Banking – the Union Way

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Unions understandably dislike doing business with nonunion employers.  So it remains more than of passing interest to their leaders that Charlotte, a nonunion city, hosted the Democratic National Convention.  They and allied groups, which now include party leadership, are responding by shifting some or all deposits from the Charlotte-based Bank of America to a New York-based, union-owned institution, Amalgamated Bank.  Taken far enough, this process could put depositors and taxpayers in harm’s way.

Everyone has heard of Bank of America, whether or not they bank there.  But Amalgamated Bank needs a little explanation.  It isn’t exactly a union.  Yet it looms as potentially the most important labor-affiliated organization in the country this side of the AFL-CIO.  And it’s got excellent connections in case it gets into trouble.

The full service bank was founded way back in 1923 by the Amalgamated Clothing Workers of America, which eventually morphed into the Union of Needletrades, Industrial and Textile Employees, or simply, UNITE.  In 2004, UNITE merged with the Hotel Employees and Restaurant Employees (HERE) to become a new powerhouse, UNITE HERE.  The marriage was short-lived.  Bruce Raynor and John Wilhelm, the respective bosses of UNITE and HERE, had a bitter falling out.  Raynor loyalists within UNITE broke ranks in 2009 to form a new entity, Workers United, re-affiliating with the Service Employees International Union. UNITE HERE and SEIU, as one might imagine, were practically at war.  Eventually, in July 2010, the two unions buried the hatchet and reached an agreement.  Among the features of the deal, ownership of Amalgamated Bank would be transferred to Workers United, while UNITE HERE would retain ownership of union headquarters.

Amalgamated Bank is based at the same West Side Manhattan street address as UNITE HERE, 275 Seventh Street, and has branches in New Jersey, California and elsewhere.  Its core depositors are union members.  With about $4.5 billion in assets, it serves hundreds of labor organizations.  Until recently, it was wholly union-owned.  That status changed last September when a pair of private equity firms, WL Ross & Co. and Yucaipa Companies LLC, each bought a 20 percent stake in the institution’s privately-issued common stock (subject to federal approval) for a combined $100 million.  In an earlier time, these transactions would have been way out of character.  But Amalgamated had little choice at that point.  Federal Deposit Insurance Corporation and the New York State Banking Department each recently had cited it as severely undercapitalized.

WL Ross and especially Yucaipa were logical choices for equity participation.  The New York-based WL Ross, founded in 2000, specializes in turnarounds of distressed companies across a wide range of industries.  It bears the name of founder and Chairman Wilbur L. Ross Jr., whose Forbes magazine-listed net worth in 2011 was $2.1 billion.  Ross, 74, a resident of Palm Beach, Fla., served under President Bill Clinton as a board member of the U.S.-Russia Investment Fund and later as a privatization issues adviser to New York City Republican Mayor Rudy Giuliani.  He’s been a major donor to the Democratic Party, though recently he’s given sizable sums to Republican candidates as well.  And during the last several years he’s moved into mortgage rescues.  WL Ross & Co. at the onset of the foreclosure crisis bought out H&R Block’s troubled Option One mortgage servicing business and the bankrupt American Home Mortgage Investment Corp.

Yucaipa Companies, founded in 1986, from the start has been under the control of Ron Burkle, whose net worth Forbes listed last year at $3.2 billion.  Burkle, 59, a Los Angeles-area native who made his original fortune in supermarket chain buyouts, is a close friend of the Clintons.  How close?  Bill Clinton in 2002 became a senior adviser to Yucaipa, serving as a middleman in locating and arranging business deals.  And Burkle raised more than $1 million for Hillary Clinton’s 2008 presidential bid.  Burkle’s Democratic Party credentials had been well-established well before that.  By 2007, 98 percent of his own $1.5 million in political contributions (not including the $50 million or more he’d bundled over the previous 15 years) had gone to Democrats.  Organized labor likes Burkle.  Among his union awards are the AFL-CIO Murray Green Meany Kirkland Community Service Award and the Los Angeles County Federation of Labor Man of the Year.

Burkle, in turn, has been good to organized labor.  Yucaipa back in 2007 was on the verge of completing a buyout of bankrupt Georgia-based long-distance car-hauler Allied Holdings, Inc., with help from the International Brotherhood of Teamsters, which represented over half of the Allied work force.  But a problem had emerged:  Investors at Hawk Opportunity Fund had filed a RICO suit against Yucaipa in Atlanta federal court, demanding $200 million in damages.  The takeover was in jeopardy.  Fortunately, Burkle had a secret weapon in Bill Clinton.  The former president was instrumental in smoothing the way for the Yucaipa takeover by getting Teamsters-affiliated Allied employees to accept a 15 percent pay cut over three years in exchange for their company avoiding bankruptcy.  Without the agreement, the old management would have shut down the company and thousands of union employees would have been looking for work.  The Hawk Opportunity Fund RICO suit eventually was dismissed.  Though the agreement triggered a Ron Burkle-Bill Clinton “split,” that was mainly for show in preparation for Hillary’s presidential run.  The two are still close.  And so are Burkle and the unions.

The fact that the Democratic Party and its constituent groups are discovering Amalgamated Bank as an attractive place to put their money, then, is no mystery:  They see a political benefactor, not just a business.  But there is also the other half of the equation to consider:  Why are they now pulling money out of Bank of America?  The answer, again, is politics.

Bank of America, formed in 1998 following a takeover by the Charlotte-based NationsBank of BankAmerica Corp., makes for an easy target – at least among people who love to hate banks.  As of June 30, 2012, it was the second-largest bank holding company in the U.S., right behind JPMorgan Chase, controlling $2.16 trillion in total assets.  Street furies of the hard Left were out in full force on May 9 in downtown Charlotte at the Bank of America annual shareholders meeting.  An estimated 500 to 750 demonstrators, many of them chanting and shouting, converged from three directions onto company headquarters that morning, blocking the intersection of 5th and College Streets.  Six persons wound up being arrested for trespassing or impeding traffic.  The rally was organized by a group calling itself “Unity Alliance and 99% Power.”

Organized labor, particularly the Service Employees International Union, and various Occupy Wall Street (OWS) offshoots – yes, there is an Occupy Charlotte – have drawn closer to these street furies ever since OWS launched its campaign in Lower Manhattan last September.  And the unions see a major mainstreaming project that can bring in some money.

Charlotte, as mentioned at the beginning of this article, isn’t exactly union territory.  It doesn’t have a single unionized hotel.  And, as if anyone needed reminding, it’s in North Carolina, a Right to Work state – that is, a state in which private-sector workers don’t risk being terminated if they don’t pay dues or (in lieu of joining) “agency fees” to a union with a collective bargaining agreement in force with their employer. According to the U.S. Bureau of Labor Statistics, the total (i.e., private and public combined) North Carolina work force in 2011 had the lowest union membership rate of any state, a mere 2.9 percent.  And a report released in 2011 by the U.S. Chamber of Commerce, “The Impact of State Employment Policies on Job Growth:  A 50-State Review,” rated North Carolina as one of 15 states with a “good” business climate, a designation based heavily on labor law (states with “fair” or “poor” ratings had laws more favorable to unions).  Charlotte, in other words, might be the last city in this country where organized labor would want the Democratic Party to hold a national convention.

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  • amused

    Did you forget ? "Corporations are people too " . .Where people bank is their own buisiness , whether it be fotr toasters , interests rates , or animosities for piublicized bad practices . many of the sycophants on this very blog exhort each other NOT to buy union . That is their right , just as it is the right for people NOT to do buisiness in a right to work state where that state bears an animosity top union labor , so too a bank . _ It's a two way street Horowitz , SO STOP YOUR BLOODY WHINING , and BTW , try coming up with a better strawman against unions…and ultimately of course the "left " .

  • amused

    LOL….would you put your money in that "union bank" / Answer – NO / Why ? lol….because you are anti-union .

    Remember , "it's two way street " Caaaarl .

  • Questions

    "Amused" apparently has a reading comprehension problem. This piece doesn't dispute the right of consumers to deposit funds in the bank of their choice. What it does dispute is the notion that there aren't any downsides to a bailout by politically-connected equity fund managers of a bank about to go belly up due to its unwise business decisions. Union-owned banks ought to be no more exempt from the rules of the marketplace than any other types of banks.

  • pyeatte

    Tell them there is a market to corner in rat skins, and they need to buy up the worlds supply while they can. It will cost a few hundred million but they can make billions once they have been turned into upscale coat liners for liberals.

  • amused

    There's nothing wrong with my reading comprehension Questions , there is however through your own bias and ignorance a problem . And that is neither YOU nor HOROWITZ knows what your talking about . Do you know the size of Amalgamated , it's total assets ? NO /Do you know it's debt ratio ? NO /Do you know its S&P rating -that is the banks ability to meet it's obligations , expressed as A , AA , BBB , bBB etc ? NO . Therefore you have no idea of what impact a loss of $72 million means to that Bank . To be a bank you must meet Federal Banking standards , and to be FDIC insured yet higher standards . All that information is readily available on ANY bank in the country . I have $300k of my portfolio in laddered and jumbo CD's in about 25 Banks across the country,all FDIC insured . Why ? Do you know how many and which Banks in this country have failed the stress test ? Of course you dont , you've already expressed your lack of knowledge by buying Horowitz' B.S. Strawman .

  • amused

    G educate yourself in these things Questions and you won't be so gullible as to believe this spun story . It has all the e;lements for the ignorant to suck up , a "secrit " deal with Michelle Obama suggesting Charlotte , The bank of America , Trumpka "pulling a fast one out of payback "…oh brother are you a sucker ! And what of this paltry sum of $ 40,000 being withdrawn from Bank of America ? Man you had better check these figures and dates mentioned in this fractured faireytale .But you guys love being led by the nose to the ridiculous conclusion of many if not all of FPM 's authors .This is like watching Wrestling , you know its fake , that's the kind of writing these hacks do , sprinkle a few facts like real names and load up an such a woven yarn of B.S. enough to choke a horse . Just like the bullshheet story of Obama contemplating the release ro Egypt of the Blind Sheik , once the phony "source " was refuted , it disappeared into the archives ,and that because THERE WAS NO SOURCE .

  • amused

    LOL…AND the phony story of Ahmahdnijab meeting with Occupy ….oh FPM knew it was truth …oh yea…the source ? AN IRANIAN NEWSPAPER . How pathetic , when intelligent people put their brain up on the shelf , for the sake of partisan ideology . Yet people like you just keep on sucking it up .

    Funny , I've never seen a retraction or correction when "facts " turned out to be false . Yea man there's some reeeeal journalistic ethics and professionalism going on here …OH YEA .

    • Questions

      Thank you for sharing with us, Amused. Time's up. As an aside, your spelling of the AFL-CIO's Trumka is a bit unusual.

  • amused

    And that's about all you are capable of gleaning Questions, no surprise there huh ? Now you go investigate that sinister mispelling , that should keep you busy for about a week .btw , I determinre when my times up …not you .

  • PowerInNumbers

    The unions should pull their money out of Bank of America!! I work for Bank of America.. Bank of America Executives and Management are dead set against unions and I have witnessed managers lie to associates in company meetings about their federal right to unionize under the National Labor Relations Act.. They tell people that the site will be closed down or that they will be fired, etc.. It’s ok for the CEO’s and Execs to receive tens of millions of dollars in bonuses and pay increases but god forbid their employees join a union and collectively bargain for better compensation and benefits so they can afford to put food on the table!