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One lesson of the Covid-19 crisis is that there are some contingencies that nobody can realistically plan for. Whether you’re an airline or the New York City subway system, there’s no rainy-day fund big enough to get through months of revenue falling 90%. Sometimes, the only entity big enough to offer financial relief is the federal government, meaning the vagaries of politics and public sentiment all of sudden matter
a lot. Given this reality, companies and industries in the future should act more in the public interest — not just because it’s the right thing to do, but also to ensure that the goodwill will be there if and when the next crisis hits and financial relief is the difference between getting wiped out or not.
This dynamic is apparent in the debate around fiscal relief as Congress works through new rounds of legislation to shore up the economy. Democrats have prioritised the interests of working families, small businesses, hospitals and
increasingly state and local governments.
Republicans have focussed more narrowly on small business, with demand for the Paycheck Protection Program running so high that Republican Senate Majority Leader Mitch McConnell is looking to rush through an additional $250 billion in funding for it less than a week after the program was rolled out. Both parties have made both moral and pragmatic appeals to win support for their interests.
It’s been a different story for large corporations and investors. Democrats have made the case that companies that enriched their shareholders with stock buybacks in the good times shouldn’t come asking for fiscal relief now, or at least without strings attached. Even President Donald Trump says he dislikes share repurchases. Airlines in particular have come under scrutiny for some of their business practices during the past decade, with some arguing that in exchange for fiscal relief they should increase legroom in coach class.
Cruise lines were excluded from fiscal relief in part because they’re incorporated offshore in order to avoid paying US taxes. There’s also the argument that there’s nothing about the cruise industry that’s in the national interest — if people can’t sail around on boats going from destination to destination, life will go on.
Colony Capital founder and Chairman Tom Barrack has similarly blamed politics for congressional unwillingness to support asset-backed securities markets, which some accuse of enabling borrowers to overleverage.
There’s been a similar reluctance to bail out the nonbank lending industry. Neither is deemed systemically important, and there are other ways to provide liquidity to households and businesses, including through some of the programs Congress has already passed.
—Bloomberg