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Why Democrats are Pushing the $165 Billion Union Pension Bailout August 11, 2010

Posted by seeineye in : Politics , add a comment

by LaborUnionReport

Somewhere lurking in the hot, putrid halls of Congress this summer is a union bailout bill of epic proportions and long-term ramifications.   Whether or not Democrats can ultimately push it (or something like it) into passage is yet to be determined. However, with rumors that Sen. Dick Durbin (D-IL) signed on as a co-sponsor on Thursday, it would appear that the union bailout is quietly creeping along.  If it passes, though, its ramifications surpass the mere $165 billion-plus price tag, as it will influence the political landscape for decades to come.  In sum, Democrats need the bailout desperately and Republicans should shun it like the plague.

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Likely to surpass the touted $165 billion it is estimated to cost, Create Jobs and Save Benefits Act (S. 3157) was introduced on March 23rd by Sen. Bob Casey (D-PA) and is designed to bailout unions’ underfunded pension funds by transferring the liability of those funds onto the backs of the taxpayers.

Under these bills, the Pension Benefit Guaranty Corporation (PBGC) would, at the request of the plans, have the authority to take over the pension obligations of employers who have withdrawn from the plans, and pay the benefits out of taxpayer dollars, says Furchtgott-Roth:

  • Once the PBGC shoulders that obligation, it would keep making payments until the last retiree or designated survivor dies.
  • Since many multiemployer plans are in financial difficulty, this legislation, if enacted, could dramatically increase the federal deficit, putting even more pressure on the American taxpayer and the economy.
  • Depending on events, it might add billions to government spending — current underfunding levels are estimated at $165 billion-bumping up future deficits.

According to a June 24th article published in the Bureau of National Affairs Construction Labor Report (subscription required):

If enacted into law, the bill would convert a private funding shortfall for collectively bargained multi-employer plans into a public obligation, said Brett McMahon, vice president of Miller and Long Concrete Construction and an ABC member.

The legislation would transfer a portion of multiemployer pension funding obligations to a new insurance program that would be operated by the PBGC and paid for with taxpayer dollars instead of employer-paid premiums, F. Vincent Vernuccio, a spokesman for the trade group’s advocacy organization, the Competitive Enterprise Institute, said during the call.

At the heart of the union pension problem are companies that, in many cases, agreed to put retirement money for union workers into “multi-employer plans” but have since gone out of business. As the unionized workers in multi-employer plans are still entitled to a pension, the remaining employers are left funding the pensions of workers who, in many cases, they never employed.

Over the past few decades, as more and more unionized companies have gone out of business, this ponzi-scheme has only grown, leaving many union pensions severely underfunded—an estimated $165 billion underfunded.  Now, with so many plans in critical status, many companies that remain in union multi-employer plans are facing an insurmountable burden that may eventually drive many of them out of business.

What’s Really Behind the Democrats’ Push for the Union Pension Bailout

Liberal talk-show host Ed Schultz proclaimed last weekend that America is in an ideological fight for the country.  The problem for many on the Right is that they are only beginning to understand that the Left’s vision for America is a long-range vision—and it is a fight where the Left is playing for keeps.

Democrats need unions to be their foot soldiers on the march to a socialized progressive America which is why the entire Left establishment has been pushing for the horrifically-misnamed Employee Free Choice Act (EFCA) for the better part of a decade.

In fact, at 2009’s Netroots Nation (the left-wing blog event for socialist progressive bloggers), one of the panel discussions held was  The Secret Plan to Defeat the Right Forever and how EFCA was key to the plan’s success.

Modernizing the nation’s labor law is critical to expanding union membership—which in turn, will ensure conservatives become a permanent minority, as newly-empowered workers actively engage in political action and demand a new way of doing the nation’s business, like creating an economy that rewards Main Street and not just Wall Street. The freedom to form unions and bargain is critical to the progressive movement—when workers have the tools they need to build a better life, they have the power to improve their communities and the solidarity to make progressive political change throughout the nation.

In other words, the Left has been relying on EFCA in order to have one-party rule in America permanently.  The problem is, EFCA has been temporarily stalled and now the train-wreck of union pensions is barreling down on the Democrats.  In order to save the Democratic Party, they must save the unions (or more specifically, the unionized companies) from failing.

While Democrats will tout the union pension bailout bill as another way to “create or save jobs,” it is misleading. The union pension bailout bill will save Democrat politicians’ jobs and it may also temporarily save some union jobs, but at what expense?

There are no guarantees that bailing out the union pensions at the expense of taxpayers will save the unionized companies.  Moreover, if the union companies are allowed to fail, the markets and industries that these companies operate in will likely absorb the work, creating jobs in other (albeit non-union) companies.

On the other hand, even though Democrats know that another union bailout will likely make them even bigger pariahs with the American people, the very survival of their party rests on their ability on passing this poisonous piece of legislation. If they fail, the ramifications for the Democrats are disastrous.

Failing to bailout the union pensions would likely cause the failure of a fairly high number of unionized employers.  If unionized employers fail, unions will lose members.  Without union members, unions would have no union dues with which they can fund Democrats’ political campaigns and would not be able to mobilize effective Get Out the Vote (GOTV) efforts.

There are a couple of reasons Democrats and their union handlers are pushing this poisonous bill now:  Union bosses and Democrats know there is likely going to be a major upheaval in November.  As a result, what they have not been able to accomplish in the last 18 months in Washington will presumably be stalled for another few years (at least until 2013).  They cannot survive that long.  The union pension bailout bill is the lifeline to ensure their survival until they can regain dominance again.

In the coming months, watch for more push from the Democrats to bailout the union pension plans. If it doesn’t happen before the mid-term elections, it could very well happen immediately after.  However, for any Republicans considering supporting this legislation, they do so at their own peril, for the Democrats are only pushing this to save their party by making sure they have foot soldiers in future elections.

“I bring reason to your ears, and, in language as plain as ABC, hold up truth to your eyes.”  Thomas Paine, December 23, 1776

ShoreBank: Is There a Rezko Connection? July 22, 2010

Posted by seeineye in : Politics , 1 comment so far

by Joel B. Pollak

For months, we have been told that ShoreBank deserves a bailout because it serves poor communities. We have been assured by ShoreBank’s patrons, such as Rep. Jan Schakowsky (D-IL), that allowing the federal government to take over the bank will put borrowers in those communities at risk.

Now, as the truth has begun to emerge, it is becoming clear that ShoreBank’s troubles did not begin in poor communities at all.

Robin Sidel of the Wall Street Journal reports that ShoreBank’s financial problems may partly stem from loans made to condominium developers and builders in parts of town beyond its traditional focus on the city’s South Side.

If ShoreBank deserves help because it is the “iconic community development bank,” as Schakowsky recently claimed, what was it doing lending money to condo kings, and why should taxpayers bail it out?

If the ShoreBank is taken over, Schakowsky claims, “the losers will be these low-income communities and the businesses and the homeowners that they serve.”

That was never true.

The businesses and homeowners will be protected, as they are in every federal takeover. Rather, those with the most to lose from ShoreBank’s failure will be its board, its political patrons, and the developers who hoped to profit from its “iconic” status.

This is not the first time that property developers have played a key role in a Chicago political scandal.

Property developer Tony Rezko, a fundraiser for both Barack Obama and former governor Rod Blagojevich, is currently in federal prison on corruption-related charges. During his career, he was involved in many condominium projects in the city, including one that Obama helped him build by urging state funding for the project.

The plot thickens. At the ongoing Blagojevich trial, Ali Ata, the former head of the Illinois Finance Authority (IFA), testified last month that Rezko arranged for him to be appointed to the IFA by helping him pay off the governor.

The current chair of the IFA, Bill Brandt, has been one of the most vociferous proponents of a ShoreBank bailout, and may even have suggested a state-level bailout to ShoreBank, rather than the other way around.

There is another Rezko connection to ShoreBank: Howard Stanback, who serves on one of ShoreBank’s boards, once worked for Rezko at New Kenwood LLC–the same development company that Obama had assisted.

(Rezko’s partner at New Kenwood was Obama’s former boss, Allison S. Davis; Stanback also chaired the Woods Fund, where Obama served along with Bill Ayers of the Weather Underground.)

Until now, the role played by property developers in ShoreBank’s demise has been hidden from all but a few insiders and key officials at the Federal Reserve.

A few days ago, Tim Geithner responded to a request by Schakowsky and other Chicago Democrats by giving ShoreBank an 11-week extension. Before, it needed to raise enough capital to avoid closure by May 21; now, it has until August 6. (How many homeowners get that kind of break?)

Republicans in Congress have pushed for an investigation into the White House’s role in trying to secure a bailout for ShoreBank. Yet we also need a public forensic audit of the bank.

Is there a Rezko connection? Are there developers with ties to the Chicago machine who would be protected by a bailout? What are the connections, if any, to Obama, Schakowsky, and other Chicago politicians?

We need to know–now. At the very least, we can already dismiss Schakowsky’s false excuse that the bailout is for the poor. It is nothing more than Chicago-style corruption on a national scale.

Institutional Bailouts: All Regulation, No Reform July 9, 2010

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by Rep. Todd Akin (R-MO)

How do you fix a problem? Well, in Washington, there is a sure-fire solution to any crisis: pass reactionary legislation without knowing what is in it to show you really “care” about the problem. Then, claim the problem is solved. Wait until the next crisis. Repeat.

The current crisis is big, overly exposed financial institutions; some of which have taken enough risks that they are now insolvent. Unfortunately, the regulatory reform (a Democratic metaphor for regulatory expansion) being considered by the House and Senate in response to the recent financial crisis will not solve the problem.  In fact, it may make them worse by cloaking the real issues with new regulations but without addressing root causes. These misguided political ambitions are especially obvious in H.R. 4173, the Restoring American Financial Stability Act of 2010.

Here are just a few examples of why H.R. 4173 is very effective at expanding government regulation but very ineffective at providing for the substantive reform needed to fix the failure points of our financial institutions:

Contrary to claims made by the Democratic majority:

The short-term political benefits that the Democrats hope to reap from this ill-considered measure will cost U.S. firms in the global marketplace, leaving them unable to create stable jobs for American workers.  The American people deserve both a better process and a far better policy outcome from their elected representatives.

In his first State of the Union address President Obama rebuked Republicans for opposing big-spending. He told us that saying “No” may be good politics, but it’s not good leadership.  Well, saying “yes” to bad policy isn’t good leadership either, Mr. President.  The 2000 plus page H.R. 4173 is just one more example of the Democratic majority’s attempts to grow government, not fix problems. Not only does it fail to address the root causes of the financial crisis, it’s bad for the economy, it’s bad for business, it’s bad for jobs, and it’s bad for America.

Fairness Doctrine in Our Future? June 7, 2010

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by Jacob Lawrence

The Federal Trade Commission ran a study of the government’s attempts to bailout or grab the media that they called “Potential Policy Recommendations to Support the Reinvention of Journalism.” The 47 page document ran from May 2009 to the present. Here is a list of some of the proposals:

– the creation of a “journalism” division of AmeriCorps, the federal program that places 75,000 people with local and national nonprofit groups annually

– tax credits to news organizations for every journalist employed

– establishing citizenship news vouchers, which “would allow every American tax payer to allocate some amount of government funds to the non-profit media organization” of their choice

– increased funding for public radio and television

– providing grants to universities to conduct investigative journalism

– increased postal subsidies for newspapers and periodicals

– a 5 percent tax on consumer electronics, which would generate roughly $4 billion annually, to pay for increased public funding

I have been warning that a form of the Fairness Doctrine hidden in a media bailout is coming. This report seems to show our officials have been trying. If a media bailout is passed, obviously the government will grab some power in the process, along with countless pork barrel projects and back-room deals in exchange for votes.

NYT: GM, Treasury lied about bailout repayment May 4, 2010

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by Ed Morrissey

This article by Gretchen Morgenson in the New York Times is significant for two reasons.  First, the Times has decided to give this significant coverage, which means the story of GM’s misleading claim of paying back the taxpayer-funded bailout will continue to have some legs. More importantly, it also points the finger at Treasury and the Obama administration for its complicity in allowing CEO Ed Whitacre to make those claims without challenge:

AS we inch closer to a clearer understanding of the products and practices that unleashed the credit crisis of 2008, it’s becoming apparent that those seeking the whole truth are still outnumbered by those aiming to obscure it. This is the case not only on Wall Street but also in Washington.

Truth seekers the nation over, therefore, are indebted to Senator Charles E. Grassley, Republican of Iowa, who in recent days uncovered what he called a government-enabled “TARP money shuffle.” It relates to General Motors, which on April 21 paid the balance of its $6.7 billion loan under the Troubled Asset Relief Program.

G.M. trumpeted its escape from the program as evidence that it had turned the corner in its operations. “G.M. is able to repay the taxpayers in full, with interest, ahead of schedule, because more customers are buying vehicles like the Chevrolet Malibu and Buick LaCrosse,” boasted Edward E. Whitacre Jr., its chief executive.

G.M. also crowed about its loan repayment in a national television ad and the United States Treasury also marked the moment with a press release: “We are encouraged that G.M. has repaid its debt well ahead of schedule and confident that the company is on a strong path to viability,” said Timothy F. Geithner, the Treasury secretary.

Taxpayers are naturally eager for news about bailout repayments. But what neither G.M. nor the Treasury disclosed was that the company simply used other funds held by the Treasury to pay off its original loan.

Scott Johnson at Power Line wonders when the Most Transparent Administration EverTM will investigate this attempt to play a shell game with GM’s bailout and steal a little political capital:

Whitacre and GM omitted two facts that render their public relations blitz highly misleading. They are the kind of omissions that constitute securities fraud when made by a company in connection with the purchase or sale of a security or when a company reports its financial results. …

GM’s fraudulent public relations blitz took place with the support of the Obama administration, up to and including Secretary of the Treasury Timothy Geithner. Geithner’s participation makes his tax cheating and related testimony pale in comparison.

In retrospect, it is obvious that GM undertook the blitz at the behest of the Obama administration. It is symptomatic of the era of national socialism in which we find ourselves, and for which GM is a leading indicator.

Scott makes a good point. This kind of misleading statement would be actionable under Sarbanes-Oxley had it been made as part of a disclosure statement. It might still yet be actionable if the SEC concluded that GM intended to mislead investors into buying GM shares the same way Whitacre wanted to encourage car buyers to come back to GM by falsely claiming that they had repaid taxpayers in full. However, that would mean that the SEC would have to investigate the role of the executive branch to which it belongs in the endorsement of Whitacre’s statement. Any investigation of this would have to originate in Congress, and they’re not likely to engage, either … at least not this year.