The Big Corporations Will Profit

[tarcone]

And here we go again. The country and world stumbles and the big corporations get bailed out by the government. At least this time they are looking out for the little guy.

F the big corps. f them for making money off me and my taxes because of their poor business practices. F the government for continually bailing them out and giving them subsidies.

[tarcone]

And food prices have increased. Oh yes they have.

This is a bad time for the little guy.

[EagleFan]

Yep, always the regular person that gets screwed. Each party will blame the other and they will line their pockets in the process.

[Jas_lov]

I wouldn't give them one penny. They got millions from the Trump tax cuts. Where's that money? If they do get a bail out make it a loan with interest and stipulate no stock buy backs, no layoffs, no executive bonuses or dividends, every regular worker gets a raise and a minimum of $15 for all workers and the workers take over the board.

[tarcone]

Shoot, GM in our area just laid off around a thousand workers. And I bet they get government money on top of those savings.

Bastards.

[EagleFan]

Originally Posted by tarcone

Shoot, GM in our area just laid off around a thousand workers. And I bet they get government money on top of those savings.

Bastards.

Sadly this. That bailout for the big corporations will never make it below the executive level. It will make sure they execs get their bonuses.

[JPhillips]

[Lathum]

send the stimulus to Americans and they will spend the money on those things

[tarcone]

Too bad the government will send it to those corporations.

[Brian Swartz]

What happens if, for example, all the airlines, most of the restaurants, high % of other industries fail. It's clear that people won't necessarily spend money on those things just by having more money - they stopped spending on those things because of totally justifiable fear of the virus.

It's ok to say don't send the corporations any money if you're ok with those businesses failing, those types of services not being available to many for an extended period of time, the prolonging of a deep depression that would result, and the many who would die as a result as well. But we should be straightforward about that being the near-certain consequence. Personally I think some form of bailout is needed both for businesses and individuals.

[JPhillips]

I'm fine with no interest loans through the Fed with some portion of those, especially for small businesses(which are hard to define) being forgiven.

What would help a lot is a European approach where the government covers a big portion of wages for companies that keep people on the payroll. That would also benefit the business by having experienced employees ready when things open back up.

[RainMaker]

Originally Posted by Brian Swartz

What happens if, for example, all the airlines, most of the restaurants, high % of other industries fail. It's clear that people won't necessarily spend money on those things just by having more money - they stopped spending on those things because of totally justifiable fear of the virus.

It's ok to say don't send the corporations any money if you're ok with those businesses failing, those types of services not being available to many for an extended period of time, the prolonging of a deep depression that would result, and the many who would die as a result as well. But we should be straightforward about that being the near-certain consequence. Personally I think some form of bailout is needed both for businesses and individuals.

There are some industries that will need help and deserve it. But it's tough to feel sorry for companies that have done nothing with their free cash flow other than buyback stock.

There are other solutions than hand them a blank check. They can first just borrow from a bank or investment firm. Yes it'll hurt their balance sheet, but that's life. They can re-issue stocks that they bought back to raise capital. They can cut dividends completely. These are not helpless entities.

The problem with the current system is we've socialized losses. These companies know they can be reckless with their decisions and cash flow. If a downturn comes, they'll just get a check from the government.

Here is a list of companies that probably should have made better decisions.

This stock buyback data from @sarahmillerdc at @econliberties is really staggering. Buybacks at some banks have totaled two-thirds of *revenues* over the past five years. pic.twitter.com/JaZQN56Mt5

— Zach Carter (@zachdcarter) March 18, 2020

[RainMaker]

Originally Posted by JPhillips

I'm fine with no interest loans through the Fed with some portion of those, especially for small businesses(which are hard to define) being forgiven.

Why no interest loans to a large company that will eventually pay it back? Why should they not assume the risk?

Instead of loans, the money should be used to purchase new non-voting shares of stock in the company. When the company is profitable, it can buyback those shares from the US government at market value. If we're covering the bill, we get to reap the rewards when things turn around too.

[JPhillips]

I think that sounds better than it would work. Once the government owns shares of the business every decision would be framed as beneficial or detrimental to each specific business. Congress would spend their time arguing over the share price of Boeing and justifying ways to pump it up.

There are industries that will need help and are important, airlines, manufacturing, hotels. Now I wouldn't touch cruise ships or casinos.

[RainMaker]

Originally Posted by JPhillips

I think that sounds better than it would work. Once the government owns shares of the business every decision would be framed as beneficial or detrimental to each specific business. Congress would spend their time arguing over the share price of Boeing and justifying ways to pump it up.

There are industries that will need help and are important, airlines, manufacturing, hotels. Now I wouldn't touch cruise ships or casinos.

How is that different from a loan? We have to determine how much each business gets specifically. At least with buying non-voting shares, we know the price on the market. These people believe in the free market, so we can find out how many shares $50 billion gets us in Boeing on it.

[Brian Swartz]

Originally Posted by RainMaker

it's tough to feel sorry for companies that have done nothing with their free cash flow other than buyback stock.

There are other solutions than hand them a blank check. They can first just borrow from a bank or investment firm. Yes it'll hurt their balance sheet, but that's life. They can re-issue stocks that they bought back to raise capital. They can cut dividends completely. These are not helpless entities.

It's' not about feeling sorry for anybody. And some of the things you mention can be done for some corporations. Others cannot. I don't like the situation any more than anyone else, but the more businesses come out of this insolvent, the longer the recovery takes. It's worth remembering that banks don't have limitless resources either. The real nightmare scenario is what happens if - and if the global economy sinks enough for long enough this will happen, I have no idea how much it would take - we run out of capital to borrow in general.

[RainMaker]

A good way to access capital is to not spend all your free cash flow buying back stock. An unfortunate lesson those companies will have to learn.

[JPhillips]

Originally Posted by RainMaker

How is that different from a loan? We have to determine how much each business gets specifically. At least with buying non-voting shares, we know the price on the market. These people believe in the free market, so we can find out how many shares $50 billion gets us in Boeing on it.

It's a political nightmare that won't ever pass the Senate, too. Who wants to stand in the way of a recovery bill because the government isn't going to be a partial owner of Marriott? I generally think the Dems don't push for enough, but I'd rather see them work towards much more popular stances, like funding salaries more and bailing out corporations less.

[Galaril]

Yes I do agree with both sides of this. We have to do something to keep at least hotels and airlines afloat but with strong stipulations on the bailout. As for helping Americans that is also very important and as usual the stuff being put in these bills won’t make a difference for anyone. A simple example I can offer is my ex wife is a hairdresser and they closed her salon for at least two weeks. But it is probably a month and she may lose her job. I asked what will she do as she is just surviving now with her 6 years of alimony ended a few months ago. She said she had no idea how she was going to pay her rent. Even though she didn’t ask I have offered to help her for the next couple of months as I am in a better financial state. Most Americans don’t have anyone who can give them rent money so what are they going to do? Let alone if they get sick or lose there job. The federal government is a completely fucking failure and we are mostly on our own with just state and local gov to help us.

[Brian Swartz]

Point is, it's not the companies that will get hurt the most. It's the entry-level people that work with them, and to a degree everyone else in the economy. That's what a global, interconnected economy literally is. There's no such thing as punishing or rewarding just one part of it with no ripple effects. Ergo, the time to worry about buybacks and stuff isn't in a crisis. It's years before the crisis happens.

[RainMaker]

Originally Posted by JPhillips

It's a political nightmare that won't ever pass the Senate, too. Who wants to stand in the way of a recovery bill because the government isn't going to be a partial owner of Marriott? I generally think the Dems don't push for enough, but I'd rather see them work towards much more popular stances, like funding salaries more and bailing out corporations less.

I know it would never pass because this is a plutocracy. Just saying that it is how things should work. If we are providing capital to a company, we should either get an interest rate equivalent to the risk or a percent of ownership like any other investor would.

[RainMaker]

Originally Posted by Brian Swartz

Point is, it's not the companies that will get hurt the most. It's the entry-level people that work with them, and to a degree everyone else in the economy. That's what a global, interconnected economy literally is. There's no such thing as punishing or rewarding just one part of it with no ripple effects. Ergo, the time to worry about buybacks and stuff isn't in a crisis. It's years before the crisis happens.

Then give the money directly to those entry level people. Skip the middleman.

[Brian Swartz]

Then the business fails and they have nowhere to work, so the money doesn't do all that much good. I've advocated for doing that as well in my initial post ( I specifically said individuals) I'm just saying letting major sectors fail, regardless of what we think they did wrong, does way more harm than good.

[RainMaker]

Originally Posted by Brian Swartz

Then the business fails and they have nowhere to work, so the money doesn't do all that much good. I've advocated for doing that as well in my initial post ( I specifically said individuals) I'm just saying letting major sectors fail, regardless of what we think they did wrong, does way more harm than good.

Is there a finite amount of companies we can have in this world? You don't think new companies will spring up and fill demand?

If we're required to use taxpayer money to keep a sector alive, perhaps it should be nationalized and run by the government. Would appear the people running it now are not capable of doing so.

[Brian Swartz]

New companies absolutely will spring up and fill demand. Eventually. The question is whether the eventually is a price worth paying, when dealing with a recovery situation where investment capital will not be readily available and these things can't be replaced instantaneously - which means a longer recovery and more suffering. For everybody. I think nationalization them would be even worse, because as bad as corporate America is at many things, it doesn't hold a candle to the dysfunction of our federal government in most areas.

I hate debt spending in general. This is one of the few times when I think it's essential. YMMV.

[RainMaker]

Originally Posted by Brian Swartz

because as bad as corporate America is at many things, it doesn't hold a candle to the dysfunction of our federal government in most areas.

These companies are stating they'll be insolvent. You literally can't run them any worse than that.

[Brian Swartz]

The federal government is insolvent and has been for a long time. Five years ago, stated liabilities were over $20 trillion. Assets were $3 trillion. So yes, you literally can get worse than being insolvent during an economic downturn. That's been the standard operating practice for the US government for decades (though I don't know the numbers on exactly when things went upside-down officially), to hit rock bottom and keep on digging even in prosperous times.

[RainMaker]

Originally Posted by Brian Swartz

The federal government is insolvent and has been for a long time. Five years ago, stated liabilities were over $20 trillion. Assets were $3 trillion. So yes, you literally can get worse than being insolvent during an economic downturn. That's been the standard operating practice for the US government for decades (though I don't know the numbers on exactly when things went upside-down officially), to hit rock bottom and keep on digging even in prosperous times.

If we are insolvent (we aren't), we definitely shouldn't be giving away money.

[Brian Swartz]

You must have a different definition of the word insolvent then. I figure that concludes the productive portion of this discussion. Peace to you.

[RainMaker]

Why are you opposed to these companies re-issuing shares of stock to raise capital?

[Brian Swartz]

I'm not. I literally said so already.

[Arles]

IMO, if a company takes a bail out from the government there should be a moratorium for a number of years (say 5+) where that company can’t buy its own stock. Seems reasonable to me.

[Edward64]

Originally Posted by JPhillips

There are industries that will need help and are important, airlines, manufacturing, hotels. Now I wouldn't touch cruise ships or casinos.

I definitely think the government should help struggling industries now. And am good with stipulations like owning part of the company (with intent of selling its shares after a recovery), limiting stock buybacks, limiting executive bonuses etc.

• So more appropriate term IMO is "loans" vs "bailouts" as the expectation is companies that survive after this mess will pay the tax payers back.

I think (unsure) that I disagree on calling out cruise lines & casinos. I get they are part of the "wants" and not "needs" for our country (e.g. I classify airlines as a need) but they do employ a lot of people and US based casinos pay a lot of taxes. Would we toss in Disney, Universal etc. in this category also?

Where I struggle is not as much who, but how much and what priority. Someway I would want "amount of US taxes paid" to factor in the formula also. There are many companies "incorporated" in Ireland and like for tax avoidance but make their money in the US, those companies should be cut down to size and/or forced to re-incorporate in the US.

What's kinda left unsaid also is we will be adding 1T, 2T, 3T (who knows but very likely more than the GR) to our deficit in the short term. However, if we follow the GR model, this should be okay.

Access Denied

Still, one thing seems clear: taxpayers came out ahead. In total, $623 billion in taxpayer money was dispersed via bailouts and roughly $698 billion has come back via dividend revenue, interest, fees and asset sales.

[Edward64]

Originally Posted by Arles

IMO, if a company takes a bail out from the government there should be a moratorium for a number of years (say 5+) where that company can’t buy its own stock. Seems reasonable to me.

I think the criteria should be once the company substantially pays back the "loan".

[sterlingice]

Originally Posted by Edward64

I think the criteria should be once the company substantially pays back the "loan".

Plus 2 years or something like that. I don't want them to take on credit just to do a buyback to raise the price in the short term.



SI

[jbergey22]

Much more to it than PROFIT Tarcone.

These companies employ thousands of people who are being supported by the company right now instead of the government. They also need to keep their stock price up or that particular business will crash as people will start bailing on them.

The reason they can ask for bailouts is because of the leverage they have as they are a worthwhile asset to the economy.

They are just like any other business. They seek to take advantage of any situation they can to increase that bottom line.

I am sure the normal person that has no real need for the free money that the government intends to hand out will not send it back. Does that make a person greedy?

[JPhillips]

The WH is apparently pushing for a 500 billion fund that Mnuchin would have sole control of to bailout companies and there would be no transparency of spending for at least six months.

Sounds like a half a trillion dollar campaign bribe fund for the GOP.

[Brian Swartz]

Originally Posted by Arles

IMO, if a company takes a bail out from the government there should be a moratorium for a number of years (say 5+) where that company can’t buy its own stock.

I agree with things like this, requiring them to eventually pay back at least part of the loan, etc. All of those kinds of strings are perfect appropriate. They won't be done of course, but that's because politics.

[tarcone]

Originally Posted by jbergey22

Much more to it than PROFIT Tarcone.

These companies employ thousands of people who are being supported by the company right now instead of the government. They also need to keep their stock price up or that particular business will crash as people will start bailing on them.

The reason they can ask for bailouts is because of the leverage they have as they are a worthwhile asset to the economy.

They are just like any other business. They seek to take advantage of any situation they can to increase that bottom line.

I am sure the normal person that has no real need for the free money that the government intends to hand out will not send it back. Does that make a person greedy?

Airlines are handing out vouchers, not refunds. So they kept the customers money and will likely get a bailout. Double dipping.

[JPhillips]

Good Lord.

JUST IN: Fed's Bullard says U.S. unemployment rate may hit 30% in the second quarter

[PilotMan]

Originally Posted by JPhillips

Good Lord.

Tomorrow is going to be a bloodbath on the market.

[Edward64]

Futures is not too bad right now. Dow is down .82% or -157 pts.

[Galaril]

Originally Posted by Edward64

Futures is not too bad right now. Dow is down .82% or -157 pts.

Down 4.5% 780 points now

[RainMaker]

Originally Posted by Edward64

I think (unsure) that I disagree on calling out cruise lines & casinos. I get they are part of the "wants" and not "needs" for our country (e.g. I classify airlines as a need) but they do employ a lot of people and US based casinos pay a lot of taxes. Would we toss in Disney, Universal etc. in this category also?

Almost all the major cruise lines are registered outside the United States to avoid taxes and regulations. In fact, I believe only one major cruise ship flies an American flag.

If Carnival wants a bailout, they should contact the Bahamas and Panama for it. You don't get to pretend to be American when the bailouts roll around.

[Edward64]

Originally Posted by RainMaker

Almost all the major cruise lines are registered outside the United States to avoid taxes and regulations. In fact, I believe only one major cruise ship flies an American flag.

If Carnival wants a bailout, they should contact the Bahamas and Panama for it. You don't get to pretend to be American when the bailouts roll around.

I'm okay with this or the alternative as I suggested above:

Where I struggle is not as much who, but how much and what priority. Someway I would want "amount of US taxes paid" to factor in the formula also. There are many companies "incorporated" in Ireland and like for tax avoidance but make their money in the US, those companies should be cut down to size and/or forced to re-incorporate in the US.

[RainMaker]

I agree completely. This bailout is for American companies who employee Americans.

[jbergey22]

Originally Posted by tarcone

Airlines are handing out vouchers, not refunds. So they kept the customers money and will likely get a bailout. Double dipping.

Airlines are in some serious trouble. They are dependent of people actually traveling. They have loans to pay just like a smaller business. Large companies dont just sit around and stockpile money. They are re-investing and growing. The government always has the option the turn down the request. Will they? Probably not because it would cause more chaos if a bunch of airlines start going bankrupt.

[RainMaker]

Originally Posted by jbergey22

Airlines are in some serious trouble. They are dependent of people actually traveling. They have loans to pay just like a smaller business. Large companies dont just sit around and stockpile money. They are re-investing and growing. The government always has the option the turn down the request. Will they? Probably not because it would cause more chaos if a bunch of airlines start going bankrupt.

They didn't re-invest or grow. They used their money to buy back stock.

[jbergey22]

Originally Posted by RainMaker

They didn't re-invest or grow. They used their money to buy back stock.

Which company? I didnt name a specific company. They all do different things.

[PilotMan]

Originally Posted by RainMaker

They didn't re-invest or grow. They used their money to buy back stock.

This is simply wrong. So wrong.