From Volume 5, Issue Number 16 of EIR Online, Published Apr. 18, 2006

U.S. Economic/Financial News

UAW Mobilizes for Bankruptcy Reform Bill, Delphi Accountability

In an April 11 press release, the United Auto Workers union called on its membership to support the Conyers/Bayh bankruptcy reform bill, to sign a letter being circulated over the Internet by Sen. Ted Kennedy (D-Mass) and Rep. George Miller (D-Calif). The letter calls on Delphi to provide workers with justification for any proposed wage and benefit cuts, and to ensure that any changes are "implemented in a gradual, humane manner." Miller has been raising these issues since he held "e-hearings" on the auto industry collapse last December.

During hearings on "U.S. Competitiveness" April 10, held by the House Committee on Education in the Workplace, on which Miller is the ranking member, the Congressman issued a strong call for "graduating 100,000 new scientists, engineers and mathematicians" over the next four years, with a revival of JFK's "public-private partnership" that made the Moon landing a possibility. It is the "inheritors of that [policy]" that have "led to the high-tech revolutions" of today, he emphasized.

Business Week Accuses Delphi of Globalization by Bankruptcy

"Go Bankrupt, Then Go Overseas," is the title of a polemical Business Week online article of April 13 on the "globalization gambit" of Delphi's pirate CEO, Steve Miller. The article gives Miller's Delphi swindle a high profile in the context of a report on outsourcing and globalization, and effectively challenges Congress to take action.

"Miller wants to use the bankruptcy courts to drastically slash Delphi's U.S. presence, thus freeing it up to focus on its already vast overseas production," the article says. "If Miller gets his way, Delphi will end up with a U.S. workforce of perhaps 7,000, leaving the bulk of its production and value abroad." The article headline has the kicker, "For Delphi, Chapter 11 is a globalization gambit. If it works, rivals will copy it." Business Week quotes Sean McAlinden of the Center for Automotive Research, that, for example, Lear Corp. and Johnson Controls—two other big auto suppliers—will use Miller's go-bankrupt-to-go-global tactic if the bankruptcy court approves it, and Congress doesn't change the bankruptcy laws.

The article reports that on April 6, Sen. Evan Bayh (D-Ind) and Rep. John Conyers (D-Mich) introduced legislation "to tighten up the bankruptcy laws in response to Delphi's moves, forcing bankruptcy courts to take all of a company's international operations into account in assessing its plans for bankruptcy reorganization, so that it cannot take all its assets abroad and hide them.

"Some international corporations that are struggling domestically use their losses at home to justify breaking contracts with American workers, while their overall company is still thriving," Bayh and Conyers are quoted from their announcement of the legislation, in a clear reference to Delphi.

Pension Plans Invest Retirement Money Into Hedge Funds

The hedge-fund boom is sucking out an increasing amount of money from pensions, according to BusinessWeek online Feb. 6. Peter Gilbert directs the Pennsylvania State Employees' Retirement System (PSERS), with $27 billion in assets. Gilbert has invested 23% of PSERS funds into hedge funds, the highest percentage so invested by any state pension system. Using the mechanism of "fund of fund hedge funds," PSERS invested its funds into 245 hedge funds.

According to Greenwich Partners, 14% of all U.S. public pension plans are already invested in hedge funds; 49% expect to increase their hedge-fund holdings during the next three years.

Theodore Aronson, who runs a Philadelphia investment fund, warned that the pension plans are vulnerable to large losses. "The deck is stacked against you," due to the exorbitant fees that hedge funds charge to manage pension-fund money. He added that, whereas performance "in the rest of the capital markets is verifiable, no one monitors this hedge fund crap."

In addition to putting nearly a quarter of the PSERS funds into hedge funds, Gilbert has invested an additional 6.8% of its funds into real estate, 12.3% into private equity and venture capital, and 20.8% into international stocks, thereby insuring that workers will have nothing left for retirement.

Hillary Wants Manufacturing Base, Not Sure How To Get It

In anticipation of a speech at the Economic Club in Chicago, Sen. Hillary Clinton (D-NY) gave an interview to April 11, which acknowledged the problems of globalization and underemployment, but her solutions were vague and indecisive.

She very quickly did away with the interviewer's assertion that the economy is "working well," by identifying the shrinkage of the workforce under Bush, undermining his proclamations of 4% unemployment "success." She also rejected the globalizers' sophistry that America had somehow reached the end of its "comparative advantage" in manufacturing. "I think it's both defeatist and dangerous to say that we cannot have a manufacturing sector that is globally competitive," she said. "What we don't have is any real sense that manufacturing must be a part of our economic future, not only for the jobs ... but also for security reasons." She scored the corporate tax evaders, asking, "how many more companies can be jammed into that little building somewhere in the Bahamas," so that they can evade paying taxes?

Her solution for all this is to create a "fair, level playing field," attacking China, for "currency manipulation." Her proposal on health care, as well, can be summed up in her call for a "national conversation," as opposed to any concrete policy proposals.

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