vaporized, retiree health benefits could be put on the chopping block (especially at Chrysler) and numerous industrial communities will suffer permanent damage. And the Obama team has forfeited the opportunity to recast the current crisis into a fuel-efficient re-industrialization of America-right when the country needs the stimulus of  high-wage green jobs the most.

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• First published in In These Times. To subscribe, click here.

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Roger Bybee is a Milwaukee-based freelance writer and progressive publicity consultant whose work has appeared in numerous national publications and websites.

By Tom Conway
USW International Vice President

Swiss-Russian owned Duferco Farrell Corp. refuses to comply with the Buy American requirements in the $787 billion stimulus package.

One consequence of that decision is the Duferco rolling mill located in Farrell, Pa., north of Pittsburgh, lost a major customer — Wheatland Tube Co., situated a few hundred yards down the street in Farrell.

Another is that Duferco, which opposes buying American, milked that loss for more tons of false publicity than an overloaded truck of steel coils at a weigh station.

Duferco Farrell made itself out to be a victim of Buy American, claiming the provision cost it a customer, and the Washington Post and New York Times swallowed that whale whole, without making any effort to dissect it.

Here’s what really happened:

Wheatland Tube, a pipe maker, stopped buying rolled steel from its Farrell neighbor because Duferco gets steel slabs from Russia and has refused to buy from domestic producers.

Wheatland is sensitive to the issue of imports, having been burned by unfair competition from China. It is among the plaintiffs in trade cases alleging unfair competition. But, more immediately, Wheatland officials feel that under the Buy American provisions, its products must be produced with American-made steel, or they can’t be bought with stimulus funds.

Bill Kerins, president of Wheatland, said he backs Buy American because it provides opportunities for American workers. It is, essentially, American tax dollars dedicated to providing jobs for American workers. And, polls show, a large majority of Americans support it. They oppose anyone spending their tax dollars to create jobs in foreign countries. He has said that more and more of Wheatland’s customers are demanding that it  meet the requirements of  Buy American.

Kerins made it clear to the Sharon Herald, the local newspaper for the town of Farrell, that he’s perfectly willing to buy rolled steel from Duferco again, if the company obtains slabs from domestic producers. Here’s what he said: “We’re prepared to do business with Duferco Farrell when they’re able to be in compliance with the Buy American provision, and we hope they’re able to work that out.”

That would leave you with the sense that Duferco could work something out, right? Well, not if you read the Washington Post or the New York Times. Neither bothered to quote Kerins or the United Steelworkers. Both limited themselves to quoting Duferco  - a one-sided story. They failed to adequately question. As a result, both provide a completely false impression.

The Washington Post, in a May 15 story, says, “The new buy American provisions, the company said, are being so broadly interpreted that Duferco Farrell is on the verge of shutting down.”

The Post story also says, without citing a source, that Duferco “manufactures its coils at its Pennsylvania plant using imported steel slabs that are generally not sold commercially in the United States.”

Finally it quotes Duferco executive vice president Bob Miller saying, “I’ve got 600 United Steel Workers [sic] out there who are going to lose their jobs because of this. And you tell me this is good for America?”

The New York Times followed, on June 3, with an editorial slamming Buy American and citing the Duferco case. The editorial gives Duferco and one other example as the reason Buy American is ‘perilous,” saying Duferco “has cut 600 jobs in Pennsylvania after it lost orders from its biggest customer because some of its goods are partly produced abroad.”

That’s just not true. And if the New York Times or the Washington Post had done an ounce of reporting work, they’d have known it. Look up the Sharon Herald clips – available on line.

Duferco began furloughing hundreds of workers last fall – long before Wheatland stopped buying from them. When the USW local there signed its labor agreement in November, Duferco already had laid off more than half of the mill’s unionized workers.  Manufacturing workers across American began losing their jobs last fall as a result of the downturn in the economy – not Buy American provisions.

In addition, there are other serious problems with the Post story. It says Duferco uses steel slabs not generally sold commercially in the U.S. If the Post had spent a minute listening to Kerins from Wheatland or to the USW, it would have gotten a different story. Kerins’ quote – saying Wheatland is prepared to do business with Duferco when it complies with Buy American – clearly suggests he knows there’s a way for Duferco to do that.

In fact, there is. Two domestic steel companies have offered to supply Duferco with the 10-inch steel slabs it prefers, at the specifications it says it requires, at a market-based price. Both firms have informed Duferco of those offers.

Duferco mostly imports its 10-inch slabs now from OJSC Novolipetsk Iron & Steel Works (NLMK) of Russia, which is the Russian part owner of Duferco. NLMK also owns a mill in Portage, Indiana, called Beta Steel Corp. Like most U.S. mills, its work force has been cut back, so orders for its 8-inch slabs would give its American workers paychecks again.

Wheatland has informed Duferco that it is willing to modify its specifications so that NLMK 8-inch slab produced in Indiana may be used.

Duferco’s response: shipping slabs from NLMK facilities in Portage, Ind. to Farrell, Pa., a distance of 375 miles, is prohibitively expensive, as is the cost of shipping the 10-inch slabs from the Maryland or Alabama mills to Pennsylvania. So Duferco must continue sending steel the thousands of miles from NLMK facilities in Lipetsk, Russia to Farrell, Pa.

Really?

Somehow that doesn’t smack of the truth. In fact, it sounds like Duferco is making every effort to avoid buying American, while its customers, its workers and even potential suppliers are all scrambling to help it buy American and re-employ its workforce.

What is really going on here is Duferco perverted this situation in an attempt to smear the Buy American provision. The Washington Post and the New York Times made no serious attempt to check out the multi-national’s lame allegations.

Not much more could be expected from a Swiss-Russian-owned corporation. That multi-national has no allegiance to America. It just wants to use this country to generate profits. If Duferco can get its hands on American tax dollars to profit in Lipetsk, it will be all the happier. But for the Washington Post and the New York Times to support that is, really, un-American.

Robert Kuttner

By Robert Kuttner
Co-Founder and Co-Editor of The American Prospect

There is a huge reality gap between the happy talk about green shoots, banks passing stress tests, the rise in unemployment slowing — and what’s happening out in the real economy, especially if you take a close look at banking and housing, ground zero of the economic crisis. Credit remains tight for all but the most blue-chip borrowers. Despite the Fed’s policy of keeping short term interest rates at just above zero, average rates on conventional 30-year mortgages, now above 5.5 percent, have jumped nearly a full point since April.

Last Wednesday, the FDIC quietly folded a program that was the centerpiece of Treasury Secretary Tim Geithner’s effort to get toxic assets off the books of banks.

The program, whose details were unveiled in late March after six awkward weeks of delay while the administration worked out the details, included special incentives for what Geithner delicately termed “legacy assets.” These are the junk securities on banks’ balance sheets, mostly backed by sub-prime loans, for which ordinary buyers cannot be found.

The Treasury drafted the Federal Reserve to provide special loans, and the FDIC to run a pilot program to attract speculators to bid on the securities. All told, the government was prepared to put up 94 percent of the capital if private investors would put up 6 percent. Government would guarantee most of the losses, and split the gains 50-50.

The plan took Geithner full circle to something like the original strategy attempted by his predecessor, Treasury Secretary Hank Paulson, when Paulson came to Congress last September asking for $700 billion to buy up toxic assets from banks. But after Paulson got Congress to approve the money, he concluded that he couldn’t make the original plan work. Instead, the Treasury pumped several hundred billions into the banks directly. The toxic assets stayed on the banks’ books.

Now, Geithner’s do-over seems to have collapsed, too. There are a couple of reasons why.

First, the government has bent the accounting rules to allow the banks to carry nearly worthless securities on their books at their nominal full value. The Wall Street Journal ran a terrific investigative piece June 3 on how the banking lobby and legislators of both parties pressured the Financial Accounting Standards Board (FASB) to suspend its rules requiring assets to be carried on banks’ books at their current market value.

With this change, banks had no incentive to sell these deeply depressed securities at anything like their actual market value. So if a speculator, armed with Fed funding and a government guarantee against losses was prepared to take a speculative flyer in a bond by bidding, say, 30 cents on the dollar, the bank was not prepared to sell at less than 90. Hence, no deal.

Second, some hedge funds and private equity companies sniffed around these deals and concluded that they weren’t worth the bad publicity or government scrutiny if the deals resulted in big windfall profits (the only kind that hedge funds pursue).

Cooking the books to inflate the value of depressed securities also explains how zombie banks like Citigroup could pass the government’s “stress tests” with flying colors. Citigroup, which has depended on $45 billion in straight government cash and hundreds of billions more in guarantees, was found by the stress-testers from the Fed and the Treasury to need only $5 billion more to be adequately capitalized. This is, of course, preposterous if you value the junk on its books accurately.

So the banking sector, despite the pretty picture painted by the stress-tests and the banks’ recent success in selling stock to investors reassured by the government’s too-big-to-fail actions, remains weak. As a result, banks are hesitant to lend. And this weakness keeps dragging down the rest of the economy.

The flipside of weak banks is a depressed housing sector. Just as the administration chose bailout over government takeover of failed banks, the administration opted for an entirely voluntary effort to induce banks to refinance sub-prime and other mortgages that homeowners could not afford. The program, announced by President Obama February 18, aims to help at-risk homeowners keep their homes.

But the terms of the plan exclude the most hard-hit homeowners. Today, one homeowner in four owns a house worth less than the mortgage on it. However, you can qualify for a refinancing only if the home’s value is within five percent of the value of the loan. In other words, if you have a $300,000 mortgage on a house valued at $250,000, forget about help. And you are also excluded from help if you are behind in your payments – the situation of most people who need help.

Worst of all, the program depends entirely on the voluntary cooperation of banks. The administration will spend up to $75 billion on inducements to banks to vary the terms of loans. But at this writing, well under 100,000 loans have been modified, out of the several million at risk of foreclosure. As a consequence, people continue losing their homes, depressing the value of other homes. The Times recently reported on a woman who heard about the administration, approached her lender, Countrywide (one of the worst sub-prime offenders and now part of Bank of America) and asked for a refinancing. The bank offered a new loan that would save the woman all of $79 a month, and in return the bank wanted $18,000 up front.

Basically, the banks seem to be viewing refinancings as new profit opportunities. The one stick in a plan full of carrots was a provision empowering bankruptcy judges, as a last resort, to vary the terms of a mortgage. The banking lobby went all out to kill this provision. In the end, twelve Senate Democrats voted against it, and the administration made no political effort to save it.

Rep. Alan Grayson of Orlando, one of the hardest-hit parts of the country in terms of foreclosures, tells the story of a woman with a $300,000 mortgage on a house now worth perhaps $60,000. She could afford the payments on a $60,000 mortgage. But the bank would rather foreclose, bear the expenses of carrying the house which will be at risk of vandalism and deterioration until is it is sold. The bank would actually be better off writing down the mortgage to $60,000 and allowing the woman to stay in the house. But few banks see it that way. In similar circumstances in the 1930s, the Roosevelt Administration created the Home Owners Loan Corporation, and the government refinanced mortgages directly. But the Obama administration prefers to work through the private sector, and the private sector is averse to refinancings in most circumstances.

Another progressive Member of Congress, Rep. Marcy Kaptur of Toledo, tells of cascading foreclosures in her district, where banks are selling foreclosed homes at a few cents on the dollar to syndicates of speculators, some from the very sub-prime lenders who caused the collapse. Rather than sell to local government or local non-profits, which want to keep people on their homes, the banks want to get a few bucks onto their balance sheets fast. The situation cries out for more effective national leadership, and the government’s failure to provide that leadership means that the downward spiral in housing will continue.

The weakness of the mortgage relief program and of the banks’ balance sheets have one big thing in common–an administration that is far too deferential to the big banks. For the crisis to be solved soon, rather than lingering on and on, we need direct government refinancing of mortgages, and direct government restructuring of zombie banks.

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Robert Kuttner is co-editor of The American Prospect and a senior fellow at Demos. His recent book is “Obama’s Challenge.”

Seth Freed Wessler

By Seth Freed Wessler
Researcher at the Applied Research Center

When General Motors filed for bankruptcy on Monday, it left behind a long trail of grievers– twenty-one thousand of them. The loss of these good, union jobs and the many more that will be shed when related businesses close are devastating families and communities. For Black workers, who are highly concentrated in the auto industry, these have long been some of the few reliable jobs that pay living wages, supplying families of color the with the possibility of entering the middle class.

As we now know, high levels of unionization equate with smaller income gaps between people of color and whites. But in the economy we’ve inherited from the last three decades of deregulation and declining union density, people of color are increasingly relegated to low-wage, precarious work that pays too little to support a family. Unless Congress acts now to ensure that work actually pays, these workers will have few options and we’ll only deepen the racial income and wealth divides.

A few months ago, I traveled to Michigan to interview dozens of people for “Race and Recession,” a new report released by the Applied Research Center. I met Leo Shipman, a 24-year-old Black man, who had recently lost his job in an auto parts factory in Detroit. “My biggest worry is my son,” he said about his 3-year-old. “You don’t know how you’re going to feed them. He doesn’t know the bills are running up, but I do.” When I met Shipman, he was on the edge of being evicted from his apartment.

With only a high school education–Shipman’s been trying to enroll in a technical college–securing a living-wage job proves elusive if not impossible. Because he had been underemployed, Shipman had no unemployment check coming in. It’s growing more likely that his only option will be to work a job that makes feeding his son a daily struggle.

As one of the last strongholds of union jobs shrinks, and people like Shipman are cast out, it’s time to confront some tough truths about work in our country. Black workers like Shipman have been hit especially hard by layoffs and closures because their concentration in the auto industry is higher than their overall share of the state’s labor market. In fact, across the labor market, workers of color are overrepresented in occupations with high unemployment rates. These include jobs in the service sector, as well as construction and transportation occupations. The loss of these auto industry jobs strikes a massive blow to the ability of workers, especially Black workers, to earn middle-class incomes, to save enough to pass on to their children and to achieve some financial stability. Indeed, the UAW was one of the first unions to organize Black workers and the implosion of GM further dismantles one of the mainstays of the Black middle class.

The collateral damage of job loss are taking their toll. Sandra Hines, a 55 year old Detroit native who I wrote about last week, lost the home her family owned for 40 years after her sister was laid off from GM and was forced refinance. The family was sold a predatory loan with an adjustable rate and was evicted after payments skyrocketed. As more people lose their jobs, more families will find themselves unable to pay their mortgages and more wealth will be drained. It is now clear that the perils of this situation go beyond these communities. Indeed, as we find in “Race and Recession,” the racially discriminatory predatory lending and foreclosure crisis was a central factor in pushing the economy into this recession.

As a country, we’re reckoning with the fall-out from decades of putting profit above people. As precious union jobs disappear, the time has come to ensure that those who are unemployed–disproportionately people of color–are able to enter employment that actually pays. Congress should immediately pass the Employee Free Choice Act (EFCA) so that workers can demand fair pay without intimidation. Since UAW now has a major ownership stake in the company, the workers who remain there will be taken care of, but the 21,000 workers who are getting pushed out will be less likely to find jobs with sufficient salaries and benefits, especially as the federal minimum wage increase to $7.25 next month still does not approximate a living wage.

Ultimately, as we recover from this recession, we need to make sure that the jobs we create and the economy we build help those who have been most hurt by the recession, which have disproportionately been families of color. Ensuring that good, sustainable jobs go to communities of color across the country is an essential part of building an inclusive and working economy.

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Check out arc.org/recession to learn about how racial inequity rigged the economy and how to change the rules.

Robert Kuttner

Robert Kuttner
Co-Founder and Co-Editor of The American Prospect

In 1932 through 1934 the Senate Banking Committee, led by its Chief Counsel Ferdinand Pecora, ferreted out the deeper fraud and corruption that led to the Crash of 1929 and the Great Depression. The Pecora Committee’s findings helped change the political mood, and laid the groundwork for the sweeping financial reforms of Roosevelt’s New Deal. Roosevelt himself often conferred with Pecora, encouraged him, and depended on Pecora’s work to build the public support for reform. He appointed Pecora to one of the newly created results of his handiwork, the Securities and Exchange Commission, though Pecora was disappointed not to be its chairman.

President Obama has now signed legislation, The Fraud Enforcement and Recovery Act of 2009, which among other things creates an investigative commission inspired by Pecora.

The new Financial Markets Commission has a sweeping mandate, including subpoena powers, to investigate all the causes of the collapse. The list is as comprehensive as one could wish for.

FUNCTIONS OF THE COMMISSION.–The functions of the Commission are–

(1) to examine the causes of the current financial and economic crisis in the United States, specifically the role of–

(A) fraud and abuse in the financial sector, including fraud and abuse towards consumers in the mortgage sector;

(B) Federal and State financial regulators, including the extent to which they enforced, or failed to enforce statutory, regulatory, or supervisory requirements;

(C) the global imbalance of savings, international capital flows, and fiscal imbalances of various governments;

(D) monetary policy and the availability and terms of credit;

(E) accounting practices, including, mark-to-market and fair value rules, and treatment of off-balance sheet vehicles;

(F) tax treatment of financial products and investments;

(G) capital requirements and regulations on leverage and liquidity, including the capital structures of regulated and non-regulated financial entities;

(H) credit rating agencies in the financial system, including, reliance on credit ratings by financial institutions and Federal financial regulators, the use of credit ratings in financial regulation, and the use of credit ratings in the securitization markets;

(I) lending practices and securitization, including the originate-to-distribute model for extending credit and transferring risk;

(J) affiliations between insured depository institutions and securities, insurance, and other types of nonbanking companies;

(K) the concept that certain institutions are ”too-big-to-fail” and its impact on market expectations;

(L) corporate governance, including the impact of company conversions from partnerships to corporations;

(M) compensation structures;

(N) changes in compensation for employees of financial companies, as compared to compensation for others with similar skill sets in the labor market;

(O) the legal and regulatory structure of the United States housing market;

(P) derivatives and unregulated financial products and practices, including credit default swaps;

(Q) short-selling;

(R) financial institution reliance on numerical models, including risk models and credit ratings;

(S) the legal and regulatory structure governing financial institutions, including the extent to which the structure creates the opportunity for financial institutions to engage in regulatory arbitrage;

(T) the legal and regulatory structure governing investor and mortgagor protection;

(U) financial institutions and government-sponsored enterprises; and

(V) the quality of due diligence undertaken by financial institutions;

(2) to examine the causes of the collapse of each major financial institution that failed (including institutions that were acquired to prevent their failure) or was likely to have failed if not for the receipt of exceptional Government assistance from the Secretary of the Treasury during the period beginning in August 2007 through April 2009;

It’s hard to improve on that. Whether the commission carries out this mandate, Pecora-style, will depend entirely on who its chair and members are, and whether they hire a tough staff. The ten commission members are to be appointed, three by the Speaker of the House, three by the Senate Majority Leader, and two each by their Republican counterparts. The Staff Director is to be hired jointly by the Chair (a Democrat) and the Vice-Chair (a Republican). Interestingly, none are to be appointed by the White House, and President Obama has already issued a signing statement reserving the right to invoke executive privilege in cases where materials or testimony from the executive branch are requested under subpoena.

To get a flavor of what the original Pecora Committee did, consider this observation from Donald A. Ritchie, associate senate historian, in his study, “The Pecora Wall Street Expose”"

With the power of the subpoena, his staff would descend upon a banker or broker, and go through is records, file drawer by file drawer, page by page, selecting and photostating documents. Staff lawyers and accountants would assemble this material to reconstruct motivations, discrepancies, delinquencies, and frauds involved. They drew a multitude of charts, tracing every event and statistic. After narrowing down the documentation, they outlined the subject’s transactions in chronological narrative on letter-sized sheets with citations in the margins to specific documents which could prove each assertion.

Will the new Financial Markets Commission be this diligent in exposing the facts and kindling public demands for sweeping reform? You can be sure that House Speaker Pelosi and Senate Majority Leader Harry Reid will be getting friendly calls urging them not to make appointments that will embarrass the administration.

Three names have surfaced in the financial press as possible chairs, supposedly based on leaks from the Democratic leadership: Paul Volcker, 81, the former Fed Chairman, Arthur Levitt, Jr., 78, SEC Chairman during the Clinton era, and retired Supreme Court Justice Sandra Day O’Connor, 79. Volcker, an honest conservative, has turned against financial deregulation in recent years, and Levitt was a reasonably tough SEC chair, who bucked (and sometimes buckled) in the face of intense Congressional pressure from both parties not to crack down on abuses. Levitt now advises one of the most powerful private equity companies, the Carlyle Group, not exactly a constituency for tough reform.

Here are two better names:

*Paul Sarbanes, the retired Senate Banking Committee chairman. Sarbanes, a well-liked senator with admirers in both parties was both highly expert, incorruptable, and tough. In the fight to get what became the Sarbanes-Oxley Act, cracking down on accounting fraud, he showed real leadership. Sarbanes, now a vigorous 76, stepped down in 2006.

*Harvey Goldschmid, probably the most expert and public-minded SEC commissioner in recent decades. Goldschmid, 69, is now a law professor at Columbia. He was seriously considered by President Obama to chair the SEC, but was passed over in favor of the somewhat weaker Mary Schapiro.

It is important that this investigation be conducted not by a figurehead, but by one with the knowledge, passion, and predisposition to build the public case for sweeping reform, and without fear or favor.

Some Republicans, such as Richard Shelby, the ranking minority member on the Senate Banking Committee, are as disgusted with the Wall Street corruption as progressive Democrats are, though that does not describe the minority leaders in either house, Sen. Mitch McConnell and Rep. John Boehner, who will make the Republican appointments.

This could be one of those rare, historic commissions that changes the course of history — or it could be window-dressing. Stay tuned.

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Robert Kuttner is co-editor of The American Prospect and a senior fellow at Demos www.demos.org. His recent book is “Obama’s Challenge: America’s Economic Crisis and the Power of a Transformative Presidency.”

Jane Hamsher

By Jane Hamsher
Founder of Firedoglake

New compromise measures supported by Diane Feinstein and Arlen Specter may pave the way for the passage of the Employee Free Choice Act (EFCA).

With 900,000 union members in the state of Pennsylvania, the Arlen Specter firewall appears to be crumbling.  He knows he can’t win a Democratic primary in Pennsylvania without labor, and they have made it clear that their support is contingent on his vote on Employee Free Choice.  

Which is why Penny Pritzker and fellow billionaires are getting nervous, publicly breaking with the White House and President Obama over his support for the bill.

The “centrist” Dems of the Senate, led by Tom Harkin, know they won’t be able to shrug and say “what can we do, we only have 59 votes” much longer.  They have thus been trying to write an acceptable compromise so the party’s progressives (including the unions) don’t decide to stay home when Specter and others need their help in the 2010 elections. 

According to the National Journal:

[Diane Feinstein's] proposal would replace the card-check provision, which would allow workers to unionize if a majority signed authorization cards and strip a company’s ability to demand a secret ballot election. “It’s a secret ballot that would be mailed in … just like an absentee ballot. The individual could take it home and mail it in,” Feinstein said. If a majority mailed the ballots to the National Labor Relations Board, the NLRB would recognize the union.

As Harkin says, the Feinstein compromise has the advantage of “protecting the secret ballot, so people can do it in private,” which neutralizes that particular right-wing criticism of the bill.  

The other bone of contention has been arbitration clause of the Employee Free Choice Act.  Specter himself supports “last best offer” arbitration.  It’s also called “baseball arbitration,” and has incentives to get both parties to quickly make their best, most reasonable offer.  Bill Samuel of the AFL-CIO says “we’re open to that.”

Labor will no doubt be disappointed with such sacrifices to the bill, but if it means getting something passed, they will probably be happy to make these concesssions which satisfy the demands of critics like Blanche Lincoln, Mark Pryor, Jim Webb, Michael Bennet, Mark Udall and Ben Nelson.  

George McGovern was recently dis-invited from the Progressive Magazine’s 100th anniversary event because of his outspoken opposition to the bill on behalf of his good friend Rick Berman.  If McGovern is interested in reclaiming his reputation among progressives as something more than the pawn of a right wing astroturfing scumbag, he now has the opportunity to acknowledge that these compromises would satisfy his concerns.

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Follow Jane Hamsher at firedoglake.com and on Twitter

Leo W. Gerard

 By Leo W. Gerard
International President

A group of tire importers that should be competitors banded together recently to ally themselves with China in a trade case.

Doesn’t sound like they’re working for the interests of the United States, does it? No, they’re not. They’re collaborating with China against American manufacturing in general and American tire workers, represented by the United Steelworkers, in particular.

They’re opposing the union’s petition seeking a limit on the flood of Chinese tires that has so overwhelmed the U.S. market in the past five years that six American tire plants closed and nearly 7,000 American workers lost their jobs.

China cheats in international trade. It does so by manipulating its currency and subsidizing its manufacturing, which results in lower prices for its exports. For the tire importers, calling themselves the American Coalition for Free Trade in Tires, China cheating means higher profits.

After taking up with China, these companies are not the American Coalition of anything. They’re the Chutzpah Coalition. Here’s the quote that explains why: “If you impose quotas, you harm American jobs because of the impact on all of the people that work for independent dealers.” The Chutzpah Coalition lawyer, Jim Jochum of Jochum, Shore & Trossevim had the lack of insight to say that.

What we have here are tire import companies that grew and profited at the cost of American tire plants and American workers now asserting that if they are forbidden from importing limitless tires, then the result will be terribly wrong and unfair because some of their importing jobs might have to be cut.

If imports are limited, preserving thousands of American tire workers’ jobs, here’s what Del-Nat president Jim Mayfield asked at the Chutzpah Coalition press conference, “What’s supposed to happen to my company and my workers?” A call to Del-Nat asking for the total number of employees got this response: 68.

That’s chutzpah.

For those unfamiliar with Yiddish, chutzpah is not generally considered a positive attribute. The typical definition goes something like this: A boy kills his parents then seeks the court’s mercy because he’s an orphan.

In dealing with the Chinese and this coalition, there’s reason to believe chutzpah can be deadly. Chinese manufacturers are notorious for cutting corners in ways that proved lethal to consumers.  Babies, cats and dogs have all died from melamine-laced milk and pet food from China. In another case, the Chinese manufacturer of Aqua Dots substituted a chemical, which when ingested reacted like the “date rape” drug, forcing a recall of the toy after it sickened American children who put the dots in their mouths, and caused at least one youngster to end up in a coma.

And then there’s the tire case. On Aug. 12, 2006, four Philadelphia carpenters were driving home after work when the treads on one of the Chinese-made tires on their van separated. The rollover crash that followed killed two of the men and permanently impaired a third. An investigation showed that the tires, imported by Foreign Tire Sales – one of the members of the Chutzpah Coalition – did not contain a gum strip between belts necessary to prevent tread separation.

Initially, when the National Highway Traffic Safety Administration ordered Foreign Tire Sales to recall the defective tires, the company said it couldn’t afford to do that. Foreign Tire said it could pay only 10 to 15 percent of the approximately $80 million cost of recovering nearly half a million tires. Sure, it could profit from importing defective products. But it wasn’t prepared to pay to clean up the mess.

Later, it decided that only 255,000 tires needed to be returned. Ultimately, Foreign Tire was spared when drivers turned in fewer than 20,000 of those tires – less than 8 percent of the total. Who knows what happened to the remainder of those questionable tires or the people driving the cars they were on.

Foreign Tire, the Chutzpah Coalition and China want to continue importing freely – free trade not fair trade. And Chinese officials have taken steps to ensure that happens. Early in May, according to a report in the People’s Daily, China’s Vice Minister of Commerce met with U.S. Embassy personnel in Beijing “to negotiate on two trade remedy investigations targeting Chinese-made products that U.S. industries recently filed with the U.S. government.”

After that, the International Trade Commission released a memo revealing that Chinese officials attempted to discuss trade cases in a private meeting – a contact that was improper because other parties in these cases did not have an opportunity to argue their side. The ITC memo said China expressed particular concern about petitions filed under Section 421, the China-specific trade safeguard law that the USW used in the tire case.

Here’s what is at risk for China and their Chutzpah Coalition allies: in 2004 China sent 14 million tires to the U.S. valued at $453 million. By last year, that had increased to 46 million tires valued at $1.7 billion.

The USW wants the U.S. International Trade Commission to limit the imports to the 2005 level, which was 21 million. That number then could rise by five percent the following year, and five percent more the year after that. 

Congress added Section 421 to the U.S. Trade Act in 2000 to give U.S. industries and workers an opportunity to obtain product-specific relief from sharp increases in imports from China. Section 421 could provide resolution more quickly than a dumping or countervailing duty case.

Another good reason to call this group of tire importers the Chutzpah Coalition is that in its news release, announcing its formation, it suggested it represented “thousands of Americans working in the tire industry.” Not likely. Two of the six members refused to say how many employees they have – Dunlap & Kyle Co., Inc. and Foreign Tire. But the total employed in the U.S. for the other four together: American Omni Trading Co.; Del-Nat Tire Corp.; Hercules Tire & Rubber Co. and Orteck Global Supply & Distribution Co., is 400.

That’s hardly “thousands of Americans.”

But they’ve cost 7,000 Americans their jobs. And they’re fine with that. They’re working hard every day to add more to that number.