by Jeff Koopersmith

Created on: July 18, 2009   Last Updated: January 13, 2010

Lending to businesses with large numbers of unionized employees has now become a red-lined activity or at most a likely matter of carefully considered choice for bankers and corporate bond investors.

At least this is what various bondholders and investment bankers say. This new caution is primarily based on the two recent mega-bankruptcies of General Motors (MTLQQ) and Chrysler (Privately Held) where employees, unionized as they are, won out over bondholders with whatever each carried away from the carnage.

Wall Streeters, who were also bailed out by the taxpayers - many of them union members - with loan terms your grandmother wishes she could obtain, are exasperated most likely because they have long-believed that organized labor is a drain on the industrialized might that was once America.

Some investors might prefer to see factory and service workers sink back into an 18th Century mire of wages and benefits so low only the devil could love them.

Yet the "brats" of Wall Street have a point just and valid as do the "thugs" of American unions; and yes, they do call each other these names.

Unions argue that their memberships slaved for these companies all their lives under contracts that were time and again renegotiated in favor of the company and not the employee. Worker's gains were given back in great part by the unions themselves in an effort to save the failing auto industry - vanishing, they argue, because of what has proved to be the most awful large corporate mismanagement in history.

Yet Wall Street opinion leaders warn they are obliged to be anxious about lending to any business "at the mercy" of organized labor which could end up costing lenders or client bondholders in future bankruptcies.

Both lenders and bondholders unquestionably see themselves as victims of the automakers bankruptcies which some argue were illegal to being with.

Union labor, however, also claims it was victimized time and again by poor management starting well before the current "crisis" we face today.

However we must face facts - unions did not get special favor from the bankruptcy courts because of judicial empathy. They won more of whatever was left of the carcass because that is the law.

All workers and all investors take risks; the investors by trusting management to earn profits and grow the company in value, and the workers for the same reasons - hoping their jobs, health-care, and retirement will remain in safe hands.

If bankers and brokers are interested to make certain they will not be left on the shorter end of the bankruptcy stick, they should do what they always do - use the courts and the Congress to do battle with organized labor to eliminate any future favoritism for one or any claimant in bankruptcy, not snipe at each other from what are truly impractical foundations.

Truth be known, most lenders and most investors will continue to loan money to promising companies, unionized or not. It's been the American way for more than 70 years.

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