BILL MOYERS: You have to feel, in more ways than one, for those workers who staged a sit-in at that factory in Chicago. Just as their heroic cry for justice was capturing the attention of the country, the press got swept up in a saga of corruption worthy of a banana republic. The feds' 76-page indictment of Illinois Governor Blagojevich would make Al Capone blush.

The late bard of Chicago, Studs Terkel, used to say, if Chicago isn't the most corrupt city in America, it's certainly the most theatrically corrupt. No wonder Obama wants to get out of town. But while corruption is a tale oft told, even in the land of Lincoln, what those workers did is an act of uncommon courage.

It was only a week ago that the company they work for, Republic Windows and Doors, told them their plant was being shut down for good. The employees were stunned. By law, they were entitled to 60 days’ notice and some parting benefits. Instead, they got just three days’ notice, and their health insurance was terminated.

The owners said the company's cash flow was suffering because of declining sales in home construction, and that Bank of America had canceled their line of credit, making it impossible to pay the bills. But at the same time, Bank of America was drawing down $25 billion in bailout money from taxpayers, including taxes paid by the workers being laid off. This is money, you'll remember, intended to open the spigots of credit so banks could do the very kind of lending so desperately needed by companies like the one in Chicago.

And that's not all. It turns out the company's owners are shutting down this union factory at the exact moment they're starting an operation in Iowa, where they can use non-union labor at lower wages.

More than 200 workers then launched what they called "a peaceful occupation" of the plant. "We shall not be moved," they sang. President-elect Obama — once a community organizer in Chicago — joined the chorus and endorsed the rebels, saying they represent millions of workers who are losing their jobs, their health insurance, even their homes.

WORKERS: Yes we did! Yes we did! Yes we did!

BILL MOYERS: Wednesday night, the sit-in ended. Public pressure forced Bank of America to relent and come up with a cash loan to pay the fired workers what they're owed.

Which brings us to what was happening this week in Washington, where Congress was asking the Bush administration, "whatever happened to the 700 billion dollars we gave to bailout the economy?" That's what those workers in Chicago wanted to know as well. So to connect the dots I'm joined by Emma Coleman Jordan. She's the editor of a book due to appear early next year, the title of which says it all: The Short End Of The Stick.

Professor Jordan teaches commercial law and economic justice at Georgetown University. She's a former White House Fellow and Assistant to the Attorney General. She's been tracking the hearings in Congress trying to nail down what has happened to the 700 billion dollars. Welcome back to the Journal.

EMMA COLEMAN JORDAN: It's good to be here.

BILL MOYERS: Why did it take a workers' revolt and public outrage to get a huge financial institution like Bank of America to do the right thing?

EMMA COLEMAN JORDAN: Well, I think these large institutions think they're beyond accountability. It appears there were no management structures in place in the Treasury Department to keep track of exactly what these banks were doing with the money. The money was given. The top banks were given $25 billion each, including Bank of America, JP Morgan Chase, banks that protested they didn't need the money. They were asked to take this money anyway It was expected that they would convert these capital infusions into lending.

BILL MOYERS: But they didn't. They got —


BILL MOYERS: — the money but they didn't lend it. Bank of America was not lending the money —

EMMA COLEMAN JORDAN: They weren't lending the money. They were busily making tactical acquisitions.

BILL MOYERS: What do you mean?

EMMA COLEMAN JORDAN: Buying other companies. Merrill Lynch, a very formidable former investment bank, just on the eve on its failure, was acquired by Bank of America.

BILL MOYERS: I read that of the first big wad of cash, something like $160 million or so, that the government handed out for lending, the banks paid more than half of it to shareholders. Which means those workers losing their jobs in Chicago, while investors are getting taxpayer funds for dividends, right? Is that your understanding of what's been happening?

EMMA COLEMAN JORDAN: It's an economic cruelty, is one of the ways of thinking about it. Where taxpayers, or people who are at the bottom on an income spectrum are asked to pay taxes into a fund that is used to rescue failed financial management strategies and practices.

BILL MOYERS: So help me understand why it is that institutions that take so much of your, my, and everyone else's money is spending it — are spending it on dividends.

EMMA COLEMAN JORDAN: Well, because there's no accountability. We have a leadership at the Treasury Department that has decided we'll just trust them.

BILL MOYERS: Trust who?

EMMA COLEMAN JORDAN: The financial institutions that produced this global crisis.

BILL MOYERS: That's not trust. That's gamble. Right?

EMMA COLEMAN JORDAN: Well, you make a point that I think is a good point. But more importantly is the belief system that Secretary Paulson brought to the decision making. And what was that belief system?


EMMA COLEMAN JORDAN: The belief system was one in which he believed that by fixing the problem at the top, by giving the money with trust to his peer institutions on Wall Street, the money would trickle down in the form of lending to consumers and businesses. And the economy would be restored. And so that way of thinking dominated his decision making, slowed things down. The facts that were clearly on display were simply ignored. And I'm giving Secretary Paulson credit for being a very smart man. I believe that the delays were caused by pre-commitments to an economic belief system that has been turned on its head by this crisis.

BILL MOYERS: The ideology is that trickle-down economics will work and that the market will eventually correct the excesses? Is that what you think that ideology is? That's the bubble they live in on Wall Street, right?

EMMA COLEMAN JORDAN: It's that confluence of belief, the Federal Reserve, the Department of the Treasury, and the White House, all believing that the markets would correct. So that in the year between August of 2007 and September of 2008, we had a natural experiment. And the natural experiment was the markets did not correct. They crashed and burned. And as a result, the government had to come in to rescue with the taxpayers' dollars.

BILL MOYERS: Just this week, the House Financial Services Committee berated the Assistant Secretary of Treasury, Neel Kashkari, who's supposed to be running the bailout, for not tracking the money. Look at this.

REP. BRAD MILLER: You going to tell us ever who got the money that we paid under AIG's derivative contracts? And if not, why not?

NEEL KASHKARI: This is a tough question, because it's hard to know, did this dollar that the taxpayers go in go to this use? Did it go to paying expenses? So I'm —

REP. BRAD MILLER: That's really not a credible response.

REP. STEPHEN LYNCH: What are we doing? What are we doing to address that piece of it, the lack of transparency? We've got to get this thing going again, and as long as people don't trust each other, folks are going to be afraid to lend.



REP. DONALD MANZULLO: An executive at AIG just got a bonus of $3 million. The three executives from the Big Three said they would work for $1 a year. I'm asking you, if that's the case, is TARP going to ask for the money back?

NEEL KASHKARI: There have been some press reports about AIG that are referred to bonus schemes. When I've looked into it and had our people look into it, there have been some cases where they had deferred compensation that was already earned by people, not the CEOs.

REP. DONALD MANZULLO: Well, deferred compensation of $3 million?

NEEL KASHKARI: Remember, Congressman, we got rid of the management team of AIG.

REP. DONALD MANZULLO: Well, who are these new clowns getting that money?

NEEL KASHKARI: Again, Congressman —

REP. DONALD MANZULLO: Why can't you just give a simple answer so the people I represent can have confidence in you? I don't think you understand. I don't think you understand at all the pain and the hurting that's going on in this country or that people were on the verge of losing their jobs and you can sit there and not come to a decision as to whether or not a $3 million bonus is too much? If you even have to ask that question whether it's too much, Mr. Kashkari, you're not the man for the job.

BILL MOYERS: Do you think this Congressional reaction is representing the frustration at the grass roots? Of people who are finally saying as Howard Beale said in that famous movie, "I'm mad as hell and I'm not gonna take it anymore"? You think that's happening? Is that what the Chicago sit-in represents? A Rosa Parks moment?

EMMA COLEMAN JORDAN: I do. I do. It is an opportunity that these workers took to stand up directly. And it's interesting because they targeted not just their employer, Republic Windows and Doors, but they targeted Bank of America. If you saw those signs, they explicitly understood the connection —


EMMA COLEMAN JORDAN: — between finance and the closing of the plant. And the workers simply said, "This is not fair. We're," like you said, "mad as hell and we're not going to take it anymore." And they took direct action. I think that's a healthy thing for our democracy.

BILL MOYERS: Let me take it one step deeper because workers and ordinary people were getting the shaft, as you say in your upcoming book, long before this meltdown. And here's the question that goes to whether or not we have a fair economic system. Some of the financial corporations and individuals at the center of this crisis over the years contributed big sums of money to both parties. AIG alone gave $1.5 million to the politicians just before it got $85 billion in loans from the government. Freddie Mac was already receiving federal funds as it was giving out in political contributions half a million dollars. Citigroup, Goldman Sachs, Bank of America gave hundreds of thousands of dollars to both political parties for their conventions this summer. Banks, hedge funds, investment companies gave millions. I mean, look, you spent your life exploring economic justice in this country. Would you say that the system is rigged so that advantage is always taken by the people at the top of our financial system of those who are paying the bills?

EMMA COLEMAN JORDAN: I agree with you that our campaign financing and political financing system and the lobbying that takes place is a scandal, a shame. And it is a breach of the deepest trust of our democracy. Anyone who believes in the Jeffersonian ideal of a democracy in which we have transparency and we have accountability, the flood of money coming in has meant that we can't trust decisions. This has been an indictment of the way business and politics are done. And it is a cause for a serious consideration of deep finance reform for our political activities.

BILL MOYERS: Time magazine this week says that while no one is looking, Congress and the IRS have been quietly changing the tax code to lower corporate taxes for years to come. Are they receiving bailout money through the front door while they're getting tax breaks and other privileges through the backdoor?

EMMA COLEMAN JORDAN: That's a change which was done at the Department of Treasury without statutory authorization to do it.

BILL MOYERS: They did it arbitrarily?

EMMA COLEMAN JORDAN: They did it on their own, with no consultation with Congress to get permission for this change, since it was absolutely antithetical to the statutory requirement. And I've looked at the comments of tax specialists. I'm not a tax specialist. But the tax specialists say this is unheard of and clearly in violation of the statute which protects the Treasury by not allowing banks that acquire failing banks to get the benefit of the losses of the failed bank and carry those losses over for the benefit of the acquiring bank. That's a big set of tax reductions. If you can acquire a Merrill Lynch and get their tax losses, that's going to mean that Bank of America pays less. If you can acquire Countrywide and get their tax losses, that is going to improve your position.

BILL MOYERS: Are we chumps?

EMMA COLEMAN JORDAN: Well, you know, that is a word I shrink from. But if I had to answer in the colloquial: you betcha.

BILL MOYERS: Watch this.

REP. ELIJAH CUMMINGS: Mr. Kashkari, in the neighborhood I grew up in, in the inner city of Baltimore, one of the things that you tried to do was to make sure that you were not considered a chump. And what "chump" meant was that you didn't want people to see you as just somebody they could get over on. And I'm just wondering how you feel about an AIG giving $503 million worth of bonuses out of one hand, and accepting $154 billion from hardworking taxpayers. You know, because I'm trying to make sure you get it, you know? I mean, and you know what really bothers me is because — all these other people who are lined up, they say, well, is Kashkari a chump?

EMMA COLEMAN JORDAN: Those are harsh words, but in this case I do believe advantage has been taken. And I'll leave it at that.

BILL MOYERS: Don't leave it at that because here's —

EMMA COLEMAN JORDAN: — no controls, no compliance requirements for the financial services industry for $350 billion. And so the fact — this chump term suggests that we are being taken advantage of. We're being taken advantage of because even as taxpayers are being asked to pay more and more, and more importantly, not this currently alive group of taxpayers but our children and our grandchildren are being asked to commit to repaying ever-larger amounts of money even as our foreign creditors are closing in on us and saying, "Hold up. You're gonna have to change your habits. We are not going to allow this to continue. We will not continue to subsidize this kind of profligate debt management."

BILL MOYERS: What about this cover story on this current issue of The Atlantic? "After the Crash: China to the U.S., 'Shape Up or Else.'" What's going on there?

EMMA COLEMAN JORDAN: What's going on is a change in the power relations, and we're seeing that the countries who have savings like China are now asserting themselves to tell us to reform our debt dependent ways, both in the public sector and the private sector. They have been financing this. China is the largest purchaser of U.S. Treasuries and other securities, government-related and securities.

BILL MOYERS: They're saying live within your means, right?

EMMA COLEMAN JORDAN: Live within your means. Your credit line has been reduced.

BILL MOYERS: You've been watching these hearings all fall about what's happening to that $700 billion in bailout. What's the picture that's emerging? What are you learning?

EMMA COLEMAN JORDAN: What I'm learning is that the highest officials in our land have proven to be less than capable in making decisions that affect the lives of so many Americans, that we've seen about faces, changes of strategy, no clear coherent strategy for fixing a world-shattering crisis.

BILL MOYERS: Are you saying they don't know what they're doing?

EMMA COLEMAN JORDAN: I'm saying if they know what they're doing, they're keeping it secret. In other words, for those of us looking from the outside, there is no coherent explanation. And the actions that have been taken are incoherent.

BILL MOYERS: One of the surprises I've learned in watching the hearings is that even the agencies that gauged the credit ratings of these loans were in on the fix, right? I mean, they were being paid by the companies whose risks they were supposed to evaluate. And it turns out they let us down, right?

EMMA COLEMAN JORDAN: Oh, my god. That is the most critical — they're just a series of disasters. Let me just say, Fitch, Moody's, and Standard & Poor, I saw that testimony. It made my heart ache to hear the head of these companies being confronted with internal memoranda and e-mails saying, "We'll rate a cow." And they have no explanation for it.

REP. JOHN YARMUTH: This is not an email this is an instant message, or a series of instant messages between two S&P officials who are chatting back and forth. As I show you these you'll see that what they're talking about — they're talking about rating a certain deal. Here's what they said: Official #1: "By the way that deal is ridiculous." Official #2: "I know, right. Model definitely does not capture have the risk." Official #1: "We should not be rating it." Official #2: "We rate every deal. It could be structured by cows and we would rate it."

Now the Committee went back to investigate whether S&P had in fact rated this particular deal, the one the instant message discusses, and yesterday the SEC informed the Committee, the Committee staff, that it indeed had rated it.

EMMA COLEMAN JORDAN: And then it turns out that the ratings were based upon home price data that was taken from the middle of the bubble. So there was no data in these models from any period when housing prices fell. That goes into the category that most accountants call GIGO.


EMMA COLEMAN JORDAN: Do you know what GIGO is?

BILL MOYERS: No, I don't.

EMMA COLEMAN JORDAN: Garbage in, garbage out.

BILL MOYERS: Right. Well, you make me think of Enron. Remember all of those scandals at the turn of the century, when the accountants were in on the fraud?


BILL MOYERS: Who can we trust now?

EMMA COLEMAN JORDAN: The raters were rating things that clearly did not warrant A ratings. In one of the hearings, I think it was Congresswoman Watson from Los Angeles who said, on the same day as one of the ratings agency gave a triple A rating to the city of Los Angeles, they gave a triple A rating to Lehman Brothers four days before they failed.

REP. DIANE WATSON: How could any rational person believe that a long-term investment in Lehman Brothers was as safe as a long-term investment in California? That's kind of quirky because we're in a little trouble. But something is amiss if a credit rating agency can give the same assessment.

EMMA COLEMAN JORDAN: That is an indictment of the process. And, more importantly, those hearings revealed ratings shopping. That if I thought you were going to give me a bad rating, you're not hired. I'll go to somebody who'll give me a good rating. Well, that was characteristic of the Enron era as well, where accountants, they were shopping for accountants. And the business would be given to accountants who were more flexible. So these gatekeepers, the lawyers, the accountants, the credit rating agencies are crucial to the fair operation of markets. And it was the failure of the credit rating agencies that Alan Greenspan found surprising and disappointing that they didn't use self-interest to monitor risk.

BILL MOYERS: It's as if the Good Housekeeping Seal of Approval, which was the standard when I was growing up, was applied to a brothel or a casino, right? Take a look at this.

REP. CAROLYN MALONEY: You were just gambling billions, possibly trillions of dollars.

MARTIN SULLIVAN: Well, I wouldn't refer to it as gambling.

REP. ELIJAH CUMMINGS: Well, clearly, do you believe there was greed?

REP. NYDIA VELAZQUEZ: The people that are watching this debate here or this discussion — they're still waiting to hear an answer as to how this is benefiting them.

REP. STEPHEN LYNCH: I have a lot of people in my district who feel that they've been defrauded and they're mad as hell.

REP. MARK SOUDER: It's clear that greed led to not only "see no evil, hear no evil," but "report no evil." It's clear that there was fraud here, but there's also, to me, incredible, gross incompetence.

REP. STEPHEN LYNCH: And they think that in light of what has happened to them that someone ought to go to jail. Someone ought to go to jail. And the more I hear in these hearings, the more I read, I am inclined to agree with them. I am inclined to agree.

BILL MOYERS: So does it come down to the basics of ethical behavior, fairness, and justice?

EMMA COLEMAN JORDAN: It does. But, you know, as I hear those Congress people expressing the outrage of their constituents, I have to ask a question of accountability for our elected officials. You've got to step up and do more to make sure that there is proper oversight before you let the money go out the door.

BILL MOYERS: You're saying there's a lot of grandstanding there?

EMMA COLEMAN JORDAN: The theatrical component is very high.

BILL MOYERS: The other big story this week is the bailout of the automobile industry in Detroit. Your whole focus is economic justice.


BILL MOYERS: Is it just to bail out these incompetent, poorly managed, irresponsible magnates who run the automobile industry into the ground?

EMMA COLEMAN JORDAN: One out of ten jobs in the U.S. Think about it that way. Don't think about the managers. Think about those jobs, the jobs of people who are working in dealerships. The jobs of people who are working in parts manufacturing. The jobs of people who are working for creditors of these auto companies. There is a web of connection to these three companies that extends deep into the American economy.

BILL MOYERS: So the answer is yes. You think we should do it?


BILL MOYERS: And should we fire these incompetent managers?

EMMA COLEMAN JORDAN: Well, I think clearly the managers who produced this disaster in the middle of this economic storm ought to be given the opportunity to retire.

BILL MOYERS: Well, now that's being just to a fault, it seems to me. No, I'm serious about this.

EMMA COLEMAN JORDAN: We're at a fragile moment in the global economy. And if this industry is allowed to fail, it would create a death spiral of consequences that are so interlinked that we can't properly calculate what the full impact would be.

BILL MOYERS: You have described a private sector in disarray and a public sector that's incompetent and out of touch. How do we not leave people feeling despair?

EMMA COLEMAN JORDAN: Well, the despair is going to be dissipated by action by citizens, like those people who went into the plant — Republic Windows and Doors in Chicago. People have got to stand up. They've got to demand accountability. And I believe frankly that this past election was the beginning of a process of standing up by citizens who were tired of being disappointed in what they were told about the reasons for going to war, who were tired of getting stagnant wages when the highest paid people in our economy were getting windfall compensation packages for failure. And they decided that — enough. They wanted a different way of political leadership. And I believe that this era of accountability is not over. And our new president-elect will see from this nearly energized democratic, small "d," Republicans and Democrats and Independents, all insisting on his accountability. So he's unleashed a set of energies in the country that will hold him accountable as well.

BILL MOYERS: Emma Coleman Jordan, thank you very much for being with me again on the Journal.

EMMA COLEMAN JORDAN: Thank you so much, Bill, this has been wonderful as always.

Emma Coleman Jordan on Government Bailouts

December 12, 2008

Georgetown University’s legal and finance scholar Emma Coleman Jordan joined Bill Moyers on the Journal in early October to deconstruct Congress’s early efforts at a financial bailout. She assessed the situation starkly:

“We’ve got a gun at our heads, and we understand that that gun means that if you don’t give the $700 billion, bad things will happen. But no one has been able to tell us that if we do give the $700 billion, good things will definitely follow. We haven’t been given that assurance.”

Emma Coleman Jordan returns to take stock of the weeks of bailout hearings as big business begs for more.

About Emma Coleman Jordan

Georgetown University Professor Jordan is best known for establishing the field of economic justice in legal theory, and for her work in financial services and civil rights. Her most recent book is Economic Justice: Race, Gender, Identity And Economics, the capstone to a series of articles, chapters, and books she has written on the subject. Her forthcoming projects concern economic justice, in addition to a book on lynching, Lynching: The Dark Metaphor of American Law. At the Law Center she teaches courses in Economic Justice, Commercial Law, Torts, and Federal Regulation of Financial Institutions.

Before coming to Georgetown, she taught for twelve years at the University of California, Davis. She began her teaching career at Stanford Law School as a teaching fellow. She has been active in the financial services field, serving as chair of the Financial Institutions Committee of the California State Bar, drafter of the statute to regulate bank check holding practices, and co-counsel in class actions challenging bank stop-payment fee charges. Her article, Ending the Floating Check Game (1985), grew out of this involvement. She organized the Financial Institutions and Consumer Financial Services section of the Association of American Law Schools.

She was a White House Fellow in 1980-81, serving as special assistant to the Attorney General. She was counsel to Professor Anita Hill during the Clarence Thomas confirmation hearings.

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