Thinking out loud here.... and I kind of don’t want this as an equity holder....

But when I think about it, why not let equity holders bear the loss? We (collectively) were the ones who insisted on just-in-time logistics, debt-addled capital structures, returning free cash flow to investors via share buybacks, etc.

Why bail us out for our short sightedness? Why create the moral hazard by teaching us that these types of losses will be socialized?

Take an airline for example. Yeah, they’ll all go broke in a month. But the planes are still there. The gates and runways haven’t moved. They’ll just be owned by the bond holders while the equity holders get wiped out. But the components of the airline will be there still when the demand returns.

One thing for sure, we wouldn’t want all these defunct companies to end up in (say) Chinese hands after the process. But why should future taxpayers bail out this particular class of equity holders?

Yeah, I’ve considered the loss of ‘organizational capital’ as potentially being a damage worth throwing money at to prevent, in at least some cases. Though that might be abated just by some sort of income replacement from the bottom up rather than bailing out the corporation top down.



I’m reminded of this meme I saw. “Sure, they’ve been telling is to keep 6 months savings in the bank for emergencies, but when corporations go a month with no revenues they’re bankrupt”

Well, I said pretty much that on Twitter, in response to a Larry Summers post ...

response

quote:

The coming recession will be nasty and brutish, but it could be short if policy is directed at heading off ..

1. Massive waves of small business bankruptcies of otherwise solvent enterprises.

2. Massive waves of personal bankruptcies of otherwise financially sound households.

and,

quote:

2/ My guess is that the GOP will prefer to throw billions more at large corporations that have easy access to capital markets at historically low interest rates.

If these enterprises do have significant organizational capital, then they will happily borrow to get through the current downturn. If it's more cost-effective to declare bankruptcy and emerge from it less leveraged, then that's what they should do.

Now you are talking sense. The mega-corps and banks and wall street have already had their Christmas and they did nothing in the public interest with their windfalls. Screw them. Let them die.

We need the feds to print money and deposit it in the bank accounts of the average American so they can pay their bills, eat, and get medical care. We need the fed to declare strict lockdown, ramp up medical equipment manufacture, get hospitals everything they need. Guarantee public health care.

How do the greedy titans of industry think their businesses will survive when the majority are dead or starving, anyway?

This is a Marie Antoinette moment if there ever was one in America. I, for one, am sharpening my guillotine.

quote:

Originally posted by piqué:
Now you are talking sense.

For the record I think there’s still quite a bit of daylight between what you’re saying and what I’m saying. lol

quote:

Originally posted by jon-nyc:

quote:

Originally posted by piqué:
Now you are talking sense.

For the record I think there’s still quite a bit of daylight between what you’re saying and what I’m saying. lol

I am well aware. I have seen corporations as exploiters all my life, and that condition has reached a heretofore unimaginable pinnacle. Now we have selfish interests lobbying to get us all killed to save their bottom line. Capitalism as it is practiced in America is toxic--socially, morally, medically, politically, environmentally toxic. I and millions of people have had enough.

It worked great for you, personally, Jon. But it is utterly destroying this country. It's the Robber Barons all over again.

I could be persuaded otherwise when I see the heads of these companies *on their own initiative* taking care of the workers who made them rich. They got a bailout--and it didn't happen. They got a huge tax cut--most of them now pay *no* taxes--and it didn't happen.

Now it takes a pandemic before the arrogant are humbled and see that the system that Reagan reignited with his lies, and that has reached its pinnacle of greed with Trump's lies, the system that enriched a few and left most struggling, working three jobs, homeless because the damned banks foreclosed on them while the feds looked the other way--just does not work.

And they still would rather kill people than lose a dime.