Invested for Purpose & Profits

LABOR'S MONEY-

IN Washington this week the A.F.L.-C.I.O. opened a new branch--a department of investment, to be headed by a onetime investment banker. The big union's new division points up the fact that rich U.S. labor organizations, with $4 billion in their coffers, are becoming an increasingly important factor in investment markets.

Although they are traditionally conservative in their investments, there is growing evidence that the unions are changing their ideas, are eagerly looking for new uses for their bankrolls. There are two reasons for the unions' move away from the safe but low-yield Government bond market that has long absorbed their money. One is A.F.L.-C.I.O. President George Meany's desire to use union funds for "social purpose." The other is a simple, management-like desire to earn more money. Often the unions have been able to combine social purpose with bigger profits.

The A.F.L.-C.I.O.'s new investment chief, Alexander Bookstaver, is an expert in such combinations. When he became union controller and invest ment adviser for the International Ladies' Garment Workers Union in 1956, the union had all its assets and pension funds in U.S. Government bonds, where they earned only approximately 2 1/2%. He diversified the $350 million reserves, put $100 million in mortgages, $40 million in corporate and utility bonds, has committed $20 million to a mortgage on a 2,500-unit low-rent housing project on Manhattan's West Side. The I.L.G.W.U.'s investment return last year rose to about 4%.

The Amalgamated Clothing Workers last summer moved out of Government bonds for the first time to free $5,000,000 to build Amalgamated Town, a 2,500-apartment union cooperative in New York's Coney Island-will earn 5 1/2% on this money. In Chicago, the Building Service Employees' International grew alarmed about the decline of the center of Chicago. To help revive the Loop, it is sponsoring $36 million Marina City, a vast, spacious complex of apartments, offices, restaurants and recreation centers near the Loop. "All of our people work in the center of cities," explains the union's Secretary-Treasurer George E. Fairchild, "and unless we protect the heart of our city, bring in new and needed housing, the growth of our union as well as our community is threatened."

One of the richest U.S. unions, the United Mine Workers, with net assets of $104 million, has invested in almost everything: railroad and steamship coal shippers, banks, and coal companies. It owns some 20% of the West Kentucky Coal Co., has substantial stock holdings in the Nashville Coal Co., has joined with management to help mechanize the coal mining industry.

Although cash-light unions often have less latitude in their investments --strike reserves need to be in banks or in short-term securities easily convertible to cash in an emergency--many a well-established union such as the United Auto Workers has learned to invest and still protect itself. The U.A.W. buys heavily in securities dated to mature about contract expiration time, in case of a strike has the money ready. "Our criteria are security, fluidity and yield--in that order," says U.A.W. Secretary-Treasurer Emil Mazey. In quest of security for its $33 million invested funds, the U.A.W. has nearly 73% in Government bonds, a large amount in federal savings-and-loan associations, plus $2,000,000 in General Motors Acceptance Corp. debentures, which Mazey counts no risk. "If G.M. ever gets in trouble," says Mazey, expressing a familiar thought, "then the U.S. will be in trouble too." The U.A.W. also owns some $21,000 worth of common stocks, representing one share of stock of each company with which the union has a contract. They were bought so the union would get announcements and annual reports. The stock returns have proved so much more profitable than the U.A.W.'s other investments that the union is considering a move into common stocks.

For all the new horizons in union investment, many unions refuse to be convinced, e.g., the huge United Steelworkers union, which still buys only Government bonds. "We have a strong feeling that the business world is not for us," says Union Secretary-Treasurer I. W. Abel. "For one thing, adventures in speculative stock purchase might give the enemies of labor a chance to attack the union's tax-free status." Probably a greater fear among most unions is voiced by Joseph T. De Silva, Los Angeles local secretary of the Retail Clerks: "These funds are even going to own some corporations before long. When that happens, the traditional union-management rivalry will exist only in negotiations." While businessmen once worried about the prospect of the wealthy unions buying in and dictating to management, some union leaders feel that investments in common stock will have just the opposite effect. The unions will become more aware that if the company suffers, so will its own members.

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