Forays Into Finance Benefit Workers

Bankers and other high-finance manipulators have reputations as friends and allies of business and the wealthy, but not of workers and unions.

Partly because of that, more unions are becoming involved in the esoteric world of big money, tackling every facet of it, from banking and investments to corporate decision making.

Also spurring the expansion of labor’s role in finance are the declining strength of unions and, on the positive side, the more than $1 trillion in workers’ pension fund reserves.

Labor representatives are exerting increasingly take-charge roles as co-managers of many of the huge pension funds. They are also opening more banks owned or sponsored by unions and are going into the mortgage loan business in a big way.

Today in Washington, AFL-CIO Secretary-Treasurer Thomas Donahue and others will announce the formal start of another major incursion by unions into the financial world with a nationwide “Union Privilege Mortgage Program” that should be very worker-friendly.

With real wages down these days, it is increasingly difficult for low- and middle-income workers to get the down payment on a home, pay the many loan costs or meet mortgage payments.

The union-sponsored mortgage program will offer down payments as low as 3%, no-point loans, interest rates at or below the national average and financial assistance to borrowers if they lose their jobs, go on strike or suffer a disability.

David Silberman, president of Union Privilege, an AFL-CIO agency that has many other worker-oriented programs, said the mortgage lending operations of the organization expect ultimately to make billions of dollars in loans to union members.

Union Privilege already provides such membership-attracting programs as a credit card with an interest rate running about 14%--well below the average. There are more than 1.2 million union cardholders.

Money for the home mortgage program will come from Federal Home Loan Mortgage Corp. (Freddie Mac); PHH US Mortgage Corp., a major private lender, and Amalgamated Bank of New York, America’s oldest and largest union-owned bank.

The AFL-CIO has long had the Housing Investment Trust and Union Labor Life Insurance Co., which channel pension fund money into unionized construction jobs. The trusts will participate in the new, larger home mortgage program.

Amalgamated Bank, owned by the Amalgamated Clothing and Textile Workers, was founded in 1923 and is flourishing, with $1.5 billion in assets.

In recent years, other unions have started banks. The newest is the Union Labor Bank being opened by the California State Council of Carpenters, with offices in Los Angeles and San Francisco.

Anthony Ramos, former head of the California carpenters, said that in addition to catering to the average worker with traditional banking services, the bank expects its borrowers to do construction work only with union labor. It will offer special interest rates to buyers of American-made cars to help U.S. auto workers hard-pressed by foreign competitors.

The incursions into high finance are part of a plan by union leaders to regain their strength. They now represent only 16% of America’s workers.

Faced with the increasingly strident anti-union tactics of many employers and more than a decade of anti-union Presidents in the White House, unions are going beyond their traditional, still-primary role of helping workers improve their wages, benefits and working conditions.

As valuable as these new banking and mortgage programs are, they may be less important in the long run than the role that unions play as trustees of many massive pension funds.

Worker trustees of the funds are rightly increasing the clout they can wield to challenge everything from anti-labor company policies and obscene corporate executive salaries to money-losing company decisions made by management.

The latest admirable example of their role as pension fund managers came last week when Gov. Pete Wilson shamefully proposed that he take power over the $62.4-billion California Public Employees’ Retirement System that covers nearly 900,000 active and retired workers.

Six union representatives on the 13-member CalPERS board joined others to furiously protest, and they may foil Wilson’s attempt to milk the fund of $1.6 billion to help reduce the state budget deficit. He also wants to replace the current worker-dominated board with nine members, five of whom he would appoint.

The governor argued that there is a nice “surplus” in the fund and that he wants to put it to good use trimming the deficit.

Private corporations once were able to take “surplus” money out of their workers’ pension funds for whatever company executives decided to call “good use.” But last year, Congress outlawed most of that slippery private-industry practice.

Rarely is there any true surplus since the reserves can diminish with startling speed in a recession, leaving too little to pay pensions.

But even if there is a temporary “surplus” in private-sector pension funds because of good investment returns, the surplus should go back to the workers for whom the money was set aside in the first place.

The “surplus” in the public employees’ fund doesn’t belong to Wilson or the state to use as they see fit, even though Congress hasn’t yet outlawed such maneuvers of public employee pension fund money.

Trustees of the fund may decide to lend the state some of its reserve, but it is their fiduciary responsibility to make such a decision, not Wilson’s or the Legislature’s.

In general, the trend toward greater worker involvement in the high finances of this country is a healthy one. It would be even healthier if the trend can be accelerated.