The Unz Review: An Alternative Media Selection
A Collection of Interesting, Important, and Controversial Perspectives Largely Excluded from the American Mainstream Media
 BlogviewTed Rall Archive
We Should Attach Strings to Corporate Bailouts
🔊 Listen RSS
Email This Page to Someone

 Remember My Information



=>

Bookmark Toggle AllToCAdd to LibraryRemove from Library • BShow CommentNext New CommentNext New ReplyRead More
ReplyAgree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments
AgreeDisagreeThanksLOLTroll
These buttons register your public Agreement, Disagreement, Thanks, LOL, or Troll with the selected comment. They are ONLY available to recent, frequent commenters who have saved their Name+Email using the 'Remember My Information' checkbox, and may also ONLY be used three times during any eight hour period.
Ignore Commenter Follow Commenter
Search Text Case Sensitive  Exact Words  Include Comments
List of Bookmarks

It’s the end of the world as we know it, and the banks and airlines feel fine because even in the midst of economic collapse, CEOs can sleep soundly at night, secure in the knowledge that the American taxpayer will bail them out. Again.

All they have to do is wait a respectable six to 12 months after the wire transfer clears to start giving themselves raises, renovating executive suites and buying back their stock.

That’s exactly what happened during and after the 2008-09 global economic crisis that followed the subprime mortgage meltdown. In 2008 alone, banks that received government bailouts spent $1.6 billion on executive salaries, bonuses and benefits including “cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management,” the Associated Press reported.

It has been two weeks since securities markets began a terrifying fall. Again, shamelessly acting under the assumption that we have completely forgotten what they did last time, corporate lobbying groups like Airlines for America are already asking for a $60 billion bailout. Some people in the media are asking the right questions. Steve Inskeep of NPR’s “Morning Edition” asked an AFA spokesman about the $10 to $15 billion in profits the airlines have been raking in annually. Didn’t they save any of that? According to Bloomberg, the idiots spent 96% of their cash to buy back their stock even as they accumulated a mountain of debt.

As a society, however, Americans ought to be asking a bigger question: Are we going to allow ourselves to be conned by these corporate jerks the way we have been in the past?

Clearly the United States economy cannot recover from the coronavirus shock without a viable transportation system. That includes airlines. Similarly, we can’t allow banks to fail. But we should not repeat the mistakes of the administrations of former Presidents George W. Bush and Barack Obama, who bailed out Wall Street at the expense of Main Street.

The federal government handed over $7 trillion interest-free, no strings attached, to the big banks in exchange for increasing liquidity in the credit markets — which they never did. It’s still too hard to get a mortgage or other type of loan. After 9/11, the feds gave $15 billion to the airline industry, which has since treated American Airline passengers like crap.

As with the bank bailout, much of the money was wasted and stolen.

As Bush said, fool me once, shame on — shame on you. Fool me — you can’t get fooled again. Or something like that.

ORDER IT NOW

I have little expectation that they will do this, but the Trump administration should target federal assistance toward ordinary citizens who are losing their jobs rather than corporations. Not only is this the right thing to do; you get twice the bang for your buck. If Obama had helped distressed and unemployed people pay their mortgages and rent, it would have kept them in their homes, propped up the underlying mortgages that tanked derivatives and, therefore, saved the banks indirectly. Reducing the number of evictions would have mitigated the real estate crash caused by the deterioration of vacant houses.

To their credit, White House officials seem to be considering direct payments to prop up the economy during the coronavirus crisis. There’s even talk of a $1,000-per-person-per-month guaranteed minimum income reminiscent of Andrew Yang’s proposal. Seems like a lot of money but not when you compare it to the defense budget. Maybe we can take a break from killing Muslims?

But I would be surprised if they were to do that. The political class is just not that into us.

Trump should offer distressed corporations two options in exchange for being rescued from the financial downturn caused by the coronavirus pandemic.

Option one: nationalization.

If we save your automobile company or your oil company or your airline, we own it. All your stock gets transferred to the property of the U.S. Treasury. If the bailout is partial, we take a proportionate share based on a discounted rate of your devalued stock prices. If you are a competent CEO, you get to stay, but obviously at a greatly reduced salary. Once you start to do better, we deserve your profits.

You’re welcome.

Option two: We get to tell you how to run your company.

I’m picking on banks and airlines because they are particularly mean to their customers, but you can extrapolate these principles to other lines of business.

If the U.S. taxpayer saves your bank, the U.S. taxpayer has the right to be treated like a human being when he or she does business with you. That means closing the gap between interest rates. It’s insane that banks pay out 0.5% interest on savings accounts while taking in 25% from credit cards. Before we dole out money to these institutions, they must promise in writing to do better.

Big bailouts come with big strings. Not one dime of taxpayer money should ever find its way into executive salaries. And no stock buybacks.

Think I’m being draconian? If so, think of all the times you have asked an institution like a bank or an airline to cut you a break. How many times did they say yes? They had all the power and used it to crush you. Thanks to the coronavirus, the tables are turned. We, the people, have the power over the money that these jerks need to survive.

Let’s leverage the hell out of it.

 
• Category: Economics • Tags: Coronavirus, Financial Bailout 
Hide 23 CommentsLeave a Comment
Commenters to Ignore...to FollowEndorsed Only
Trim Comments?
    []
  1. Couldn’t agree with you more, Ted. Certainly not draconian. Its a chance to start fixing the rot that began systematically in the 80’s.
    But, nationalisation is only the first step. Most Co’s that are nationalised will (would) eventually be returned to public ownership (tho, there maybe a good argument that the Gov hold onto 51%).
    Therefore, there needs to be major legislative change.
    Ban stock buybacks (they’re naked market manipulation). Severely restrict the derivatives market.
    This list could go one for ages. But the sad fact — can you imagine ANY R or D government doing anything that even discomforted the Oligarchy ?
    Perhaps if the whole legislative & executive branches died from the virus….? But even then, i doubt it

    • Replies: @obwandiyag
  2. Svevlad says:

    Tax stock buybacks severely

    Permanent nationalization of ALL strategic resources

    Hitlerian banking system where interest is a fixed sum instead of this calculated crap where you end up giving back nearly twice of what you took

    Ta-dah, all problems fixed

    • Replies: @Curmudgeon
    , @Pat Kittle
  3. A123 says:

    The best solutions are:

    — Bring back Glass-Stegall so retail banks, investment banks, and insurance are again separate.
    — Block anti-competitive mergers line TMobile-Sprint and the various airline oligarchies.

    Some firms will grow rather than merge to size. If Amazon needs a bailout, strings would be the right answer. However, large firms that simply outgrow their competitors seem to do OK. Amazon is going to make it through WUHAN-19 with no government bailout.

    PEACE 😷

    • Replies: @Curmudgeon
  4. TG says:

    Agreed, but in your dreams.

    I mean, these CEOs drive their companies into the ground, the taxpayers bail them out – and then you expect the taxpayers to get equity in exchange for their investments? What are you, a socialist? 🙂

    Here’s another kick in the head: none of the cruise ships fly American flags because they don’t want to deal with our regulations and labor laws. But they’ll get bailed out regardless.

    Not to worry, when Joe Biden is elected we’ll have a president who is a drooling moron corporate stooge, instead of a jackass billionaire reality TV star. So things are looking up.

  5. Maybe we can take a break from killing…

    How dare you! That would be sacrilegious and unAmerican!
    The smell of burning flesh is pleasing to our lord.

    they must promise in writing to do better.

    Corporate psychopaths are most trustworthy.
    Perhaps we can make them pinky swear.

  6. It´s not like the planes, pilots and mechanics will evaporate when you send the airlines into Chapter 11; what are they gonna do, take their toys and go home?
    I doubt many passengers would even notice …

    Do not bail out any publicly traded company, much less one engaged in buybacks.
    The share as such is an instrument of exploitation – replacing the entrepreneur with the CEO has laid waste to both responsible investment and workers´rights.
    The rentier caused this shit, let the rentier bleed.

    If there is excess money (fat chance), put it in public transport – and resegregate it.

    The Great One foresaw all this a century ago, so there´s no excuse.

    What kind of lefty are you?

  7. @Svevlad

    Hitlerian banking system where interest is a fixed sum instead of this calculated crap where you end up giving back nearly twice of what you took

    You mean Christian and Sharia law banking systems instead of Talmudic banking systems.

    • Agree: Catdomnj
  8. @A123

    You forgot the “financial WMD” – derivatives.
    Congress ignored Brooksley Born’s warnings that Greenspan’s “complex financial instruments” were illegal, with or without Glass-Stegall. When the smoke clears over this latest controlled demolition, it will be derivatives again as the explosive.

    • Agree: Adam Smith
    • Replies: @A123
  9. melpol says:

    Those who hold the purse strings of the nation will not give up their advantage. They will milk the treasury out of every dime. When it is out of cash they will return the nation to the people. It is the same as a guy dating a pretty woman until her looks are gone. She is then thrown to the poor and homely who are left with no other choice.

  10. As a libertarian, I seldom agree with Rall but on this I’m 100% in sync. The 2008 bailout was a perfect opportunity to break up the banks and end corruption, but of course it didn’t happen.

  11. Ronald Reagan was criticized by the Democrats and trade unions for opposing the Chrysler bailout as none of the government’s business. Where was he wrong?

    • Replies: @Craigart14
  12. A123 says:
    @Curmudgeon

    You forgot the “financial WMD” – derivatives.

    Actually I did not forget them.

    Interest Rate Insurance and Sovereign Default Insurance are insurance products. With Glass-Stegall restored, those insurance products would be regulated as insurance. The firms issuing that insurance would have to carry enough reserves to make good on those policies.

    Speculative unsecured ‘swaps’ trying to simulate insurance would not be possible.

    PEACE 😷

  13. @Reg Cæsar

    Chrysler paid back all its government loans. As did GM.

    • Replies: @Reg Cæsar
  14. nickels says:

    How about a string from the CEO and board members necks to a lamppost?

  15. @Craigart14

    Chrysler paid back all its government loans. As did GM.

    That makes it legitimate? Finland and Hungary paid off their WWII reparations, too. Britain, her WWI debt– in 2015. Does that make war all right?

    https://www.cnbc.com/2015/03/18/who-still-owes-what-for-the-two-world-wars.html

    https://www.cnbc.com/2015/03/09/uk-finally-finishes-paying-for-world-war-i.html

    • Replies: @Pat Kittle
  16. What would be best would be nationalizing the big corporations.

    Even if you are an insane free-market austerity hawk, you got to admit that nationalizing Amazon would be a great thing. Don’t you just hate that bald-headed fuck?

    https://ellenbrown.com/2020/03/21/socialism-at-its-finest-after-feds-bazooka-fails/

    • Replies: @Catdomnj
  17. @animalogic

    How bout banning shorting. And high-speed trading. Just throwing them in there.

  18. fenestol says:

    Strings, no. Ropes, yes. Liberal use of the gallows is a necessary part of nationalizing industries.

  19. Impose a “maximum wage” on any bailed out company. The “maximum” would be applied on a global basis to all operations. The “wages” used for calculation would include those wages paid to contractors or vendors. Thus, for example, if you contract out “landscaping” and the landscaper pays its workers the minimum wage–but all of your own bottom rung employees are paid double that–we used the landscapers wages as your “bottom” to do the math.

    Math is simple, the highest paid employee (or contractor) may earn no more than 23 times the wage paid to the lowest paid employee calculated on an hourly basis. This is also calculated globally. Thus your CEO in the US may earn only 23 times what you pay the worker in the factory in Vietnam who assembles your product.

  20. Catdomnj says:
    @obwandiyag

    Yeah a government run Amazon would be so efficient.

    • Replies: @obwandiyag
  21. @Svevlad

    …Hitlerian banking system…

    ??

    Nice try, shylock.

    Hitler’s popularity came in no small part from freeing Germans from these (((banksters))).

    A minor little detail we don’t learn in school.

  22. @Reg Cæsar

    Finland and Hungary paid off their WWII reparations, too. Britain, her WWI debt– in 2015

    One fine day (((those primarily responsible for WWI & WWII, as well as Cold War I & Cold War II))) will be assessed reparations.

    There’s going to be some serious sticker shock.
    🙂

  23. @Catdomnj

    You pathetic loser idiot winger braindead wanker. Even in the face of the truth all around us you persist in your pathetic brainwashed fantasies.

    Anyone who says “efficient” is a wanker. It is an idiot-word. It has no meaning except to show that the inunciator of it is trying to sound smart when he isn’t.

    A non-existent Amazon would be most, not efficient, but wonderful, fantastic, terrific, excellent. You cretin.

Current Commenter
says:

Leave a Reply -


 Remember My InformationWhy?
 Email Replies to my Comment
Submitted comments become the property of The Unz Review and may be republished elsewhere at the sole discretion of the latter
Subscribe to This Comment Thread via RSS Subscribe to All Ted Rall Comments via RSS