It seems that it wasn't only Wall Street that believed in ... creative accounting.
According to the article, the AFL-CIO is currently a candidate for insolvency. Also the SEIU.
You read that right: the AFL-CIO, the American Federation of Labor and Congress of Industrial Organizations, the largest union in the US, has debt exceeding its assets, one of the critical signs of an impending bankruptcy (the other key indicator is when cash flow growth turns negative and profit margins disappear).
How did it get into this situation?
Well, first of all there's this:
In the mid-1990s, the AFL-CIO struck a deal with Household Bank to market the cards to union members in return for royalties. In the year ending June 30, 2008, the AFL-CIO earned $35 million from Household, about half the $74 million it collects in union dues. The deal has been a windfall for the union, but that may not last amid rising credit-card losses and flat consumer spending.
In other words: the AFL-CIO doesn't live from union dues, but rather through, basically, having sold their union member database to a credit card issuer who then tapped into the union membership via the "Union-Plus" credit card company. Hmmm: haven't the leadership and the unions generally attacked financial shenanigans that exploited workers?
But it's not just the AFL-CIO: the SEIU (Service Employees International Union) is also in trouble:
As for the SEIU, as recently as 2002 total SEIU liabilities were about $8 million. According to its 2008 disclosure form, the union owed more than $156 million, a 30% increase over the $120 million it owed in 2007. Its liabilities now equal more than 80% of its $189 million in assets. Net assets fell by nearly half last year, to $34 million, from $64 million in 2007. The debt includes an $80 million loan the SEIU took out in 2003 to purchase a new headquarters in downtown Washington, D.C. But the liabilities also stem from political spending, including at least $67 million last year on political and lobbying expenses, twice what it spent in 2007.
The SEIU added to its debt burden last year with $25 million in new bank loans, including $15 million from Amalgamated Bank of New York. Amalgamated is the nation's only union-owned bank and its chairman is Bruce Raynor, who until recently was also general president of Unite-Here. Mr. Raynor has been fighting for control of that textile-hotel union, and he helped Mr. Stern conduct a raid on Unite-Here members before bolting to the SEIU.
By the end of 2008, the SEIU also owed Bank of America nearly $88 million, including its headquarters loan and another $10 million for unspecified purposes. This is the same BofA that the union has spent the past months attacking as the face of Wall Street excess. The SEIU has protested outside of Bank of America offices and demanded the resignation of CEO Ken Lewis. We assume no one forced the SEIU to invest in real estate or borrow from a bank to finance it.
An SEIU spokeswoman says the union works on a four-year cycle, in which it goes "all out for the presidential election" and then rebuilds its finances. She adds the union has paid back more than $10 million of the $25 million it borrowed last year. But it's nonetheless true that the SEIU's liabilities have continued to climb each year from 2003 to 2008.
That last paragraph is the key quote.
What is bankrupt is not the merely the finances of the unions: it is the role of unions per se. They have mutated into no less than political party machines for the Democrats (and don't make me laugh by claiming that Republicans benefitted here), dedicated for that purpose only, willing, if need be, to face financial ruin in order to get Democratic candidates elected.
Hence here are the newest candidates for bankruptcy: the American union movement, betrayed by its "leaders" and now, through its very actions, responsible for getting tens of thousands of union members fired.
That's gonna be hard to sell to the rank and file. But since when did the unions in the US care about what the rank and file thought?
Forcing the unions into bankruptcy would be the healthiest thing that could happen to the US unions: they could once again become representatives of their workers, rather than the corrupt political hackeries that they are.