mykeystrokes.com

"Do or Do not. There is no try."

“The Great Detroit Betrayal”: The Residents, Employees And Retirees Are Not The Tragic Heroes Who Brought The City Down

Detroit has filed for bankruptcy. Most of the spot-news coverage has focused on the immediate fiscal crisis of the city, but the immediate fiscal crisis really isn’t what got the city into such deep trouble. Certainly, Detroit’s contracts with its employees and its debts to its retirees don’t explain anything about how and why this once-great city has come to such grief. Those contracts and retirement benefits are par for the course for major American cities—certainly, no more generous than those in cities of comparable size.

Any remotely accurate autopsy of the city will find the cancer that killed Detroit was the decline of the American auto industry. The failure of U.S. automakers in the ’70s, ’80s and ’90s to make better cars at a time when foreign-made autos were beginning to enter the U.S. market was surely one factor. Another was the trade deals that made it easy for Detroit automakers to relocate to cheaper climes—most particularly, NAFTA, which boosted maquiladoras while shuttering auto plants in the United States, disproportionately, in Greater Detroit. Taken in aggregate, the U.S. trade deals of the past half-century have benefited finance while crippling manufacturing, and Detroit—along with swaths of Cleveland, Chicago, Pittsburgh, and other industrial cities—paid the price.

A second factor is the racial polarization that Detroit has never managed to overcome. As far back as the 1920s, the Detroit factories attracted workers who didn’t always get along. In particular, it drew hundreds of thousands of workers from the African American South and white Appalachia. Since its formation in the 1930s, the United Auto Workers has spent much time and energy trying to combat white racism, and to keep tensions between these two groups from erupting in violence. The union didn’t always succeed. While it generally managed to get both its white and black members voting for liberal Democrats for state and national office, it seldom managed, even during the height of its strength in the ’30s, ’40s and ’50s, to get its white members to vote for its endorsed candidates for Detroit city office. Why the difference? Because city officials, unlike state and national ones, set Detroit’s policing and housing policies, and many white Detroiters, including auto workers, wanted to preserve racially segregated housing and a brutal, racist police force.

As mass suburban development came to Detroit in the decades following World War II, the city became prey to epochal white flight. By the late ’80s, when pollster Stan Greenberg conducted his now famous study of Macomb County—a white, working-class suburb adjoining Detroit, which had voted overwhelmingly for John Kennedy in 1960 and just as overwhelmingly for Ronald Reagan in 1984—he discovered a white electorate convinced that Democrats had created a government that benefited only blacks. Any notion of regional cooperation between increasingly black Detroit and its white suburbs was a non-starter.

As the auto plants closed and the whites fled, Detroit hollowed out. In time, as jobs and services vanished, blacks fled as well. In 1950, the city was home to 2 million people. Today, it is home to 700,000. Its unemployment rate, at 18.6 percent, is the highest of the 50 largest American cities. Its tax revenues, not surprisingly, can’t support adequate city services. And today’s bankruptcy filing is likely to reduce those services still further, while likely reducing the monthly pension checks of its retirees, though they and their unions have a strong moral claim to most favored creditor status. Moral claims often don’t amount to much, however, in bankruptcy proceedings.

Is it right to call what has happened to Detroit a tragedy? Not, surely, in a strictly Greek sense. There was hubris aplenty, but it was the hubris of auto executives who certainly don’t live within the city limits and won’t suffer the bankruptcy’s consequences. As for those who will suffer them—the residents, employees and retirees of Detroit—they’re not the tragic heroes who brought the city down. They’re the tragic victims.

 

By: Harold Meyerson, The American Prospect, July 19, 2013

July 21, 2013 Posted by | Auto Industry | , , , , , , , , | 1 Comment

“Nice Work If You Can Get It”: Why Mitt Romney Likes Firing People

Mitt Romney would prefer for you to recall just one number regarding his record at Bain Capital. That would be 100,000 — the number of jobs that the Republican candidate claims he created during 15 years at the private equity firm.

But now there is a more interesting, plausible and relevant number: $20,000. That’s how much money Romney is estimated to have made from each worker laid off during Bain’s many corporate takeovers.

In fairness, Romney’s goal at Bain was never to create jobs but to reap the biggest returns for their valued investors. Judging by that metric, he did exceedingly well, as even Bill Clinton accidentally admitted when discussing Romney’s “sterling” business career. And of course, Romney’s fortune, estimated somewhere between $190 million and 250 million, attests to that assessment.

But over the course of the Romney’s years at Bain Capital, at least five of the companies he took over eventually went bankrupt, while still rewarding Bain investors handsomely:

• American Pad & Paper: Bain invested $5 million in the Ohio paper company in 1992, and reportedly collected $100 million in dividends on that investment. But AMPAD went bankrupt in 2000, resulting in 385 employees losing their jobs.

• Dade Behring: Bain invested $415 million in a leveraged buyout in 1994, borrowed an additional $421 million, and ultimately walked away with $1.78 billion. Dade filed for bankruptcy in 2002, and laid off 2,000 employees.

• DDI Corporation: Bain reportedly invested $46.3 million in the electronic parts manufacturer 1997, earning $85.5 million in profits plus $10 million more in management fees. When the company went bankrupt several years later, 2,100 workers were laid off.

• GS Industries: In 1993, Bain invested $60 million in the Kansas City steel maker, borrowed a lot of money, and then took $65 million in dividends. But GS eventually went bankrupt in 2002, and 750 workers lost their jobs and pensions.

• Stage Stores: Bain invested $5 million to purchase the Houston-based retailer and took it public in the mid-’90s, reaping $100 million from stock offerings. In 200o, following Romney’s departure from Bain, Stage filed for bankruptcy and 5,795 workers were reportedly dismissed.

While it is true that some of those companies went under after Romney had left Bain, the job growth for which he now seeks credit also occurred after his departure in 1999. But the bankruptcies — and the bust-out scenario that helped Bain to profit anyway — are not news. What AOL’s Daily Finance has contributed to the Bain debate is a simple calculation: Bain Capital booked $1.995 billion in profits from the layoffs of 11,030 workers at various firms. And by that scoring, Romney earned roughly $20,000 himself for each of those fired employees. Nice work if you can get it (or take it away from someone else).

 

By: Axel Tonconogy, The National Memo, June 15, 2012

June 30, 2012 Posted by | Election 2012 | , , , , , , | 1 Comment

“I Could Have Done That”: All Good Ideas Belong To Mitt Romney

So says a campaign advisor, who pinned the auto bailout success on the former Massachusetts governor.

Back in 2009, when the newly elected President Barack Obama was contemplating a bailout of the auto-industry, Mitt Romney emerged from his temporary hiatus to push policymakers in the other direction. “Let Detroit go bankrupt,” he urged in an op-ed for New York Times. For Romney, a managed bankrupcy of the kind he had pioneered at Bain Capital was the only way to “save” the American auto industry. As for Obama’s approach, Romney warned that “If General Motors, Ford and Chrysler get the bailout their chief executives asked for yesterday, you can kiss the American automotive industry goodbye.” A few months later, Romney repeated his warning: If Obama continued on his path, “it would make GM the living dead.”

Three years later, Romney’s prediction hasn’t come to pass. The American auto industry is thriving even as conservatives run with the idea that government is categorically ineffective. In February, during the Republican primary in Michigan, Romney further disparaged the auto bailout, granting its success, but accusing Obama of kowtowing to “union bosses.” This message didn’t play well, and only gave Obama and Democrats an opportunity to tout the success of the bailouts, and contrast them with Romney’s position.

Now that Romney is in the general election, he has begun to shake the Etch A Sketch on a number of issues. One of those, if this comment from Romney advisor Eric Fehrnstrom is any indication, is the bailout:

“[Romney’s] position on the bailout was exactly what President Obama followed,” Fehrnstrom said. “He said, ‘If you want to save the auto industry, just don’t write them a check. That will seal their doom. What they need to do is go through a managed bankruptcy process.’”

“Consider that the crown jewel,” Fehrnstrom said. “The only economic success that President Obama has had is because he followed Mitt Romney’s advice.”

Writing at Talking Points Memo, Pema Levy points out that Romney’s position on the bailout has been hazy; he was vehemently against the administration, but in a way that gave him a way to claim credit, as Fehrnstrom does. Of course, the fact that Romney has rhetorical space to take credit for the bailout doesn’t mean that’s any less ridiculous; it’s the political equivalent of twelve-year-old boasting—“I could have done that too! If you’d picked me first.”

One last observation—this continues an odd pattern by the Romney campaign, which inhabits a frame established by the Obama campaign rather than creating something for themselves. First, there was the “War on Women,” where Romney advisors argued that it was Democrats who were fighting the real war on women, while conceding that the existence of an actual war. Then, in Romney’s speech last Tuesday, there was “fairness,” when the former Massachusetts governor argued that government was the real purveyor of unfairness in the country. And now we have the auto industry bailout, where Romney claims to have been the real mastermind behind the policy.

I’m not sure what the campaign hopes to get out of this approach. By continuously talking about Obama on Obama’s terms, they do nothing but put themselves on the defensive. It’s a bad strategy, and the only saving grace is that we’re still early in the election.

 

By: Jamelle Bouie, The American Prospect, April 30, 2012

April 30, 2012 Posted by | Election 2012 | , , , , , , , | Leave a comment

Personal Parachutes: How Elites Could Profit From A U.S. Debt Crisis

Have you developed a hedging strategy to protect against America’s rapid decline? Or repositioned your portfolio to take advantage of orphaned Treasury securities? Or stashed some cash so you can buy distressed assets from the newly bankrupt?

If you’re like most Americans, the answer is, of course not. But if you work on Wall Street, the man-made debt crisis that’s brewing in Washington might represent a surprising opportunity to make money. As the whole world knows by now, the U.S. government will no longer be able to borrow money as of early August, unless Republicans and Democrats swallow their vitriol and come up with a compromise deal that will begin dealing with America’s oversized debt and allow the government to function normally. The nation’s mushrooming debt load is a big problem, but abruptly halting all federal borrowing would transform it into a disaster, since it would require vast government spending cuts that would promptly trigger another recession.

The ongoing assumption is that legislators will puff and posture until the last second, then congratulate themselves for making a deal that should have been in place months ago. But even if politicians avert the worst-case scenario, the size of the debt and the deep dysfunction in the nation’s capital are likely to cause other trouble. It’s increasingly likely, for instance, that rating agencies like Moody’s and Standard & Poor’s will cut America’s credit rating from AAA—the top rating, which the United States has held for decades—to a notch or two lower. That would force thousands of institutional investors to determine whether they can keep holding Treasury securities or whether they need to dump them. Even small spending cuts that come as part of a deal to raise the federal borrowing limit could cut into weak economic growth, especially if they go into effect immediately.

The knock-on effects of a U.S. debt downgrade, sharp spending cuts or a “policy mistake” in Washington could rattle financial markets, depress hiring and drive confidence back down to recessionary levels. But smart investors know that one man’s crisis is another’s opportunity, and the monied class is planning how to profit if America goes bust. As the New York Times reported recently, some hedge funds are stockpiling cash, to buy U.S. government securities at fire-sale prices if there’s a credit downgrade and conservative investing vehicles like pension or money-market funds are forced to dump Treasuries. Others are trying to identify institutions that might be damaged by a U.S. debt crisis and forced to sell assets that vulture investors could buy on the cheap. Another way to gamble on America’s collapse is to invest in credit-default swaps that would pay out if the United States defaults on its debt. The price of such insurance has doubled recently, indicating a lively market for bets against America.

The modern financial markets are sophisticated casinos that allow steely investors to gamble on almost anything, including gloom-and-doom scenarios that could potentially harm millions. Though it might sound unctuous, betting on the likelihood of adverse events is a healthy part of a free market, because it creates an even stronger incentive for those who would suffer from bad outcomes to prevent them—and punishes those who destroy value, such as CEOs who mismanage their companies. But it doesn’t always work that way, and besides, this kind of gambling is generally open only to professional investors or those wealthy enough to have experts handling their money.

In his 2010 financial disclosure forms, for instance, House Majority Leader Eric Cantor listed a small investment in a fund that bets against U.S. Treasury securities and would benefit if the U.S. government defaulted or something else happened that devalued Treasuries. That became controversial, since Cantor is one of the key Republicans involved in the debt negotiations and a conservative stalwart who insists there should be no new taxes as part of a deal. Cantor’s office says the fund is in his wife’s and his mother-in-law’s name and amounts to less than $4,000, while the vast majority of Cantor’s retirement savings are invested in conventional securities that would lose value if there were a true U.S. debt crisis. But Cantor’s portfolio is probably similar to those of other affluent Americans, with traditional investments offset by a hedging strategy meant to minimize losses if something profoundly bad happens.

Ordinary Americans who lack investment funds or live paycheck-to-paycheck don’t have much of a hedging strategy, however, which makes them directly vulnerable if Washington wrecks the economy and jobs gets even scarcer. Some economists think the drawn-out debt drama—and the near-total absence of action on other big problems, like the foreclosure epidemic or sky-high unemployment—is already causing harm. Businesses, for instance, have virtually stopped hiring while they await the outcome of the Washington Follies. A sliding stock market reflects jittery investors who can’t figure out if they should invest in a global recovery or gird for Armageddon. “Washington is locked in a budget war that will determine the U.S. economy’s fate, not only for this year and next but for generations,” writes economist Mark Zandi of Moody’s Analytics. “Lawmakers may well misstep on this path to fiscal sustainability.” If they do, many of them will no doubt have their own personal parachutes. If possible, get your own.

By: Rick Newman, Columnist, U. S. News and World Report, July 22, 2011

July 24, 2011 Posted by | Capitalism, Class Warfare, Congress, Conservatives, Consumers, Debt Ceiling, Debt Crisis, Deficits, Democrats, Economic Recovery, Economy, Federal Budget, GOP, Government, Government Shut Down, Ideologues, Ideology, Income Gap, Jobs, Lawmakers, Middle Class, Politics, Public, Republicans, Unemployment, Wall Street | , , , , , , , , , , , , , , | Leave a comment

Insurance Companies: Guarding Health Is Not Their Business, But It Is Ours

If for one moment anyone has the notion that for-profit health insurance companies are in the business of guarding the health (or wealth) of policyholders, that notion ought to be quickly dismissed in favor of the truth.  For-profit health insurance giants guard profits.

I arrived outside the WellPoint annual shareholders meeting in a hotel in Indianapolis yesterday to be greeted by more guards (and some armed) than I have seen surrounding President Obama at times.  Apparently just the prospect of having some of the legal shareholders question the business practices and ethics of the WellPoint board and CEO Angela Braly was very scary for the company and its elite leaders.

Some of the shareholders have in recent years put forward a resolution supporting WellPoint’s return to its non-profit roots.  After last year’s meeting, the resolution earned 9.6 percent or 30,000,000 shareholder votes.  The current leadership doesn’t like that nor do they like the efforts of the shareholders who keep challenging them.

One shareholder asked Ms. Braly  at yesterday’s tightly controlled and guarded meeting, as a sort of speakers’ “shot clock” counted down her speaking time, “Tell me, Ms. Braly, could you please explain what you do that warrants a salary ($13.5 million annually) that is more than 375 public school teachers in Indiana earn?”  Braly’s answer was a classic.  No shot-clock running for the CEO as she explained that the board sets her compensation and it has to be competitive with the other comparable giants in the insurance industry.  It is a breathtaking demonstration of greed and hubris.

I wondered how we have allowed this country to amble onward to the point where 1,275 Americans who carry health insurance go bankrupt every single day (if the courts stayed open seven days a week) while an insurance company CEO like Angela Braly pockets $140,000 for her day’s salary.  Every day.

That’s quite a lot of money that doesn’t go to healthcare.  That’s quite a lot of money for one person to earn in one day.  That may be why such scary guards are needed outside WellPoint shareholder meetings – they wouldn’t want CEO Braly to have to mix it up with any of the policyholders or others who might question too directly what value the for-profit health insurance industry adds to the U.S. healthcare system.  I also wondered how much money those guards cost.  And the shot clocks to keep pesky questions to a minimum?  And how about the pro-Angela and pro-profit softball questions planted in the room?

WellPoint, like the other major insurance giants, can claim the best profits ever this year.  Times are good at the top.  Things are not so good for millions of Americans who want for decent healthcare within a system that provides a progressively financed, single standard of high quality care.  Medicare for all would be nice.  The American Health Security Act of 2011, S915/HR1200 as offered by Sen. Bernie Sanders, I-VT, and Rep. Jim McDermott, D-WA, provides a model for moving forward.  Public financing (yes, a single payer system) coupled with public and private delivery (not a single provider).  No insurance giants paying huge board compensations and CEO salaries.  No armed guards protecting the profit.

Outside the City Market in Indianapolis, in the rain and with no need for guards, the advocates of healthcare sanity gathered – and I was thrilled to be among the Hoosiers for a Commonsense Health Plan.  We affirmed our commitment to the work ahead and to one another.  We sang.  We are shareholders in a society that values more than profit – we value behaving justly and humanely, and we’d like a healthcare system that reflects that.

Forgive my repetition of the theme, but health insurance is not healthcare.  Health insurance is a financial product.  Health insurance is a financial product sold to protect health and wealth which may well do neither. Health insurance is a defective financial product for millions of people who made what we felt were responsible decisions about protecting ourselves and our families from financial or health disaster with health insurance products that have loopholes and flaws big enough to leave thousands dead every year and hundreds of thousands bankrupt.

I will never have the salary or earnings of insurance CEOs like WellPoint’s Angela Braly.  That’s OK by me because I’ll also, I hope, never need guards to keep those I have harmed and those I would harm from questioning me about why.  But, my life and the lives of my loved ones, my neighbors and my friends are surely as valuable in terms of access to healthcare in America in 2011.  The day will come.

By: Donna Smith, CommonDreams.org, May 18, 2011

May 18, 2011 Posted by | Affordable Care Act, Consumers, Health Care, Health Reform, Ideology, Insurance Companies, Politics, Public Health, Republicans, Single Payer, Under Insured, Uninsured, Wealthy | , , , , , , , , , | Leave a comment

« Previous Entries     Next Entries »