The Multinational Monitor



A Campaign From the Heartland

by Veta Christy

PITTSBURGH, PA-In a campaign that strikes at the heart of the investment policies of the U.S. financial system, a group of local unions and churches are urging union members and labor supporters to challenge the foreign lending practices of the Mellon National Bank, the nation's 14th largest bank and a major lender to the steel industry.

Since February, the campaign organizers have collected pledges of more than $30 million, which they began to withdraw from Mellon in early June to protest the bank's refusal to reinvest in local industry.

The boycott was sparked by Mellon's foreclosure last February on Mesta Machine Company, at one time the nation's largest manufacturer of equipment for the steel industry. When the company missed its January payment on a $20 million mortgage held by the bank, Mellon foreclosed, putting 1,200 people out of work in the town of Homestead, a community already hard hit by layoffs in the steel industry. As Mesta's chief creditor, Mellon also froze all assets of the company, a move which prevented the payment of over $250,000 owed to former Mesta workers, as well as some payments of life and health insurance premiums.

On June 3, the campaign received a big boost when United Steelworkers of America (USWA) President Lloyd McBride endorsed the campaign after a meeting with church leaders. Several days later the Pittsburgh City Council voted to join the boycott and passed a resolution urging the mayor to withdraw $30 million of the city's money from Mellon.

Then on June 8, a federal bank court judge ordered Mellon to release the more than $510,000 owed to former Mesta workers.

Though leaders of the clergy/labor coalition called the announcement a victory, they vowed to continue the boycott to focus attention on the level of overseas lending by local banks. These loans, they say, are undermining local industry and destroying the economy of the Monongahela Valley (Mon Valley to local residents) around Pittsburgh.

"Mellon National has poured about $20 million into Sumitomo Heavy Industries," one of Japan's largest manufacturers of steel mill equipment, says Mike Stout, head grievanceman of USWA Local 1397 in Homestead.

"They're taking money out of this area and financing industries in other countries, paying workers there lower wages while putting people here out of work." To complete the circle, U.S. Steel is investing in a new continuous caster (a highly efficient furnace that conserves energy) at its Fairfield, Alabama plant while Jones and Laughlin is putting in a caster at Indiana Harbor near Gary. Both companies are buying their casters from Sumitomo "to the tune of $65 million," he says.

The impact of what even steel executives recognize as a policy of disinvestment is all too apparent in this area, where unemployment is 17 percent. Three years ago, there were 90,000 people employed in the steel industry here. By January of 1983, 60,000 workers had been laid off.

In Homestead, many of the storefronts in the borough's business district are vacant, and its streets are riddled with potholes. Municipal services have been cut back repeatedly. Coffeshops and the lunch counters of corner drug stores are busy late in the morning, filled with jobless workers discussing their union local's business or scanning the want ads of local newspapers. According to most industry analysts, one half of those laid off-approximately 30,000 people-will never be called back.

Union locals and unemployed committees are kept busy dealing with the immediate effects of massive unemployment. Locals have established food banks and are working on several plans to provide medical care for unemployed workers who have lost their medical insurance. The Mon Valley Unemployment Committee has helped write plant closing legislation and is currently working on legislation that will protect the homes of unemployed workers who cannot meet mortgage payments.

But enraged by the refusal of local banks to deal with the crisis, local trade unionists have recognized that more radical approaches are needed. For this reason, they joined with Denomination Mission Strategies (DMS), a group of area, ministers, in the bank campaign.

Members of the coalition see the pattern of disinvestment in steel as a direct attack on labor, but they note that major investments are being made in the community in other industries. "In addition to making foreign loans, local banks are investing heavily in the city of Pittsburgh's Renaissance II project," says James Von Dreele, Pastor of St. Matthews Church in Homestead. "They are building new corporate headquarters in the heart of the city or high-rise condominiums along the river front while ageing factories and our steel mills, in need of modernization, are turned down for loans because of the poor rate of return on investment in the basic industries."

In January of 1983, the clergy petitioned the state government to declare the Mon Valley a disaster area, which would have made it eligible for federal aid. When that effort failed, the clergy joined with several steel worker locals and the Tri--State Steel Conference, a labor-church coalition with members in West Virginia, Pennsylvania, and Ohio, to fight the closing of Mesta. The campaign, which has also received the support of several locals of the United Mineworkers Union and the United Electrical, Radio and Machine Workers of America (UE), is now called the "Network to Save the Mon Valley."

"The more we got involved in fighting the Mesta closing and other plant closings, the more we began to understand the central pivotal role the banks and finance capital played in disinvestment," says Stout.

According to its own figures, Mellon National loaned Japanese manufacturers a total of $396 million last year. The bank's foreign loans for that year totaled almost $3 billion. According to the bank's 1982 annual report, this figure represents 23 percent of the bank's assets and is roughly one-third of the amount loaned to domestic industries and financial concerns. The report also shows a steady increase in loans to foreign industries since 1976.

Such loans have tied Mellon to industries in Japan, Brazil, and other countries that have become major competitors with U.S. companies. Such practices might seem suicidal for a bank with close ties to the U.S. steel industry (the bank has links to U.S. Steel and is the main stockholder in LTV Corporation, the conglomerate that owns J & L Steel). But they are more logical when viewed in relation to Mellon's other relationships, especially its ties to the oil industry. The Mellon family, which controls the bank, also owns 20 percent of Gulf Oil, until 1980 the major supplier of oil to South Korea and a major supplier world-wide. Mellon also owns 20 percent of First Boston Corporation, the large investment banking house that handles capital raising for Gulf. In 1970, if Mellon's First Boston and Bank of London and South America affiliates were counted, the bank was the second largest foreign lender to the Japanese steel industry after Morgan Guaranty Trust Company (see accompanying article on Japan).

American banks lend to Asian manufacturers because there are profits to be gained. Business Asia reports that the average 1981 return on investments in manufacturing in Asia was 23.5 percent, compared to an average rate in the U.S. of 9 percent (6.8 percent in steel). According to the Oriental Economist, U.S. banks were top lenders to industries in Asia as well as Africa and Latin America.

Mellon is also a major lender to Mexico and recently purchased the Bank of Brazil, through which it has financed heavy industry. On the domestic front, the bank recently purchased Girard Bank, a local bank in the city of Philadelphia. Activists in the Philadelphia Unemployment Council say that they are concerned that Girard will be drawn into Mellon's international network, and fear a similar decline in lending to Philadelphia as has occurred in Pittsburgh.

Mellon National refuses to comment on the strategy of the coalition publicly. But in remarks to the press after a demonstration at the bank on June 6, a bank spokesperson called the dispute between Mesta and Mellon a spat between "family members" as the result of "hard times." When asked by a reporter if Mellon would reinvest in Pittsburgh, he said, "Let's be frank. We're coming out of a depression. This area will come back, and Mellon wants to be a catalyst for that. But the bank is looking for new entrepreneurs with new ideas and innovations before they can begin reinvesting in the industry in this area." He would not comment on the bank's loans to Japan.

In recent comments to the Pittsburgh Press, J. David Barnes, chairman of the Mellon National Corporation, denied that the bank was using U.S. dollars to make foreign loans. "With international loans it is not a matter of taking money out of the Mon Valley or any other domestic area and lending it abroad," he said. "Foreign loans are usually made with deposits received outside the U.S., the so-called Eurodollars."

What Barnes was referring to are the domestic dollars deposited in the foreign branches of U.S. banks. While credit in the U.S. is regulated by the Federal Reserve Board, no single agency has similar influence over Eurocurrency loans, allowing banks to pay more interest to depositors and make cheaper loans. According to Paul Volcker, Chairman of the Federal Reserve Board, the Eurocurrency mechanism has led U.S. banks to make more foreign loans than in the past, sending more dollars abroad than ever before. Critics of the system fear that lack of control over the lending practices of banks involved in the Eurocurrency market could lead to further instability in the banking system. Total Eurocurrency assets-including money from the Middle East and Japan-have been estimated at close to $1 trillion.

The Denomination Mission Strategy disputes Mellon's contention that the Eurodollars used to make foreign loans always originate outside the U.S. "In 1982," says James Von Dreele, "Dreyfus Liquid Assets transferred more than $80 million from Mellon National in Pittsburgh to its London Branch where the dollars became Eurodollars available for investment overseas. And that's just one example. Other investment firms like Federated Industries of Pittsburgh are doing the same thing with savings money of the people of this valley."

The campaign hopes that its boycott of Mellon Bank will lead to changes in this policy. "We feel that as the area's largest bank, Mellon should be leading other banks by reinvesting in the industry and people of the Mon Valley," says Von Dreele. "We hope this action will persuade the bank to begin serious negotiations with us about the economic future of our community."

Veta Christy is a freelance journalist and documentary film producer in Pittsburgh.

The Network to Save the Mon Valley can be contacted at: 130 East 8th Avenue, Homestead, PA 15120, (412) 464-1892.

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