Let us go back, shall we, to the heady days of September 2008, when plutocratic bankers, of the kind Thomas Nast once drew, clamored for public money -- for the good of the nation. "This is not about how to bail out Wall Street," wrote Kenneth Lewis, Chairman, CEO and President of Bank of America, in an op-ed for the Wall Street Journal titled "Main Street Needs The Treasury Plan." "This is about saving the U.S. financial system for the benefit of American businesses, consumers and the economy at large." You remember the argument: because of the choices they'd made, banks were finding it hard to borrow money themselves, and had stopped lending to businesses large and small. "Without a systemic solution, this problem will get worse," Lewis wrote. "Workers will bear much of the impact."
So now that BofA has a $25 billion government backstop, it's loaning to small businesses, right? Alleviating the stress on workers, right? Wrong! Last week, in Chicago, 230 workers began a sit-in at Republic Windows & Door after the manufacturer abruptly shut down. The company, hit hard by the slowdown in construction, said it couldn't continue operations once its lender refused to extend its line of credit. That lender was -- wait for it -- Bank of America.
We shouldn't be surprised that banks, fortified with our money, aren't lending. Joe Nocera, a reporter for the New York Times, got it from the horse's mouth when he listened in on an internal conference call among bankers at JPMorgan Chase. An employee asked if the government injection would "change our strategic lending policy," and an executive replied, "What we do think it will help us do is perhaps be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling. And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment."
A number of Agenda wrote back in September that while I was right to be outraged, the bailout was necessary, if better, medicine. Was it? Two months later, banks can borrow money, but they won't lend it. They'd rather buy other troubled banks and create still-bigger troubled banks. (Nocera reports that the discredited Bush Administration is making this even easier with a helpful tax break.) Housing prices haven't stabilized, and the tide of foreclosures hasn't been stemmed? How should we feel about the bailout now?
And we're doing it again. What, I wonder, will the Big Three do with their bailout money? Presumably, they'll use it to build factories in China.
All true enough, as far as it goes. But facts are stubborn things, as John Adams said*, and the problem with poster children is that sometimes you don't see everything. Now there's reason to wonder if Republic owner Rich Gillman hasn't behaved dishonorably.
First, there was the surprising equanimity from the company's vice president of sales and marketing, Amy Zimmerman, who said last week, "Banks are in the business to make money and at some point they have to make a business decision and that's what this is." Then it turned out, thanks to some nifty reporting from the Chicago Tribune, that in November, one Sharon Gillman formed a new LLC called "Echo Windows & Doors," which bought a factory in Red Oak, Iowa. An Amy Zimmerman is a contact for the new company, and Sharon Gillman, the Tribune cautiously reports, "shares an address with Republic President and CEO Rich Gillman." (Psst! She may be his wife.) The paper also reports that last week, Echo Windows "officials" told employees at the Iowa plant that it would double the workforce because it already has "production orders lined up."
So it would appear that the Gillmans had a shutdown in mind for a while. They later confirmed that they approached Bank of America about winding down operations in October and acknowledged that they had formed another company to make the same products in rural Iowa, presumably because wages are lower than in metro Chicago. The bank says such discussions began in July, and that it first approached the firm about its financial condition in February. Yet the Gillmans were somehow unable to comply with a federal law that requires 60 days notice before closing a plant. And they managed to blame the bank for being unable to pay severance and vacation, in some cases to workers who had given decades to the company. Oh, there's also the question of $10.4 million in city development money that the company took in late 2007, just a few months before the bank claims it began discussing Republic's future, which the Tribune reports obliges the firm to maintain certain employment levels at the Chicago factory until 2019. In 2007, incidentally, the couple bought a $2.6 million condo, according to the Chi-Town Daily News.
The opportunistic predators are out in full force. We may learn more once Illinois Attorney General Lisa Madigan concludes her investigation into Republic. Journalists investigating the story may be able to shed some light on the Gillmans' actions, if there are any reporters left.
In the meantime, yesterday brought word of a merry enough Christmas for Republic's former employees: Bank of America, apparently shamed by, of all people, Illinois Governor Rod Blagojevich, has agreed to loan the firm $1.35 million in order to pay severance and accrued vacation time to all of the workers. (JP Morgan, which happens to own 40 percent of Republic, will kick in $400,000.) One hopes, though, that the bank's recourse to collect from its borrower extends to the Gillmans and the various entities they've created. After all, it is our money.
*I know this because I'm in the middle of the miniseries (it's great!), and as Homer Simpson once said, "TV's always right!"