have joined the airline industry in asking Congress for emergency
financial help as Las Vegas and other tourist destinations take a severe
financial hit from the coronavirus outbreak.
requested aid for the casino companies, raised by lobbyists in recent
days, could come in the form of a comprehensive bailout package, similar
to what lawmakers may provide to airlines, cruise companies and the
hospitality industry. Other possibilities include direct cash payments,
deferred taxes or special bankruptcy protections, said two people with
knowledge of the conversations who were not authorized to speak
Casinos could also receive additional scrutiny given the close personal
and professional ties that Trump, a former casino developer and owner,
has to the industry. Steve Wynn, a top GOP donor, has known Trump for
years and was vice chairman of Trump’s inaugural committee. After Trump
entered the White House, Wynn was named chairman of the Republican
National Committee’s finance committee before stepping down after sexual harassment allegations.
week you can expect to hear warnings from business groups about the
jobs that will be lost, the bankruptcies that will be triggered, the
financial panic that will ensue and the recession that will be prolonged
if the government fails to act quickly and aggressively.
there will be the predictable rants about putting taxpayers on the hook
for “bailing out” undeserving shareholders, banks and hedge fund
managers even as waiters, taxi drivers and maids are left to fend for
Democrats will accuse Republicans of groveling to Wall Street and
business interests while Republicans will accuse Democrats of groveling
to unions and wanting to pick winners and losers. In the end, a rescue
package with a price tag of hundreds of billions of dollars will be
narrowly approved by both houses of Congress over the opposition of
partisans and ideological purists in both parties. ..
start with the word “bailout,” which will be tossed around
indiscriminately in coming weeks by politicians and pundits and headline
writers. Bailout has a pejorative connotation, one that suggests people
and companies who should have known better are saved from the
consequences of their own risk-taking with large gifts of government
in this case, the pejorative does not apply. For if anything qualifies
as an event outside human control — an “act of God” as the contract
lawyers put it — certainly it is a pandemic. Nor is this a case of
anyone acting recklessly...
Then there is the practical reality that the government simply doesn’t
have the capacity to review the financial situation of millions of
businesses and quickly determine which ones genuinely need capital and
will be viable enough to pay it back. In addition, the potential for
fraud and political favoritism is significant...
Behind the scenes, airlines, cruise lines, hotel companies and theme
parks are already making the case that the government should simply hand
over an initial tranche of cash to compensate them for the lost revenue
they suffered as a result of government restrictions on travel or large
gatherings. That would be a mistake...
there is precedent for such grants to the airlines in the 9/11 rescue
package, that was a time when airlines were routinely reorganizing under
the bankruptcy code. But after 20 years of unchecked consolidation, the
airlines — along with hotel operators and theme parks — have become
disciplined oligopolies characterized by high prices and profits. They
should get no better deal from the government than if they were seeking
capital from Warren Buffett and Berkshire Hathaway.
not all the government should demand. Until the government gets its
money back, the companies should be prevented from paying any executive
more than $2 million a year in salary, bonus and stock incentives, which
would be a comedown for the chief executives of nearly all of these
companies. They should also be prevented from paying shareholders any
dividends or buying back any shares of their stock. And rather than
laying off a large number of employees, they should be required whenever
possible to institute job-sharing programs so that all employees remain
on the payroll part-time until the crisis has passed. The details of
these deals should be posted on the Treasury website, along with an
audited accounting of when and how the money has been repaid.
More at the link.
Addendum: A Slate article decries bailing out the airline industry:
It has been a little more than two years since American Airlines CEO Doug Parker told investors,
in an instant business school cautionary tale, “I don’t think we’re
ever going to lose money again.” How time flies when a viral pandemic
ravages the earth...
Fact check: true. Airlines are coming off a remarkable 10-year run. Delta’s profits for
each of the past five years, back from 2019 to 2015, were $4.8 billion,
$3.9 billion, $3.2 billion, $4.2 billion, and $4.5 billion. Mergers
have given the big four (Delta, United, American, and Southwest) about
80 percent of the U.S. market. With oil prices low and the economy
humming along, it has been a great time to run an airline.
So now that the lean times are here—admittedly, a surprising turn of
events for us all—where did all that money go? Why are
multibillion-dollar airlines held to a budgeting standard that, if it
were adopted by a typical American household, would seem totally
irresponsible? And why, if they blew through all that cash, should we
help them now?...
Nobody wants to bail out executives and shareholders who spent years
lining their pockets as hundreds of thousands of owner-operated
restaurants go out of business. But letting the planes go down would put
nearly a million people out of work and deprive the country of nearly
all its long-distance travel infrastructure.