
For Years WallStreet Spent More on Buybacks Than It Earned-Now They Want Bailout - baronmunchausen
https://thesoundingline.com/for-years-wall-street-spent-more-on-buybacks-and-dividends-than-it-actually-earned-now-they-want-a-taxpayer-bailout/
======
lordnacho
People seem to forget that when a business goes under, there's still something
left.

If an airline goes down, the planes are not immediately turned to dust. The
pilots and ground crew do not forget how to fly and maintain aircraft.

What happens at bankruptcy is that the claims on various assets are
reassigned. The planes will get sold to someone who reckons they know how to
run an airline, and the staff are likewise hired by new businesses.

This is worth keeping in mind when considering bailouts, because they tend to
keep things in the hands of the same people, sometimes even on not much worse
terms. And that's despite having steered the firm into the ground.

Don't forget there's value in this sort of reassignment. Assets and labor get
moved around in new configurations that might be better.

~~~
clairity
> "bailouts ... tend to keep things in the hands of the same people"

yes, this is the crux, a gross unfairness. common folks get harsh punishments,
while financiers and corporate executives get away with major thefts and get
to keep the fruits of their transgressions.

i'm all for harsher punishments for actions that lead to greater damages to
more lives (in this case, taking a little bit from lots of people). with
greater power must come even greater responsibility. tear up the corporate
veil.

and let's be vigorous in reassigning assets so as to support a functioning
market for better management.

~~~
rmrfstar
There is a middle path, where creditors are converted to shareholders and
shareholders are massively diluted.

Effective control of the company will be placed in the hands of people who re-
capitalize the company, and they will _definitely_ not let the old management
stick around.

Relative to bankruptcy, this has the benefit of allowing the company to
continue operating. It also deters future recklessness. Probably should have
happened in 2009, but didn't.

~~~
ace32229
It did happen in the UK. Banks that took bailouts traded shares for cash with
the Treasury (this is a layman's understanding at least). RBS notably became
84% publicly owned.

The real scandal is the government selling back the shares for less than they
paid for them (when RBS was on the brink of collapse).

~~~
joey_bob
Did the Treasury improve the bank operations for the better? It’s difficult to
imagine that they’d do the same jobs as private creditors, considering 1\. The
Treasury decision makers stake in the longer term performance of the banks is
low 2\. The Treasury has money as an institution of government, even in a
downturn, and has come to possess through political means. Private creditors
have some come to possess, and more importantly keep/remain solvent during a
downturn, the money they have to lend through means and methods more closely
related to the effective operations of the banks. Not that every private
creditor who ended up in control would do a better job, but on the whole firms
would be more effectively run in the long term. Especially when it comes to
avoiding risky leveraging situation as we’re in now. Not a britbong, so my
understanding of how everything works over there might be wrong

~~~
EdwardDiego
I respectfully disagree with point 1 - our Treasury, at least, which I imagine
works along similar lines to the HM Treasury, realises the important social
role healthy, and well-capitalised banks play.

------
lowdose
The least we can demand for these bailouts is that executive bonus of last
years will be returned. These companies don't deserve bailouts and should all
go into chapter 11.

We got all severely fucked last time. Boeing bought for $52 billion shares
back and now they want $60?

I hope Donald Trump is going to push his Tough guy act now. If he says no to
all the bailouts he is going to be remembered as the best president ever.

~~~
quickthrowman
Boeing unfortunately has to be bailed out, if we as a world want airplane as a
method of transportation. It’s only Boeing and Airbus, there are no others.

Management should be punished excessively as a warning to others, though I do
not expect them to be punished at all.

~~~
thaumasiotes
> Boeing unfortunately has to be bailed out, if we as a world want airplane as
> a method of transportation. It’s only Boeing and Airbus, there are no
> others.

Somehow I suspect that if the earth swallowed every employee of Boeing and
Airbus, and every plane ever produced by either, there would be more airplanes
and more airplane manufacturers soon enough.

~~~
tomatotomato37
Soon enough will still be around a decade - the development/tooling
development for your average sedan is already 5+ years, and that's building
off of previous experience and technology. I can't imagine what it would be
for creating a vehicle bigger than a doublewide that has to be hefted in the
air by 100k lbf engines from scratch

~~~
ageofwant
That's just silly. Bankrupting Boeing does not destroy 140 years of aviation
technology or make aeronautic engineers forget their training. Neither does it
erase the thousands of aircraft flying today. All those assets that Boeing has
inefficiently hoarded now becomes available for other, more competent
organisations and businesses.

------
mattmcknight
The generic reference of "Wall Street" in the title, but then not referring to
financial firms but transportation, manufacturing and other firms located
across the country seems to be a misuse of the term. Like many other things
the meaning drifts into "things I don't like".

~~~
theandrewbailey
I've always took "Wall Street" to mean all parties involved in the U.S.
financial market, publicly traded companies in particular.

~~~
whatshisface
I thought "Wall Street" meant financial firms and exchanges.

~~~
kevas
Those two words have an extremely fluid definition depending on who you talk
to.

~~~
smokelegend
Having worked on Wall Street, it essentially boils down to public/private
businesses and financial institutions/firms/banks/exchanges are considered
"Wall Street"...

Everyone one else is considered "Main Street"...

They have their own language and culture that exhorts greed and profit above
humanity and peace. ie. "Wolf of WallStreet"...

------
basch
Wouldn't it make the most sense then for the Bailout to be mostly for equity
at the current price? They have stock, they want cash, they sell the stock.
American Taxpayer holds onto the stock for a while, fixes the company, and
then sells for profit.

That of course is if the American Taxpayer wants to save that business.

~~~
asdfasgasdgasdg
I think this is the answer. If they want additional runway, they should
dilute. It's fine for the government to act as a buyer of last resort in the
event that it believes the market is responding irrationally. But it should
still get a steep discount. The government can sell the assets back into the
market when it believes the situation has stabilized.

~~~
erentz
Maybe don’t sell it but put the holdings into a big sovereign wealth fund? The
wealth fund can rebalance its holdings later, and can work as an
infrastructure bank or similar in future to support the country’s ongoing
development.

~~~
asdfasgasdgasdg
I don't know. Maybe. In general I'd prefer the government to hold debts than
assets, especially when debt is so cheap as it is today. I don't want to see
long-term crowding out of private investment. I think the investment system
generally works pretty OK, except for in extreme circumstances like this.

~~~
basch
If the government is going to play kingmaker and choose which business succeed
and fail, the profit for those moves should go back to the government, not
just the old shareholders.

>I don't want to see long-term crowding out of private investment.

This really wouldnt be that different than Blackrock and Vanguard and State
Street controlling like 10% of the market, except the government wouldnt be a
passive investor, they would exert some form of control over controlled
companies.

It almost seems like cheat mode, for the government to say "we wont let this
undervalued stock collapse, watch us save it. now its worth more (naturally
because we saved it.) profit."

~~~
asdfasgasdgasdg
> the profit for those moves should go back to the government, not just the
> old shareholders

If the government buys the assets at distressed prices and sells them at
ordinary prices, it would?

~~~
basch
Why sell if you fixed the company? Reap your reward? If youre confident their
value will continue to increase after your bailout.

~~~
asdfasgasdgasdg
If you wouldn't buy it you should probably sell it is my motto. The gov't
wouldn't pay retail for one of these companies, so they should probably sell
it at that price. But if they believe the long term fundamentals are good,
they might buy at a distressed price. That's my working theory anyway.

------
jcfrei
As usual Matt Levine has a pretty good take on this:
[https://www.bloomberg.com/opinion/articles/2020-03-17/the-
go...](https://www.bloomberg.com/opinion/articles/2020-03-17/the-good-times-
for-airlines-are-over)

~~~
sm0ss117
This gets to one of the fundamental limits of for profit operation of
businesses, different scales of firm have different incentives. For American
Airlines it made logical sense to do stock buybacks, but if the whole of
society was in control of American Airlines they would've prioritized service
and just paid to keep the operation on life support during the downturn.

~~~
jcranmer
Given the way that public transit is run, I think service would be the lowest
priority of an airline if it were run by society instead of capitalists.

~~~
sm0ss117
Try public transit in literally any country besides the US, the US is
currently terrible at public utilities for ideological reasons. Basically the
line of thinking is the government doesn't work, so let us in power to prove
it to you

------
mcguire
" _Prior to 1982, stock buybacks were considered market manipulation and were
illegal under SEC rules. Whether buybacks should be outright illegal or not,
they are a sign that a company thinks so little of its own products, services,
and market potential that its capital should be diverted from growth and
towards financial engineering._ "

That's very well put.

~~~
TrackerFF
Performance based compensation, were share value is the key measure/indicator
for performance, leads to this kind of culture.

There are legitimate reasons for stock buybacks, but when they're being used
for nothing more than short-term increases (in share prices), then that says
something about the system.

------
pjmorris
If an individual is expected to have a 3-6 month 'emergency fund', would it be
reasonable to expect the same of a corporation?

~~~
vsareto
That 3-6 month projection of operating expenses goes out the window once an
emergency happens. Business require many more things to sustain itself. The
recommendation is good for every day people because the actual cost to keep a
healthy human sustained is actually pretty cheap (food, water, shelter). A
business does not have human needs, it might need oil, metal, ores, chemicals,
etc. to do its job. If the prices of those things spike dramatically, your 3-6
month emergency fund could quickly turn into 1-3 months.

~~~
0xffff2
Have prices spiked dramatically? The only variable costs to an airline that I
can think of are fuel and parts. With worldwide travel demand evaporating, it
seems unlikely to me that either of those things are in short supply.

~~~
mardifoufs
You could take all of the profit (including buybacks) American made in the
last 6 years and that would still be only enough to fund 4 months of
operations. I'm against the bailouts because I think we shouldn't make some
investments riskless and subsidized , but to blame airlines for not having 6
months of reserve is just weird.

Buybacks are just a scapegoat when in reality an airline parking 14b$ in case
of a black swan event would have made absolutely no financial sense especially
since shareholders expect some reward for their risks. Imagine if they did
that and ended up with just 4 more months of operation at incredible losses.
Stocks would probably have plummeted to similar levels anyways and the
shareholders would've ended up with no returns at all.

The reality of the industry is that they had to keep prices super low to
satisfy consumers expecting always cheaper flight _and_ at the same time
satisfy shareholders who are aware of how cyclical the industry is and require
a big RoI to justify their risk. That requires a lot of leverage, high
efficiency and a low margin of error in their cashflow predictions.

~~~
thrwaway4000
>Buybacks are just a scapegoat when in reality an airline parking 14b$ in case
of a black swan event would have made absolutely no financial sense especially
since shareholders expect some reward for their risks. Imagine if they did
that and ended up with just 4 more months of operation at incredible losses.
Stocks would probably have plummeted to similar levels anyways and the
shareholders would've ended up with no returns at all.

If they are the only airliner left standing after four months I think the
outlook would be quite different. That only works if the government doesn't
bail out their competitors leaving them at a disadvantage.

~~~
mardifoufs
Maybe that will give you better chances of survival but think about it from an
airlines perspective. Is it rational to basically ignore shareholders to hold
reserves in case of a black swan that would cut your entire cashflow in the
hope of surviving a few months at best?

You're basically giving no return on investment to your shareholders, which
could have made use of the money in a more productive way than just parking it
in cash/equivalents, so that they get the privilege of seeing that money burnt
down at a phenomenal rate if that improbable worst case scenario happens? And
all of that while investing in a riskier industry?

Again, the investors took a risk and should not be bailed out. But the
buybacks and the lack of reserves make sense. You can't take a risk without
expectation of return only to get an extremely risky solution (that may or may
not save half of your equity value) to an improbable event.

------
formercoder
We need a way to include "black swan readiness" in corporate finance /
valuation. Historically, it's not something investors have cared about, so
corporations haven't done it.

~~~
RayMan1
It is 2 black swans this time, coronavirus and gas prices, but yeah, you are
right

~~~
dragontamer
Low gas prices would be good for airlines normally, because gas prices are a
large portion of their operating costs.

~~~
supdatecron
+1 to this. I think it was 4 years back, the oil prices dropped hard and the
airlines bought futures quantities in large supply to hedge for future needs.
It was a smart strategy

~~~
UncleEntity
...then they sold the futures when prices went back up to make a quick, tidy
profit.

Except Southwest -- which had the other airlines whining because they had an
"unfair advantage" with their locked-in lower prices.

~~~
rym_
Wow, do you have a source for that last part?

------
themagician
I don’t see a problem with the loans. They get paid back with interest. I see
no problem loaning the airlines money.

Grants, however, is something else entirely. If they are in so much trouble
they need a literal bailout then they should be nationalized. They can be re-
privatized later, after a decade of drama and red tape, but nationalization
should be the consequence that’s faced until bad actors can become
responsible.

~~~
michaelt
_> I see no problem loaning the airlines money._

A cynic would say if the airlines want market-rate loans, they can get them
from the market.

If the airlines want _subsidised_ loans, that's just a grant with a stick-on
moustache.

------
generalpass
This can be listed among the moral hazards of bailouts. These companies know
that when a downturn occurs, the government or the Fed will bail them out.

------
CHsurfer
Instead of a bailout, lets do a stock offering, with the government as the
purchaser. This way, the government can sell it's shares later on and get the
public's money back.

~~~
mdasen
This is close to how the TARP bailout (2008) worked and the government did get
the public's money back. From the banks, the Treasury got about a 21% profit
([https://www.thebalance.com/tarp-bailout-
program-3305895](https://www.thebalance.com/tarp-bailout-program-3305895))

One thing to remember is that the current share price of companies is based on
the value that buyers and sellers are agreeing to. There are many more people
who own shares and are unwilling to sell at the current price. When someone
talks about Boeing costing $51B, that doesn't take into consideration that
many people holding Boeing shares wouldn't sell at that price. That's the
price you can buy at if you're looking to buy 1 share. If you're looking to
buy all the shares (or a substantial portion), there probably aren't enough
sellers at that price.

The point of that is to note that companies will reject money that comes with
terms or pricing that is too bad. If you offered to give Boeing $60B in
exchange for 100% of the company, shareholders would reject it. Might as well
take your chances that the company will survive. Fire all employees, eliminate
all payroll for a year, and then try and re-start in 2021. If you ask too
much, investors have other options.

For the government, these other options are really bad for the economy - and
ultimately for government revenue. We don't want a situation like that if
there's a way to avoid it. If the government lends $10B to a company at 0%
interest and it means that the company keeps paying $5B per year in taxes
instead of filing for bankruptcy and paying $0 in taxes, that's still
important even though the government is getting no interest. One thing that
people don't realize is that the government basically already owns parts of
companies - the government gets a percentage of the profits. If those profits
go down, so does government revenue.

The TARP bailout was smart. Dividends to the government were between 5% and 9%
interest along with warrants for shares. Usually banks bought the warrants
back from the government rather than the government converting them into
shares and selling the shares, but it's essentially the same as what you're
talking about (without throwing the market into chaos as the government tries
to find buyers for hundreds of billions in shares).

Could the government have gotten more? Maybe. Berkshire Hathaway got a couple
deals at a slightly higher interest rate before the government started
stepping in. However, some banks wanted to reject the government's help
because it was expensive - they thought they had enough reserves to weather
the storm without help.

It's bad that the public thinks of these "bailouts" as free money. They aren't
free money. It makes a lot of sense for the government to be a lender in a
time of crisis since they're the only lender that can print money. If the
government lends with an appropriate eye to risk and sets reasonable interest
rates and secures those loans against the companies, it's a really good thing
for the economy.

Personally, I think that the government should also be working on the
individual side as well. In some ways, they are. Unemployment usually covers
instances where you're temporarily unemployed for things like this. I'd go
even further and say that the government should save money for rainy days and
give people grants (rather than loans) to keep everything normal. Bailout
loans wouldn't help a lot of people who wouldn't be able to pay back an 8%
loan easily. However, grants would go a long way to making sure that people
were taken care of.

If people start spending less money, it has cascading effect. Businesses
employ X number of people assuming a certain number of customers. If their
customers go down by 10%, they probably need 10% fewer employees. Then those
laid off employees start spending less causing other businesses to lay off
unneeded employees. Then those new laid off employees spend less causing...
and so on.

We want the country to go through this crisis as smoothly as possible. The
government should lend money to companies on terms that are good for the
government and good enough for companies that they'll take it. We don't want
companies thinking that they should take their chances or shut down for
extended periods of time beyond what is necessary for public health. We don't
want a huge drop off in government revenue if companies shut down more than is
necessary for public health.

~~~
jfengel
I largely agree with your thesis here, but I wanted to point out that the
taxpayer has a right to be cranky when executives receive large compensation
packages during bailouts.

These compensation packages are a small part of the bailout money, and it's
unfortunate that the people with the most knowledge of the company's position
and needs are the ones who put it there. They're not fungible and there's no
good way to say, "Fix this for zero salary before we fire you and start
looking to claw back some of your prior bonuses."

Most taxpayers do have little idea what's going on, but they're at least on
point about the injustice of that. Preventing that involves rather substantial
changes, and doing them after the last crisis and before the next one --
exactly when politicians, some voters, and business all start to get cranky
about burdensome regulation. Voters who said "I told you so" have some
justification and a right to be pissed.

------
vijay_nair
This was a compelling read on the buyback issue from earlier this year:
[https://hbr.org/2020/01/why-stock-buybacks-are-dangerous-
for...](https://hbr.org/2020/01/why-stock-buybacks-are-dangerous-for-the-
economy)

------
theandrewbailey
> The appropriate course of action for distressed companies that have engaged
> in share buybacks is that they should issue new shares to raise capital. If
> they can’t raise enough capital through share issuance, they should enter
> Chapter 11 bankruptcy and be restructured. If they cannot pull through a
> restructuring, they should go out of business. That’s how capitalism works.

If Uncle Sam stopped bailing out corporations, I wonder how differently they
would do business.

~~~
jetrink
It's telling that Spirit Airlines (among the least likely airlines to be
bailed out) has 3x the cash on hand as American Airlines.

~~~
stopyellingatme
Calls on Spirit, Puts on American ftw

------
cryptica
Through this unprecedented money printing, the Fed is devaluing not only the
dollar and all pegged fiat currencies but also all institutions which are
centered around it. It's not surprising then to see cryptocurrencies
outperforming stocks over the past couple of days.

The Fed's QE program back in 2008 was one of the main incentives which drove
the creation of Bitcoin and its subsequent adoption.

The Fed has a real problem now. People are beginning to realize that not
everyone has to work as hard to get the same amount of money, but the truth is
even worse than that; not everyone has to deliver the same amount of value to
society in order to get the same amount of money... The root of the problem is
the Fed and the mechanism by which this newly printed money enters the
economy. It's not a fair process.

The real intrinsic value behind fiat money is based solely on its ability to:

\- Deceive people into thinking that it has value backed by real economic
contributions.

\- Forcibly coherse people into accepting its nominal value even if some of
those people doubt it.

In other words, the intrinsic value of fiat is rooted in lies and
manipulation. Smoke and mirrors. Then it follows logically that every
institution which derive their value from it is also rooted in those same lies
and manipulations.

------
awinder
People want to get all pissy about this, and come up with all kinds of
contrived punishments for the offenders. I’ll grant that this is an awful
looking situation, but the most cost effective thing we could do is just learn
the damn lesson finally. Don’t give companies money in boom times, keep it
around for when a true unexpected disaster strikes. It literally requires no
work, no new bills, just a memory that lasts a little bit and some
introspection.

~~~
nicbou
The problem as I understand it is that those large companies hire thousands of
skilled workers, and are often the only source of employment in some regions.
If they go under, they bring a significant segment of the population with
them.

~~~
Nasrudith
And how is that different from thousands of small businesses who went under
with nary a peep? Of all of the others who put their eggs in one flimsy rotten
basket?

The way I see it too big to fail is always just special pleading furiously
rationalizing from being spoiled by status. There is no logical reason to give
them special treatment in spite of all of the stupid human hierarchy tricks. I
see it no different than demanding that a rich kid who killed someone driving
drunk be treated as "making a mistake" and anyone else as "proven an
irredemable waste of human life".

The only sane and just thing is equal treatment. Either everyone can get
bailouts or nobody can. The favor for a few approach doesn't work morally or
practically - just producing more spoiled nitwits who can and should be
replaced. There are no redeeming circumstances or grand sacrifices on their
part to justify special treatment.

------
TomMckenny
It's remarkable that the same parties who denounce any government
participation in markets will be using that government to decide which
companies to prop up. No doubt with lobbyist's advice.

The irony is there is a way to do this _and_ use a little market force: dump
the money on to consumers and let them rather than lobbyists decide what is
worth keeping afloat. I imagine in that case, cruise lines would be lower
priority.

------
grandinj
If they hadn't used stock buybacks, they would have issued dividends, and we
would be in the same situation.

~~~
WillPostForFood
Buybacks are worse because so much of it has not been financed with cash, but
cheap debt from issuing corporate bonds which are now at risk of default.

~~~
Ididntdothis
It’s weird that paying out dividends from borrowed money is not ok but doing
buybacks is.

~~~
grandinj
So then the real problem is the debt, most likely that US corporate debt is
given special tax treatment.

~~~
formercoder
Borrowing for tax purposes is sort of a perpetuated myth. Firms in zero tax
nations have debt, and firms in the US prior to corporate taxes had debt. Debt
is first a foremost a way of financing corporate activities.

------
moosey
Our leaders, both business and government, find themselves entrapped in
thinking about economics in terms of money. Soon we will be thinking about it
in terms of productivity: how do we make sure enough food is made and
distributed? How do we make sure we have enough medical supplies? We got away
without thinking about productive capacity, instead focusing on money.

We will lose more people to this disease than any war since WW2, based on the
statistics presented by people I trust. If we don't learn about wartime
economics and fast, then the number will be higher than it needs to be.

Unfortunately, like I said, the people in charge are trapped in a box,
believing that the systems that awarded them with great wealth must be the
best possible system. The side-effect of this will be more death than
necessary.

~~~
Nasrudith
There is a reason why money was used for eons - planned economies failed
horribly and the logistics of it likewise would utterly break. I accept that
it is theoretically possible for a better system to be come up with but in
practice we have been kept waiting. Even when there was a nominal alternative
in the USSR their "economics" were nonsense backed by ideology even by the
standards of questionable economics.

I would be interested in seeing theoretical and hypothetical alternative
system models but sadly what I have come across is more like "alternative" in
the alternative medicine sense. Sellinf questionable cures and railing against
"big pharma" rhetoric and attacks and little to none on rigorous models or
experimentalism to actually build anything.

------
Taniwha
Surely they can just start selling those shares? that's where their current
investments are.

Of course they likely wont get as much as they paid for them, but that's just
a poor investment decision on their part, not something the government should
bail out

------
gdubs
This crisis is exposing that our modern economy has a very thin layer of
resilience. I can't help but think of Climate Change as the next obvious thing
that we should have seen coming, but have not adequately taken seriously.

------
sturza
When companies do these buybacks, they deprive themselves of the liquidity
that might help them cope when sales and profits decline in an economic
downturn.

~~~
formercoder
That’s why banks have regulatory capital requirements, which have gone up
since ‘08. There are no such regs for non financial firms sadly.

------
simonblack
Buybacks signify that the company's management can't find any better use for
their money.

It signifies that the company sees no value in investing that money in
developing more business for the company in the future, but wants to spend
that important money on ephemeral share prices instead.

Companies that only plan for today instead of planning for their own greater
futures deserve to go under.

------
outside1234
In my opinion, we need to support them with a bailout because we can't not
have functioning airlines or banks.

But we should do by taking a stake in the company by having them issue stock.
This would punish shareholders (through dilution) while at the same time not
bankrupting the companies.

The stakes in the company would be tied to a timeframe and then sold by the
government within a time window.

~~~
joshstrange
If they want money they can always issue stock. Just like how they bought it
up to artificially inflate it in the first place.

~~~
outside1234
Good point - although I wonder - can they do that in the timeframe they need
the money on (I have no idea on how long it takes to issue stock)?

~~~
joshstrange
I'm fairly certain they can do it immediately if they want, the reason they
don't is it will cause their stock price to fall. Why spend your own money
when you can just wait for the government to bail you out?

------
rmrfstar
For those who want to understand buybacks, please read the first 7 pages of
[1].

This is the leverage ratchet effect in action.

[1] [https://www.gsb.stanford.edu/faculty-research/working-
papers...](https://www.gsb.stanford.edu/faculty-research/working-
papers/leverage-ratchet-effect)

------
lochuan
The Times 03/Jan/2009 Chancellor on brink of second bailout for banks

------
jb775
I want to say just let them fail, but that would make competition even lower
in already low-competition industries. If there are bailouts, it should be in
a form that spreads out the losses over time, so these companies can still
operate short-term but still get punished for the mis-management.

~~~
0xffff2
Failing doesn't mean that the airline disappears. All of the planes and
personnel don't just evaporate. Failing should mean replacing the current
equity holders with the current bondholders and continuing to operate.

~~~
copenja
Honest question here.

How would they continue to operate post-bankruptcy if they cannot pay their
employees? Or why would they?

~~~
0xffff2
To start with, they don't pay a lot of their (former) employees. Global travel
demand is going to take a long time to recover and a lot of furloughs are
going to happen across the industry in any case. Second, the new company
probably takes on some amount of new debt. If they can't find it in the
private market then there's nothing wrong with the government stepping in. The
two keys are that the government steps in _after_ the current equity holders
are wiped out _completely_ , and that the government support comes in the form
of loans, not grants.

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llcoolv
I found a book which very well explains the ideology behind what has been
happening over the last 11 years. It is called Capitalism 4.0 by Anatole
Kaletsky.

If Capitalism 4.0 is really capitalism I would leave to everyone's discretion.
It is about to end in an really really ugly way though.

P.S. The book distinguishes between american 'democratic capitalism' and
chinese state-run capitalism, but I personally don't see how the democratic
one based on money printing[1; the stock market growing 20% a year with GDP
only 2%] is any different or capitalism in any way.

1\. [https://www.businessinsider.com/qe-correlations-between-
stoc...](https://www.businessinsider.com/qe-correlations-between-stocks-and-
bonds-2013-11)

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zigzaggy
Trust me, I am the LAST person to advocate corporate socialism. But I think
this deserves an honest conversation. I really wonder what would happen if we
didn't save the airlines. What would happen if we let an entire industry
collapse under the weight of a natural disaster? (That's not a rhetorical
question, I'm honestly asking). Wouldn't that cause a domino effect crashing
through the whole system?

Don't get me wrong - I agree that it's terrible to have to continue bailing
out greedy corporations. But is this the time to rebuild the system? I'm not
so sure we can handle that on top of everything else going on.

We should attach all kinds of strings to this bailout, and then hold our
representatives responsible for fixing this mess. But I'm not sure letting the
whole thing collapse is the reasonable thing to do.

~~~
zimpenfish
> But is this the time to rebuild the system?

Thing is, though, whenever this conversation is relevant (ie when the airlines
need a bailout because of recession, whatever), you can always dodge the issue
by saying "but we have too much going on right now for this".

> We should attach all kinds of strings to this bailout

Definitely. But normally what happens is that corporate lawyers are much
smarter and more devious than government lawyers with the benefit of huge
leverage and these strings get waived, ignored, litigated for years, etc.

~~~
zigzaggy
>you can always dodge the issue by saying "but we have too much going on right
now for this".

I agree with this, which is why I'm looking for an honest conversation. Maybe
THIS IS THE TIME to push back. I fully support direct political action in
response to the bail outs, if "we the people" decide enough is enough. I just
think we should do so thoughtfully, not emotionally.

>these strings get waived, ignored, litigated for years, etc.

Unfortunately we also allow that by being swept up by the next big emotional
moment, and once we've been redirected to something else, the strings
magically disappear.

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sunstone
Boeing LOL.

------
cultus
This behavior is being systematically reinforced more and more with every
recession. Is there anyone outside of the mainstream of the two US parties who
thinks that modern capitalism is desirable or sustainable?

~~~
thinkmassive
government bailouts are not capitalism

~~~
LarryDarrell
True, but now you are in the No True Scotsman weeds.

Government bailouts have been happening regularly for most of our lifetimes.
We are incessantly told the US is a Capitalist country. So in the minds of the
average citizen, either bailouts are part of the capitalist system, or the US
has never been capitalist.

We're going to see "Modern Capitalism" and "Late Stage Capitalism" thrown
around with a lot more frequency as corporations exert their power and we
struggle to define what we are seeing.

If we had more consciousness and weren't so confused by 50 years of Cold War
brain rot we would just call our age Late Stage Plutocracy or something.

