Dec. 9 (Bloomberg) -- A fire roared in a trash bin outside the Republic Windows & Doors factory on Chicago’s north side last night, warming supporters who brought coffee, food and sleeping bags to 250 fired workers occupying the building.

Nearby, a protester held a placard: “Bank of America. You got bailed out. We got sold out.”

Workers blame Bank of America Corp., the biggest U.S. retail bank, for the factory’s Dec. 5 closure after it canceled a line of credit to the manufacturer, whose sales have been gutted by the housing slump. The Charlotte, North Carolina-based bank has received $15 billion from the U.S. Treasury as part of its effort to boost capital, while Merrill Lynch & Co., the securities brokerage it is buying, has gotten $10 billion.

The workers’ union is planning a rally at noon tomorrow at the Bank of America building in downtown Chicago as the factory sit-in becomes the center of the debate over how more than $700 billion in federal funds are used to help the world’s largest economy weather the worst economic decline since the 1930s. Government bailout money should be used to help businesses such as Republic Windows rather than Wall Street firms and global banks, the United Electrical, Radio and Machine Workers of America, which represents the Republic workers, said on its Web site.

“We will continue to occupy the factory until a resolution is reached,” said Leah Fried, a union representative.

‘Absolutely Right’

President-elect Barack Obama, whose home is 12 miles from the factory, in Chicago’s Hyde Park neighborhood, said at a Sunday press conference the workers are “absolutely right” to demand their severance and vacation pay.

“These workers, if they have earned these benefits and their pay, then these companies need to follow through on those commitments,” said Obama, who gave up his U.S. Senate seat from Illinois last month.

Workers were told the plant was closing three days before the sit-in began, said Ricardo Caceres, 39, who assembled windows for 15 years at Republic. The company gathered everyone in the cafeteria at lunchtime and told them they could come and pick up their final paychecks on Friday, said Caceres, of Chicago. The sit-in began after workers saw they were not being paid for unused vacation time or given severance packages.

‘In Shock’

“Everyone was in shock,” said Caceres, the father of two children.

Richard Gillman, previously a minority shareholder in Republic, bought Republic in 2006 and replaced some of its management. Under Gillman, Republic reduced expenses by 47 percent and boosted productivity by 30 percent, according to a company statement distributed yesterday by Business Wire.

“Despite inheriting a company bloated with overhead and lacking any type of manufacturing discipline and/or productivity, the company made significant improvements only to encounter an unprecedented decline in new-home construction,” the Republic statement said.

Illinois Governor Rod Blagojevich said yesterday that Bank of America won’t get any more state business until it restores the line of credit. The governor and John Harris, his chief of staff, were arrested today by FBI agents on unrelated corruption charges. The two men are scheduled to appear today in federal court in Chicago, according to a statement by Chicago U.S. Attorney Patrick Fitzgerald.

Bank of America has managed the sale of at least $2.1 billion in municipal bonds within the state of Illinois in the past four years, according to data compiled by Bloomberg.

Bank of America isn’t empowered to tell a company how to manage its business, spokeswoman Julie Westermann said yesterday. Republic is unable to operate profitably in the current economy, she said.

“Bank of America has worked with the company and shared our concerns about the company’s situation and its operations for the past several months,” she said. “It is unfortunate that the company has been unable to reverse its declining circumstances.”

Republic’s sales tumbled to $40.3 million this year from $52.3 million in 2007 as orders from homebuilders dropped to $6.3 million from $17.9 million, the company said in a statement.

New-home sales in the U.S. fell in October to 433,000 at an annual pace, the lowest level in 17 years, as the credit crunch deprived potential buyers of needed financing, according to the Commerce Department.

To contact the reporters on this story: Brian Louis in Chicago at blouis1@bloomberg.net; Kathleen M. Howley in Boston at kmhowley@bloomberg.net.

Last Updated: December 9, 2008 11:58 EST