Thinkers can bring steel back
“Fair trade,” “Steel on the other side of the world,” Tribune Chronicle, May 25, 2014. “Law OKs one stop financial shopping,” The Vindicator Nov. 13, 1999.
What do these items have in common?
The last item recalls the repeal of the Steagall-Glass Acts of 1933 and 1934. These laws regulated what banks were not allowed to do in the wake of the collapse of the banking industry in the late 1920s and 1930s. Banks were not to be investment bankers, stock brokers, or sellers of insurance. In one momentous moment, the Congress in its infinite wisdom dramatically changes the banking industry. They now are allowed to redo business the way it was when the banking industry failed and started the Great Depression.
It did not take too long before events began to unfold. World Com and Enron went bankrupt. I do not believe in coincidence. It was not long after that the banking industry began its slide into a chaos that called for massive “bailout” of the financial and the automobile industries.
On Nov. 18, 2008, Secretary of the Treasury Paulson stated, “There is no playbook for responding to turmoil we have never faced. Obliviously, Secretary Paulson never heard of the Great Depression of 1930 and the Steagall-Glass Acts.
What did Paulson do in this instance? We have an example in this area. Instead of helping the National City Bank by loaning “bailout” money do keep it in business, he thought it expedient to loan $7 billion to PNC Bank, which used $5 billion to buy National City. Nothing was mentioned about the $2 billion that PNC did not need. This best notion is that it went for salaries and bonuses to managers and officers for doing such a good job in adversity.
How does this relate to steel? We are now about to dismantle a billion-dollar blast furnace, and at the same time float $50 billion in infrastructure for road and bridges. Where is all the steel needed for that work? We need big steel manufacturing facilities. Only an investment bank can find the money.
When Youngstown Sheet and Tube printed a 50-year history in 1950, it showed that during the Great Depression, the company was buying new equipment to be ready for the good times to start again. When the war was over, so was the incentive to modernize the steel industry. A point in this area was the building of what is known as continuous caster for the steel industry at Republic Steel in Warren. This is some 20 years after it had been going on in Europe and Asia. It wasn’t the high cost of labor that caused the demise of the steel industry, it was the lack of forward thinking.
This is, of course, not the entire story. It is only a small insight into what has happened, and a hope that just maybe some entrepreneur might see that a lot of profit can still be made in the steel industry.
Leonard J. Sainato