Today, the government released the results of the stress tests performed on the nation’s 19 largest banks. Thanks to a series of leaks, we already knew that the not-very-stressful tests resulted in large-but-not-catastrophic capital holes for the banks to fill. Bank of America leads the pack — needing to raise $34 billion — but most banks need to raise far less, if any.

However, one interesting aspect of the announcement is how the government plans to help the banks raise the capital that they need. While the banks will presumably do their best to go out and raise capital from private investors, if they can’t, they will have the option of converting the shares that the government bought with the initial round of TARP into a new financial instrument:

This new instrument, called a “mandatory convertible preferred” share, gives banks the ability to create common equity as needed. The preferred shares convert to common shares when a bank or its regulator decides they should.

This means that the banks can convert government debt into equity if they hit a rough patch and the need arises. But as Robert Reich pointed out, “by this sleight-of-hand, the public takes on more risk,” moving from a preferred creditor to a common shareholder.

But more importantly, this whole song-and-dance means that the banks are still operating with a government guarantee, but without government control. They can go out and try to raise money, and investors know that the government is going to cover them if things go badly. The plan assures that the banks will remain alive, no matter how troubled, because Treasury will always swoop in to save the day. As James Kwak and Simon Johnson put it:

In the end, when a financial system is dominated by banks that are too big to fail – and they do fail – the only options are an FDIC-style takeover or the kind of public-private co-dependency that we see today. As far as the current crisis is concerned, the die is cast and the big banks won.

The Wall Street Journal reported today that the Senate is working on a compromise version of the Employee Free Choice Act. The deal may involve dropping the provision allowing workers to form a union through majority sign-up, while negotiating over other parts of the bill aimed at ensuring that workers who form a union get a fair shot at receiving a contract and implementing stiffer penalties for employers who break labor law.

Evidently thinking the battle over “card check” has been won, conservatives are now turning their attention toward these other provisions. To this end, anti-EFCA spokesman George McGovern penned an op-ed today attacking what he calls the bill’s “compulsory arbitration” provision, which would bring in arbitrators if employers and a union can’t agree on a contract in 120 days:

Compulsory arbitration is bound to trigger the law of unintended consequences. Currently, labor law maintains a careful balance between the rights of businesses, unions and individual employees. While bargaining power differs depending on individual circumstances, the rights of the parties are well balanced. When a union and a business enter negotiations, current law requires that both sides bargain “in good faith.”

The law may require “good faith,” but in reality, workers receive anything but. Here are some examples of what “good faith” looks like these days:

- It took meat cutters at a Texas Wal-Mart nine years after they voted to form a union to begin negotiations with the company.

- Employees at a Rite-Aid drug warehouse in California voted more than one year ago to form a union, but Rite-Aid is trying to run out the clock, so that it can “stop the pretense of negotiating.”

- On March 31, 2007, workers at the Trump Casino in Atlantic City, NJ, voted to form a union. They still have no contract.

Cornell organizing expert Kate Bronfenbrenner found that “a third of workers lack a contract a year after voting for union representation.” “There is no penalty,” she said. “You can have an employer that refuses to meet and talk and the worst penalty is another piece of paper saying, ‘Shame on you.’”

And it’s not like businesses don’t use arbitration in other matters. For instance, businesses love to put mandatory arbitration clauses in contracts with consumers, so that they can avoid class action lawsuits. In fact, companies include mandatory arbitration clauses in 75 percent of consumer agreements. The U.S. Chamber of Commerce has also written that “virtually any type of dispute between private individuals or entities can be addressed by arbitration.”

Any compromise on EFCA needs to have a mechanism ensuring that workers who have legally formed a union can take part in fair contract negotations. The status quo of unpenalized delay is simply insufficient.