Families have a strong incentive to spend savings on stuff they need. So this is not really an argument against the idea that, like families, businesses ought to save money for an emergency.
One way to change shareholders is to partially nationalize bailed out companies, giving them shareholders with different incentives. Voila!
Sadly, this is spot on. Maybe something different this time is in order.
My objection is to a no strings attached bailout. If there was a bailout tied to say an ownership stake the I’d be all for that, as it worked out well for the auto bailout in 2008. And if an airline refuses that then no money, honey.
I agree that businesses should plan better for the future. My point was that banning buybacks does not make them plan better for the future. Buybacks are a symptom of the underlying problem.
I hope there are more politically realistic ways to accomplish the same goal.
I hope so, too, but hope is not a strategy. Condition bailouts on taking an equity stake, in voting equity. Some airlines will decline, so they’ll have to dig themselves out. Others will accept and become partially nationalized, and the taxpayers will mitigate some of the worst depredations of management. It will not be the end of the world as we know it.
The problem with your plan is that it is too susceptible to the political leanings of the current administration. Whenever the GOP is in power, airline management would tilt back towards short-termism. Or worse, the shares would simply be sold to cronies.
I think a regulatory approach would have a much better chance of long term success. It is much harder to change regulations than replace an individual.
And if you think regulatory capture is bad, imagine the length to which a company would lobby the government over who gets to sit on their own board.
This is true of every plan. It’s not like regulations are immutable, or that they can be enforced over the objections of the executive. We’re seeing that right now, aren’t we?
Of course I’m happy to have a much broader set of laws regulating the financial and other behavior of public and private for-profit organizations. I just don’t see that happening with the legislature we have or are likely to have; whereas conditioning bailouts on acceptance of government ownership stakes seems narrow enough to actually be achievable.
Even though the government has the option to buy stock in airlines as a condition of bailout, it is only buying nonvoting shares. Treasury’s aim seems to be to eventually sell the stock and turn a profit.
I think that in the current environment, getting government representation on the board of an airline is no more likely than passing new regulations.
That isn’t strings. Thats just saying the bailout is preventing more people from being unemployed. Which isn’t a benefit so much as the point of doing bailouts in the first place.
And the remainder being a loan is also not strings either, unless there is language about how those are handled. Its just an interest free loan.
If you think those strings are anywhere near sufficient to prevent the moral hazard behavior in the future, I have a bridge to sell you.
The strings are in the second and third paragraphs.
What makes you think it’s interest free?
So here are the strings, from the article
Airlines that accept the payroll support money are prohibited from major staffing or pay cuts through September. The airlines must also refrain from buying back shares or paying dividends through September 2021 and must agree to limits on executive pay until late March 2022.
In a statement, Sara Nelson, the president of the Association of Flight Attendants union, welcomed the payout as “an unprecedented accomplishment,” but criticized Mr. Mnuchin for delaying the aid and for asking that airlines repay a portion of the funds.
Which is trivial. ‘Don’t do these things for a year or two’ and even then the airline industry is complaining about having to pay it back in any portion.
Fuck em. Time to make them bleed.
Yeah, fuck unions. Make em bleed.
It is nearly interest-free. Far better financing terms than they would get from anyone else.
Yes that is the correct and proper take away.
This is his usual shtick.
Ok, so not “interest free” and not “no-strings attached”.
You are indignant over the union response. Sorry, but I’m not angry at them.
Contrarian for the sake of contrarian, yes I am aware.
Yes, of course you’re right, we could not possibly make a better deal to bail out airlines that pissed away profits for decades after being bailed out, and no one should suggest we could. Thanks for clearing all this up.
I literally said we should have more regulations a moment ago.
But, to borrow a page, there are regulations! It’s not a no-regulations environment. Just as there are strings. There is interest. Never mind that they’re toothless and inadequate.
When did I say there were no regulations?