The Point

"Now he belongs to the ages"

These words came to mind Saturday as Sen. Edward M. Kennedy was laid to rest. The words, of course, were uttered by Secretary of War Edwin M. Stanton on President Abraham Lincoln's death.

Ted Kennedy wasn't a president, but he and his legacy belong to the ages - to those too young to remember the lives and accomplishments of his brothers, President John F. Kennedy and Sen. Robert F. Kennedy, and to those even too young to fully appreciate this Kennedy's accomplishments. And they belong to the generations who will follow and whose lives will also benefit in untold ways from his years of work and service.

I marvel at the myriad ways that Senator Kennedy touched my life over the years, even though I met him personally only once: at a reception honoring him for sponsoring and shepherding the Civil Rights Restoration Act of 1987. Among other things, the law protects women from discrimination in education institutions and provides increased athletic opportunities for women in colleges and universities across the country.  

The Equal Pay Act allowed me as a woman to work in the same field as a man and be paid the same wage. And while Kennedy's direct involvement in this law is muted, his efforts throughout the years strengthened employment laws in pay, promotions and hiring practices that baned discrimination based on gender, race, national origin, age and disability.

Then there is CETA: The Comprehensive Employment and Training Act, signed into law in 1978. The Act provided opportunities for vocational training in state programs across the country and gave a hand up to those, like me, who wanted to learn valuable skills and earn a livable wage. Such opportunities are quintessential Ted Kennedy. And it was through CETA that I had the opportunity to learn machinist and tool-and-die skills, to enter a drafting and design program where I studied tool design technology, and to be eventually hired by the Boeing Company, where I designed the fixtures and "tools" used to build and assemble the 757 and 767 aircraft.

Thanks to another of Kennedy's accomplishments, sexual harassment in the workplace became illegal under Title VII of the Civil Rights Act. As a result I did not have to endure the sexual insults and innuendo of male colleagues and supervisors while I worked at Boeing and was able to legally challenge a coworker at Boeing who threatened my job and my life without reprisal.

I also enjoyed the right to union representation in my workplace, a cause Sen. Kennedy not only championed, but expanded and strengthened during his life. The law gave and me - and my colleagues - the legal right to bargain with Boeing over our wages and our benefits. These included annual cost-of-living raises to keep pace with the rising costs of food, housing and transportation, wage increases based on both length of service and ability, paid vacation, sick leave and holidays, and company-paid health insurance.

In 1993 when I found myself unable to work full-time after I was diagnosed with clinical depression, I applied for and was granted Social Security Disability benefits and eventually Medicare health coverage. Ted Kennedy's involvement in passing Medicare is well-known, but he also worked to strengthen and expand Social Security coverage to include disabled individuals who find themselves unable to work, either temporarily or permanently.

Then in 1996, as I struggled for a way to reengage in the world, I discovered the Rehabilitation Services Administration. RSA is an agency within the Education Department that oversees and administers grant programs that help individuals with physical or mental disabilities obtain employment and live more independent lives. RSA provides such supports as counseling, medical and psychological services, and job training and education opportunities.

RSA supports and grants provided me the opportunity to return to school and obtain my college degree so I could move forward in my life.

Last is the Mental Health Parity Act of 2007 - one of Kennedy's final and signature accomplishments. The law ensures that mental health expenses, such as psychological counseling services, addiction treatment and hospitalization, to name a few, are treated the same by insurance companies as physical illnesses, with respect to coverage and reimbursement.

These are the ways that Sen. Kennedy's lifelong commitment to social and economic justice have touched my life. When I look at the things he did to make life better for so many, including me, it is so much more than a long list of accomplishments, for his work - the causes he championed and the laws he crafted - helped lift me up and give me hope in a more promising and productive future, especially during a long period that seemed hopeless and futile. 

Like so many others whose lives he touched and changed, I can imagine what my life would have been without these helping hands - harsher, darker, and certainly without hope for a better future.

Thank you, Senator Kennedy, for all that you did. Rest in peace. Now you belong to the ages.

The big (loop) holes in Geithner's toxic assets buyback plan

When Treasury Secretary Tim Geithner introduced his toxic assets purchase plan (the public-private partnership wherein the government ponies up "incentive money" for investors to buy these assets) I held off criticizing it until reading and analyzing more of the details. Not being a financial wiz-kid of any kind, it just seemed too soon to climb on a bandwagon to criticize.

However, as details of the plan have come rolling out, I fail to see how either the government or taxpayers won't end up with the short straw in this program, primarily because there are too many ways that bankers and financial types can (and will) game the system.

Business Week lays it out nicely:

[snip]

SELLER FINANCING

Banks may be able to finance the sale of their own troubled loans, lending money to the public-private partnerships that buy the assets. A bank's loan to the partnership would be buttressed by an FDIC guarantee. Administration officials confirm that the Treasury may allow such seller financing. ...

PUMP AND DUMP

Say a private investor in one of the partnerships owns big stockholdings in a bank putting assets out to auction. By overbidding for the bank's sludge loans, the investor could help drive up the banks' shares and make a tidy profit. ...

PASSING OFF THE LOSS

... the way the deals are structured, the FDIC and Treasury will absorb as much as 93% of any losses, while getting to keep just half of any profits. "The government's going to be on the hook for the [deals] that are bad," says Brookings' Young. With their own downside so limited, the private partners are likely to be drawn to the riskiest deals, which offer the highest potential payoffs—and the government the biggest potential losses. ...

PORTFOLIO SWAPPING

... A bank could effectively swap its existing portfolio of junky loans for another one very similar—only this time limiting the downside by using government loans and guarantees. The bank would auction off its loans to a public-private partnership. Then, using a portion of the auction proceeds, it would set up a different public-private partnership that would of course have access to government loan guarantees and matching funds. The bank would use the new partnership to buy a portfolio of similar problem assets twice the size of its old portfolio. The bank would then split any gains from the new portfolio 50-50 with the feds—but risk no more than the sliver of equity it contributed to the deal. ...

LAYERS OF LEVERAGE

Perhaps the most intricate maneuvers will likely stem from "layering" the government's many programs of the last six months. Starting with some of the capital infusion received last fall from the Treasury, a bank could invest in a private partnership that buys toxic assets using a loan guaranteed by the FDIC. Those assets could then be chopped up and sold as securities to other investors—who put together the financing for the deal by availing themselves of another program of low-risk loans from the Federal Reserve. ...

[snip]

See here for another take.

Government and taxpayers end up on-the-hook again for banks' new and improved schemes to earn what amount to ginned-up profits on these assets because their stake in buying them is buttressed and subsidized by government loans and TARP funds.

We still don't know where most of the TARP funds to date have gone, although more evidence indicates they have been used on anything but purchasing toxic assets and recapitalizing. My hunch is that in addition to using funds to buy up failing banks and financial institutions, recipients have also  stockpiled funds as a big hedge against the recession. On this latter I have only anecdotal examples.

Therefore, to sum up: we should be optimistic that the same players who took death-defying risks with home mortgages and have pushed the U.S. (and world) economic and financial system to the brink will behave well (and above-board) because they are receiving government financial assistance and would never do anything to harm the U.S. economic and financial system.

On another, related note, Geithner has now indicated that bank executives who mismanage their companies could be fired as part of Treasury's overall effort to stabilize the financial industry. The key here is if they "aren't performing well -- as opposed to the sterling job they've done so far...

Whither labor contracts in the economic crisis?

The Obama Administration’s decision to force GM’s and Chrysler’s hand over the weekend is troubling for several reasons, the most blatant of which is the hypocrisy — apparently it is more acceptable to the public to let an automotive executive go than it is to fire a hank/financial company CEO .

Of greater concern is what is sure to come: abrogating employment agreements between the U.A.W., other employee unions and the car makers.

No such contracts were broken for bank executives, who still received their bonuses and golden parachutes. For that matter, Rick Wagoner, too, will walk away from GM with a hefty $20.2 million from two separate retirement plans.

For retired autoworkers, there appears to be no such contractual guarantee, particularly given the pressure GM is under now to reduce and/or eliminate its “legacy” costs — a large chunk of which is comprised of pension and healthcare benefits to retirees and future retirees.

Then I read this in Tuesday’s  NYT.

Half a dozen states and cities across the country are declaring bankruptcy, which gives them legal cover to void their labor agreements. In the troubled economic environment we are in labor contracts are seen as “eminently re-writable”, according to David A. Skeel, a University of Pennsylvania law professor.

Here’s a hint from the article:

Honoring any type of contract can be hard in a down economy, but financial agreements, like the ones between A.I.G. and its derivatives counterparties, are so far faring better.

The possible ripple effects of not keeping those financial contracts, or defaulting, have raised alarms and prompted arguments that it would be too dangerous to void them. After all, the collapse of Lehman Brothers is widely blamed for paralyzing the credit markets last fall, which may in turn have prompted the Federal Reserve to stand behind A.I.G.’s derivatives contracts, making its trading partners whole.

Employment agreements have enjoyed no such help. In the past, the belief that voters would make their disdain known has at least discouraged politicians from using a heavy hand.

Now, though, officials in the Obama administration may be looking ahead to a rescue of the automakers, an enormous challenge that could be simplified, from the government’s point of view, if kept out of court and under tight administration control. That would make it easier to change the terms of contracts governing retiree benefits, said David L. Gregory, a law professor at St. John’s University in New York.

What, then, might we expect from employers who are not affected or hurt by the recession? They may already be letting workers go whether it is necessary or not, simply because they can during this time.  Why should we think that union contracts covering wages, benefits, working conditions, pension/retirement provisions will fare better, or at all?

If these agreements can be so easily voided, where does that leave retirees and soon-to-be retirees, especially, in a sinking economy?