Democrats playing politics with Chicago plant closing

Barack Obama's stint as a community organizer, and his allegiance in the principles of Saul Alinsky (a strategy that values the power of protest), has elicited much speculation regarding how he would act as a President when it came to labor issues. We have insight now since we can see how he acts as President-elect

A factory that makes windows and doors in Chicago is closing - a victim of a poor economy, a union work force with wages that makes the company uncompetitive, and the actions of Bank of America which withdrew credit lines to a failing business. The response of the union work force was to stage a sit-down at the factory to protest what they see as a failure of management to reach a settlement with the workers being laid off. The workers are looking for thousands of dollars to cover vacation time and lost wages.

Last week, the factory notified its nearly 300 employees, of which about 80% are unionized, that it would close by Friday because Bank of America had told the company it would be cutting off all financing.

On Monday, Illinois Gov. Rod Blagojevich, at a news conference in front of the Republic Windows & Doors factory, called on state agencies to suspend business with Bank of America, based in Charlotte, N.C.

The city of Chicago also threatened to stop doing business with the bank.

In a statement, Bank of America said that it is "reaching out" to Republic management "to see what they can do to help resolve this issue." But the bank noted that "When a company faces such a dire situation, its lender is not empowered to direct the company's management how to manage its affairs and what obligations should be paid. Such decisions belong to the management and owners of the company."

 
Well, much as the statement by Bank of America makes sense (management is charged with the responsibility of running a business) that is now how Democratic politicians view reality.

Their response?

Threaten Bank of America with the loss off all state business unless it extends a loan to a business headed toward bankruptcy.

Governor Rod  Blagojevich has called on state agencies to suspend business with Bank of America. City politicians have joined the bandwagon. So has our President-elect.

The state's total business with Bank of America is valued in the "hundreds of millions of dollars," according to Kelley Quinn, spokeswoman for the governor. She said every Illinois state employee who travels for business has a Bank of America credit card; those cards would be suspended. Many state agencies also have deposits with the bank.

"We want to know that [Bank of America] was acting responsibly during this process and that they did everything in their power to protect the workers," Ms. Quinn said. She added that if a satisfactory resolution is reached, the state could continue doing business with the bank.

Also on Monday afternoon, 15 Chicago aldermen said they were planning to introduce a city ordinance next week that would require the city of Chicago to stop doing business with Bank of America, including a requirement that the city withdraw all funds and deposits with the bank or any of its subsidiaries.

 
And President-elect Obama-what say he?

Gov. Blagojevich's comments came a day after President-elect Barack Obama offered support for the employees, saying at a news conference that they are "absolutely right."

The complicating issue is that Bank of America has been the recipient of $15 billion dollars as part of the government's Troubled Asset Relief Program (TARP) and politicians are using this as a rod to beat Bank of America. This is a sign of things to come: federal money that comes with strings attached. Not just strings, but lassos and the strings that control the actions of a marionette. Aid extended by the government can be used to strengthen emerging industries-high-tech or highly value-added service industries. The crux is, of course, that those industries are not heavily unionized and thus are not reliably Democratic.

In contrast, old businesses  such as window and door companies are heavily unionized and thus almost automatically Democratic (at least when it comes to the funds unions use to elect politicians). Therefore, it is in the interests of these Democratic politicians (Barack Obama included) to threaten banks to provide an unwise flow of money to businesses that would otherwise close for economic reasons. I thought the problem with banks was imprudent lending? That has been the mantra on the campaign trail, anyway.

But whose interests are being served here? America's? Taxpayers should not see their money (which is TARP money) flow to workers just to help Democratic politicians with their constituencies. Bank loans should flow to growing businesses, not to provide life support for unions who may have priced themselves out of a job. Even more importantly, government should not force banks to loan money via a threat to cut off government business with the banks. This is extortion. It is also another manifestation of the growing threat of socializing our economy and putting its control in the hands of Democratic politicians.

This may sound cruel and cold but it is in the nature of the principle of creative destruction trumpeted by famed economist Joseph Schumpeter . Such creative destruction of old industries can be the very lifeblood of a new stronger economy that provides all of America with a higher standard of living.

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