Chicago factory sit-in: Ire at Bank of America is misdirected

A settlement has been reached between the workers at Republic Windows and Doors, a smallish manufacturer in Chicago, and the management.

If you're not up on all the details, the story began a little over a week ago when Bank of America, the main creditor for Republic, pulled its client's line of credit as it became clear that business was way down and the prospects that the company would be able to repay its debt became doubtful.

No credit, no money to pay the workers. Layoffs ensued as the factory was shut down.

The workers did not take this unfortunate development in stride; they staged a week-long sit-in at the factory, refusing to leave until they were paid their due severance and accrued time off.

Now I don't know the legality of their sit-in, or their demands. I don't know what Federal laws the workers claim were violated when their lay off came with only 3 days' notice. That's not what this is about.

What I do know is that the bulk of the workers' anger, and that of their surrogates (Jesse Jackson, Governor "Hot" Rod Blagojevich, and President-Elect Barack Obama among them) has been directed at Bank of America for cutting off the credit.

The instinctive sentiment is this: Bank of America is part of the banking community that just received a collective total of $350 billion in "bailout" money as part of the government's TARP program. How dare they freeze the credit on this business. Bad big business. Evil corporation. Greedy bankers.

While these emotions are certainly understandable (we are all human, after all), they are not justified. If all those railing against BoA stopped being driven by base instinct and gave some logical thought to the problem, they would understand that it is Republic, the employer, who is at fault here, not BoA.

So let's think this through:

(1) Why did BoA pull the credit? Because in its own business analysis of risk versus return, it determined that keeping the line of credit open did not make good business sense. Weren't banks just reamed by Congress for making thousands of bad loans over the past several years?

(2) If business at Republic was so bad that BoA felt compelled to close off the credit, the management at Republic must have had some sense of impending doom. Why did they not plan for paying the workers? Why did they not use the remaining cash on hand to fulfill any obligations for severance pay or other due compensation? It seems that it was a mismanagement of available cash that is the real culprit here.

(3) As of several hours ago, a settlement was reached and a collective loan of $1.75 million will be made by BoA and JP Morgan chase to pay the severance costs of the unemployed workers. Hello! The factory is shut down. No product is being manufactured; no sales are being made. What is the chance that this loan will be repaid?

Once again, government has stepped in and pressured banks to make loans with very little chance of being honored. Sound familiar? Congratulations. You, the taxpayer, have just paid the severance for these unfortunate workers. Another step closer...