A bank president stood beside the head of a big teachers unions at a glitzy Clinton Global Initiative event last month and the two pledged to invest $100 million in early childhood education. A few weeks earlier, the union had endorsed Hillary Clinton because she had come out in support of that same issue. The union, the American Federation of Teachers, also happens to be a client of the bank.
The Amalgamated Bank is union owned and has extensive ties to the Democratic establishment. It is a growing financial phenomenon managed and patronized by Big Labor's biggest players. From the Democratic National Committee to Hillary Clinton's presidential campaign, Amalgamated has
attracted high-profile accounts with its blend of specialized political financing and ideological bent.
The bank has positioned itself as an innovator in the new niche of political investment banking, offering cash on short notice to political action committees and campaigns, while providing round-the-clock service to political groups that operate outside traditional banking hours.
Amalgamated Bank has also become an unconventional vehicle for unions in the corporate world. (AP file)
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It has also become an unconventional vehicle for unions in the corporate world. It's home to billions of dollars in union pension funds, which it invests strategically across a broad portfolio of companies. Essentially, Amalgamated gives the labor movement a seat at the corporate governance table and thus an influential voice in how big businesses operate.
Since its founding in 1923 by a New York City garment workers' union, Amalgamated's evolution has mirrored that of the labor movement as a whole. Just as well-connected national unions have overshadowed local ones, so too has the bank's target market shifted to Washington power players.
Ten years ago, an Associated Press Financial Wire reporter said of the bank: "The 80-year-old company caters to everyone from New York City firefighters to carpenters to teachers."
But as Amalgamated approaches its centenary, its top clientele has expanded to include Democratic candidates, political advocacy groups, and union empires that have come to play an outsized role in shaping the Left's agenda.
Politicized pensions
Amalgamated, which declined to comment for this story other than to say it follows Federal Election Commission guidelines for campaign lending, prides itself on being "America's Labor Bank" when the labor movement is an increasingly polarizing political force.
The country's rich and romantic history with unions has given way to plummeting private sector membership and growing support for "right-to-work" policies that free workers from the obligation of joining and contributing to unions. Republican Gov. Scott Walker built his national profile "busting" public unions in his home state of Wisconsin, and GOP presidential hopefuls from Carly Fiorina to Sen. Rand Paul have spoken out on the campaign trail against public sector collective bargaining.
Across the aisle, Democratic candidates are scrambling to lock up coveted union endorsements ahead of the 2016 congressional primary season. Neither the powerful AFL-CIO nor the Service Employees International Union has picked their candidate yet. Each is delaying its endorsement to encourage candidates to bid for it with the friendliest policies.
Keith Mestrich, Amalgamated's president and CEO, was a top SEIU official before joining the bank in 2012 as the director of its Washington office.
Mestrich soon began cultivating Amalgamated's connections to the Democratic Party, reflecting the labor movement's push to deepen ties with the political Left.
In 2014, Amalgamated attracted the business of the Ready for Hillary PAC. (AP file)
Mestrich has said he traces the "renaissance" of the bank, which struggled just a few years ago to recover from economic downturn, to the Democratic National Committee's 2012 decision to transfer over its assets from Bank of America. During the following year, deposits from the Washington area rose by 70 percent and more than 100 new Democrat-linked groups reportedly started banking at Amalgamated.
In 2014, Amalgamated attracted the business of Ready for Hillary, a political action committee created to build a broad bench of support for Clinton ahead of her official campaign launch.
"It is important for us that our bank share the progressive values of this effort," said Adam Parkhomenko, executive director of Ready for Hillary, of the PAC's move to Amalgamated last fall.
Many on the left have praised the bank for conducting its business according to a set of ideals to which it is committed. But others criticize Amalgamated for allowing politics to seep into its investment practices.
Steven Allen, senior editor at the conservative Capital Research Center, said Amalgamated's marriage of political and financial interests exposes it to problems.
Right-to-work supporters frequently point to unions' political spending, which is massive and goes largely to Democrats. (AP file)
"Amalgamated Bank has always been sort of an interesting creature in that it's a cross between a union institution, and what you would think of as a bank that's in the business to make money for the shareholders," Allen said. "Whenever you have a hybrid like that, of course what you're going to get is the potential for corruption. That kind of thing is not unexpected."
Right-to-work supporters frequently point to unions' political spending, which is massive and goes largely to Democrats, when arguing that mandatory union dues unfairly force members to fund candidates and causes with which many disagree. The concern extends to the lending and investment practices of Amalgamated, which almost exclusively benefit Democrats.
"Amalgamated is a perfect embodiment of the slush fund that organized labor has become," Matt Patterson, executive director of Center for Worker Freedom, an arm of the right-leaning Americans for Tax Reform, wrote in an email. "Unions take dues from members (by force in non-right to work states) and funnel it directly to liberal groups and Democrat politicians."
Anti-union organizations worry that mandatory member dues allow labor groups to make financial decisions that the members themselves might not support, including where the unions park their pension funds. In the case of Amalgamated, those pension funds are used as tools to force "social" and "environmental" agendas on private businesses. Other arms of the bank nurture Democratic causes, creating tensions for Republican members who were compelled to pay dues that were then funneled into Amalgamated.
"The Amalgamated Bank is a classic example of the left-wing shadow infrastructure that labor unions create using mandatory member dues," said Rick Berman, executive director of the Center for Union Facts, which is critical of the labor movement. "Exit polls show that 40 percent of union households vote Republican, but the cozy relationship between the Amalgamated Bank and Democratic Party ensures that conservative-leaning union members will never be meaningfully represented, and will always fund politicians they don't support."
For Republican union members, the conflict extends far beyond Amalgamated. In the last election cycle, 89 percent of the labor movement's spending went to Democrats. In 2008, 92 percent of more than $75 million that labor spent in politics went to Democrats, according to the Center for Responsive Politics.
But Amalgamated's openly partisan leaning injects progressive politics into an area that is usually kept unbiased: workers' retirement savings.
Ivan Osorio, editorial director at the Competitive Enterprise Institute, said the union-controlled bank's lending in electoral politics is far less transparent than the typical political activity of unions.
Campaign lending can be a complicated process because campaigns and PACs often have little credit or collateral, but are forced by the nature of elections to move enormous sums of money quickly. (AP file)
"One major difference is that union political donations are done directly. That's very clear. They collect so much money in dues, they give so much money to candidates ... It's pretty straightforward," he said. "With a bank, it's supposed to be run like a business, so it's not a direct donation. Whether that kind of campaign lending constitutes undue risk, that's for the bank to decide."
Campaign lending can be a complicated process because campaigns and PACs often have little credit or collateral, but are forced by the nature of elections to move enormous sums of money quickly.
Bob Biersack, senior fellow at the Center for Responsive Politics, said campaigns typically borrow against "physical assets" such as computer systems or, less conventionally, donor lists, which he said campaigns can sell or rent to other organizations to generate income.
Amalgamated has worked to make itself a resource in political finance for Democratic groups that need increasingly flexible options. When Ready for Hillary needed a seven-figure loan last fall, the bank "was willing to underwrite the loan against the flow of future contributions," according to a New York Times report.
"There's an ideological dimension to Amalgamated and that's what makes it different from most banks," Osorio noted.
Biersack said the bank's campaign lending is not the same as a donation and ultimately benefits union pension holders, just as any other loan would.
"The bank (and its pension fund investors) earn money because it charges interest on loans and fees for other kinds of services. They aren't giving anything to campaigns without getting paid," Biersack said. "The bank isn't giving anything to anyone. It's earning a return on its business activities. Contributions are gifts with nothing coming in return and lobbying efforts are spending money hoping to get a policy outcome."
A contentious history
Amalgamated's pivot to politics came as the bank emerged from a financial crisis that had threatened its survival.
In 2011, it was drowning in the red ink of a deep economic slump, and faced punishment from the Federal Deposit Insurance Corporation as its cash flow evaporated.
According to an enforcement action filed by the FDIC that year, Amalgamated was under scrutiny for allegedly allowing delinquent loans to sit uncollected on its books, even though some were unlikely ever to be repaid. (Bloomberg file)
"Amalgamated was so undercapitalized in 2011, how did that happen? Because of investment losses," Allen said.
According to an enforcement action filed by the FDIC that year, Amalgamated was under scrutiny for allegedly allowing delinquent loans to sit uncollected on its books, even though some were unlikely ever to be repaid. In some cases, the bank reportedly issued new loans to pay off dud loans and thus avoided or delayed listing the unpaid loans as losses.
The union-owned bank was rescued in the spring of 2012 when a pair of left-leaning billionaires injected $100 million into Amalgamated, each taking a fifth of its common stock.
One, Wilbur Ross of WL Ross & Co., had a history of swooping into failing firms and turning a profit, a practice that earned him nicknames like "vulture investor" and "the king of bankruptcy."
The other, Ron Burkle of the Yucaipa Companies, is perhaps best known for his hard-partying tendencies and ties to former President Bill Clinton, a longtime friend.
Bill Clinton reportedly earned $15 million as an adviser to Burkle's business since inking an agreement with the Democratic donor in 2002. The arrangement sparked controversy during Hillary Clinton's first presidential bid due to stories about Burkle's lifestyle and his company's questionable business deals.
As recently as 2007, the former president was raking in millions from an ill-defined "partnership" with Yucaipa, according to tax returns released this year by his wife's campaign. The two have since parted ways amid a public feud over payments.
Bill Clinton reportedly earned $15 million as an adviser to Ron Burkle's business since inking an agreement with the Democratic donor in 2002. (Bloomberg file)
"Frankly, there weren't a lot of other people standing in line around the bank willing to put that kind of money into it," Noel Beasley, Amalgamated's chairman and president of Workers United, which now owns a majority stake in the bank, told Bloomberg Business in 2013.
"Regulators were threatening significant sanctions and possibly closing," Ed Grebow, then the bank's CEO, said of the 2012 Ross and Burkle investments.
At a time when Occupy Wall Street was ripping into the financial industry for alleged corruption and excessively risky practices, Amalgamated hung a banner proclaiming support for the movement outside its branch near New York's Zucotti Park, where the protest movement was camped in the fall of 2011.
The bank ultimately provided a home for Occupy's finances. Amalgamated has grown its relationships with a variety of left-leaning causes, from Organizing for Action to the Democratic Governors Association, as it has pulled out of the financial hole it dug for itself in 2011.
The massive investment losses had come on the heels of a bitter battle over control of the bank between Unite Here, the remainder of a failed 2004 merger of the UNITE and HERE unions, and Workers United, which was spun off from Unite Here in 2009 and subsequently affiliated with SEIU. By stepping into the break-up of Unite Here and subsidizing the newly-formed Workers United, SEIU was able to gain control of Amalgamated in a 2010 settlement. That was a major accomplishment for SEIU, because the powerful union had borrowed millions from Amalgamated.
By stepping into the break-up of Unite Here and subsidizing the newly-formed Workers United, SEIU was able to gain control of Amalgamated in a 2010 settlement. (AP file)
"Part of the political nature of the bank extends to how it's controlled, the way it changed hands," Osorio said of the Unite Here battle that ultimately determined Amalgamated's fate. "How its current control came to be determined was itself political in nature."
Boardroom vigilantes
Amalgamated's political involvement extends to actively pressing corporations to adopt policies that unions support.
The bank invests unions' pensions through a company called the Longview Funds LLC, which it then uses to pressure or sue corporations that mismanage assets or, in some cases, act in ways Amalgamated doesn't like.
Through a series of shareholder resolutions and lawsuits, the bank has pressed companies that resisted concessions demanded by unions.
For example, Amalgamated has pushed Massey Energy and Union Pacific to end "golden parachute" severance packages for executives. In 2008, the bank promoted a resolution that required Urban Outfitters to adopt a labor code that incorporated international human rights standards. Two years earlier, it urged Citigroup to tie executive compensation to performance, and has since done so for Valero, Avon and Walgreens, among others.
Amalgamated sued News Corp after the company acquired a firm owned by Chairman Rupert Murdoch's daughter. (AP file)
Amalgamated brought a suit against News Corp, the media conglomerate that owns Fox News and the Wall Street Journal, in 2011 alleging "nepotism," among other things, after the company acquired a firm owned by Chairman Rupert Murdoch's daughter. The resulting settlement reportedly forced News Corp to disclose its political contributions and set up an anonymous tip line for company whistleblowers.
Last year alone, Amalgamated pushed the boards of three different gun or ammunition companies, Sturm Ruger & Co., Olin Corporation and Smith & Wesson, to disclose all political spending.
In every case, Amalgamated used shares held by Longview either to vote on shareholder resolutions or to bring a lawsuit.
Osorio said Amalgamated's boardroom activism separates it from most other banks.
"It's driven by a political agenda in a way that banks generally aren't," Osorio said. "If there is a pattern of shareholder resolutions that seek to advance some sort of political agenda, clearly there are considerations other than what's best for the pension fund coming into play."
Amalgamated pushes the boards of gun and ammunition companies to disclose all political spending. (AP Photo/Tom Haya)
The concern with Amalgamated's shareholder activism is that decisions about where to direct pension fund money might be dictated less by what's best for the worker's retirement pot and more by what's best for the bank's idea of "social justice."
"With pension fund investments, the goal should be to increase returns," Osorio added.
Allen said the bank's efforts to shape corporate policy go to the heart of why the labor movement embraces Amalgamated in the first place. "Why does a union have a bank?" he asked rhetorically, "So it can either provide people with loans that maybe you and I consider questionable, but they can at least legally justify it, or they can use the bank's power to pressure companies to go along with unionization."
This article appears in the Oct. 19 version of the Washington Examiner magazine.