How the Teamsters Beat Goldman Sachs

[demosincebirth]

By ANDREW COCKBURN

Among the causes of the ongoing financial meltdown, many experts cite the Commodity Futures Modernization Act, smuggled through Congress late on a December evening in 2000. The law exempted Credit Default Swaps (CDS) which are essentially bets on the value of securities from all regulation, including state gambling laws. This allowed Wall Street to conclude that any risk could be hedged with a bet. The result, of course, was disaster, with economic consequences that we will be feeling for a very long time.

“When I wrote part of that legislation with these hands on my little keyboard,” a former financial industry lobbyist who helped craft the law recently told me, “I didn’t realize that this was going to make people lose their jobs, pension funds their reserves, universities their endowments. But that’s what happened”

There are now shelves full of books describing the disaster caused by the enabling of Wall Street as a wide open casino. Butt amidst the wreckage and plaintive cries for “reform,” Wall Street is full tilt in the business of destroying companies and throwing thousands of men and women out of work in order to turn a quick profit on a CDS trade.

In recent weeks the 30,000 employees of YRC Worldwide, one of the nation’s largest trucking companies, discovered that they had unwittingly been drafted as chips in the casino. The company, built up through a series of misguidedly overpriced takeovers in the years of the credit bubble, had hit a financial wall thanks to the fall off of business in the recession. Unless investors holding the company’s bonds could be persuaded to swap their debt for equity, the company would go bankrupt and its employees thrown out of work.

In a sane world the bondholders would have had little trouble in seeing the wisdom of the plan and signing on. But the world we live in does things differently. We have, for example, the practice known as “basis packaging” in which a company such as YRCW, while attempting to restructure its debt, discovers that some of the bondholders have simultaneously bet, through the use of credit default swaps, on the company going bankrupt. As bondholders, they can sabotage any rescue operation by refusing to cooperate and thus collect on their winning bets even as the truck drivers begin collecting unemployment.



more:
http://www.counterpunch.org/andrew01082010.html

[laughingliberal]

1. Excellent article! Bless the Teamsters and their pea pickin' li'l hearts!

Another reason the business world hates unions. Sinisterly, another reason the unions are being targeted by HCR reform? This part of the article was of real interest although not unknown heretofore.


<snip> Waiting for policy-makers to do the right thing will take a while. Credible reports indicate that Rahm Emanuel is counting on Wall Street cash to get the Democrats through the 2010 election. But fortunately the YRCW workers had the backing of their union, the Teamsters.<snip>

Is the administration serving the unions up to Wall Street on a platter to secure their campaign donations? How does the Goldman Sachs Oval Office feel about the Teamsters thwarting this little plan and saving the jobs of 50,000 of the 'little people?'

[demosincebirth]

2. I was never a Hoffa ( Jr .) fan..I'm starting to change my tune.

[laughingliberal]

3. Would consider cross posting in GD

Just a thought. This was an excellent article and a real illustration of why we still need our union brothers and sisters.