Do you believe in "too big to fail?"

[scott in nashville]

Even with the stimulus bill, there will no doubt be companies that go under. Some of them are teetering on the edge anyway (retailers), and companies like Macy's furloughed 110,000 people yesterday. Do they deserve a buyout?

If no, how about the transportation industry? That feels more like infrastructure, but they've had their share of troubles for a long time too.

How about hotels or cruise lines?

 

[TigerEE91]

• Oil & Gas: Maybe/Probably
• Hotels: Absolutely not
• Cruise Lines: LOL Absolutely not
• Major Financial: Yes
• Major Food Producer: Yes
• Automobile Manufacturing: Maybe
• Aircraft Manufacturing: Yes
• Utilities: Yes
• Telecommunications: Yes

The one industry that everyone ignores when these discussions comes up is Cloud Computing. Talk about shutting the entire world down if that stumbles...

 

[clemsontyger04]

Even with the stimulus bill, there will no doubt be companies that go under. Some of them are teetering on the edge anyway (retailers), and companies like Macy's furloughed 110,000 people yesterday. Do they deserve a buyout?

If no, how about the transportation industry? That feels more like infrastructure, but they've had their share of troubles for a long time too.

How about hotels or cruise lines?

Have we decided the stock market is too big to fail as well? By tying people's retirements into it, we have decided that we have to prop it up. This of course coincides with industries needing bailouts like banks, hotels, airlines etc etc.

I realize that our main institutions are necessary for success of the country but by allowing people pieces of them we are just becoming even more reliant on them than previously too.

 

[GoodWord28]

The thing about the bailouts is that if they fail, we will all feel it on a large scale.

 

[CUFam98]

I don't look at this as a bailout. Its basically the government bridging the time that the time that the company can't work because the government said people aren't allowed to use your services.

Hotels...maybe. The stay in place orders and limiting travel have certainly impacted their business. A lot of them are actually small businesses.

Cruises...maybe not. They have been floating cesspools forever.


If they fail later due to an extended recession after the COVID crisis is over, the let them.

 

[clemsontyger04]

The thing about the bailouts is that if they fail, we will all feel it on a large scale.

We feel it even prior to a bailout.

 

[scott in nashville]

Have we decided the stock market is too big to fail as well? By tying people's retirements into it, we have decided that we have to prop it up. This of course coincides with industries needing bailouts like banks, hotels, airlines etc etc.

I realize that our main institutions are necessary for success of the country but by allowing people pieces of them we are just becoming even more reliant on them than previously too.

that’s actually an interesting perspective, unfortunately the alternative is government pension and I’d rather not do that thanks.

 

[clemsontyger04]

that’s actually an interesting perspective, unfortunately the alternative is government pension and I’d rather not do that thanks.

Isnt that just social security?

 

[TigerEE91]

Even with the stimulus bill, there will no doubt be companies that go under. Some of them are teetering on the edge anyway (retailers), and companies like Macy's furloughed 110,000 people yesterday. Do they deserve a buyout?

If no, how about the transportation industry? That feels more like infrastructure, but they've had their share of troubles for a long time too.

How about hotels or cruise lines?

Just a follow-up....actually Kohl's and The Gap announced furloughs yesterday too. I think total affected is something like 300,000+. The thing is though: people are still going to buy "retail" - it will just accelerate the inevitable shift to online retailing. I have been amused at the list of "essential" businesses put out by various states. Here is the list of businesses that the state of North Carolina announced yesterday that won't need to close:

• Businesses that meet social distancing requirements
• Businesses operating in CISA identified sectors
• Healthcare and public health operations
• Human services operations
• Essential infrastructure operations
• Essential government operations
• Stores that sell groceries and medicine
• Food, beverage production and agriculture
• Organizations that provide charitable and social services
• Religious entities
• Media
• Gas stations and businesses needed for transportation
• Financial and insurance institutions
• Home improvement, hardware and supplies
• Critical trades
• Mail, post, shipping, logistics, delivery, and pick-up services
• Educational institutions
• Laundry services
• Restaurants for consumption off-premises
• Supplies for COVID-19 essential businesses and operations
• Transportation
• Home-based care and services
• Residential facilities and shelters
• Professional services
• Manufacture, distribution, and supply chain for critical products and industries
• Defense and military contractors
• Hotels and motels
• Funeral services
• Additional COVID-19 essential retail business

Seems like putting out a list of what is not essential would have been much shorter.

 

[steele-tiger]

We need airlines, but a significant portion of the bailout allows the airlines to not lay-off anybody until 9/30.

In essence it is just providing groups of employees a much larger unemployment benefit paid by the government not available to everybody.

 

[The Orange Wave]

Even with the stimulus bill, there will no doubt be companies that go under. Some of them are teetering on the edge anyway (retailers), and companies like Macy's furloughed 110,000 people yesterday. Do they deserve a buyout?

If no, how about the transportation industry? That feels more like infrastructure, but they've had their share of troubles for a long time too.

How about hotels or cruise lines?

Too big to fail in the context of government forced bankruptcies is an interesting concept. Were companies like the retailers on there way out? Yes, but the market did not decide that now is when they should go. The government did based on its policies. Same with everything from the local pizza joint to the airlines. This is not the time to argue about free markets vs. corporate socialism. If you are for allowing all these companies to fail then you cannot at the same time argue for allowing the government to shut down the economy. None of this is an argument that says the current quarantine measures are right or wrong. But you have to take it in the context of what is going on right now.

 

[The Orange Wave]

We need airlines, but a significant portion of the bailout allows the airlines to not lay-off anybody until 9/30.

In essence it is just providing groups of employees a much larger unemployment benefit paid by the government not available to everybody.

How is it not available to everyone? The CARES Act pays an additional $600/wk in unemployment on top of state benefits. Or smaller companies can borrow and have loans be forgiven in the same way the airlines are doing it.

 

[steele-tiger]

How is it not available to everyone? The CARES Act pays an additional $600/wk in unemployment on top of state benefits. Or smaller companies can borrow and have loans be forgiven in the same way the airlines are doing it.

Pilots make a lot more than $600 a week.

CARES Act will not forgive any compensation for anybody that made more than $100,000 yearly in any prorated period in 2019. It is also only for 8 weeks not for 6 months.

Pilots in general make a lot more than that.

 

[Trading Tiger]

that’s actually an interesting perspective, unfortunately the alternative is government pension and I’d rather not do that thanks.

Surely that's not the only other option, 401k and government pension??

I'd like to see things go back to the way they were back in the 50's. And by that I mean doing away with the absurdly huge wage gap between the "normal workers" and upper management. There should be a gap, of course, but it doesn't need to be as large as it is.

And the other thing is I'd like to see more companies promote from within. That is something that has pretty much gone away.

 

[hopefultiger13]

Even with the stimulus bill, there will no doubt be companies that go under. Some of them are teetering on the edge anyway (retailers), and companies like Macy's furloughed 110,000 people yesterday. Do they deserve a buyout?

If no, how about the transportation industry? That feels more like infrastructure, but they've had their share of troubles for a long time too.

How about hotels or cruise lines?

It's amazing how many people ragging on Berie just a month or two ago are now full on socialists looking for that government tit (this is not an attack on you OP, just an observation on the point you bring up). My feeling is that if a company provides some service to the public or country that is not easily replaced (Airlines for instance), then we should consider bailing them out. Otherwise, **** them and let them go under. If there's demand for the product and a profit, another company can step right in and pick up the slack.. you know.. CAPITALISM.

Man, these companies. We have been on a 10+ year journey of growth as far as the economy goes under Trump/Obama. AND these companies got the biggest tax cut EVER just a few years ago. Now they have 2-3 weeks of hardship and they are ready to fold? REALLY? Does that not tell us something about how they are being run? Time to figuratively flush the shit and get a fresh start.

 

[The Orange Wave]

Pilots make a lot more than $600 a week.

CARES Act will not forgive any compensation for anybody that made more than $100,000 yearly in any prorated period in 2019. It is also only for 8 weeks not for 6 months.

Pilots in general make a lot more than that.

If this goes on longer than 8 weeks then the government will extend it. The government is trying to not make this look like a corporate bailout after the 08 experience. The benefits are directly tied to ensuring the money goes to workers. Will someone who make $200k last year take a hit? Sure, but they are in a better position to weather the storm than the lower paid employees.

 

[Clemblack]

No bailouts.

If a company is dying, let it die. If demand remains, then the company will be replaced by a better one. That is progress.

 

[scott in nashville]

It's amazing how many people ragging on Berie just a month or two ago are now full on socialists looking for that government tit (this is not an attack on you OP, just an observation on the point you bring up). My feeling is that if a company provides some service to the public or country that is not easily replaced (Airlines for instance), then we should consider bailing them out. Otherwise, **** them and let them go under. If there's demand for the product and a profit, another company can step right in and pick up the slack.. you know.. CAPITALISM.

Man, these companies. We have been on a 10+ year journey of growth as far as the economy goes under Trump/Obama. AND these companies got the biggest tax cut EVER just a few years ago. Now they have 2-3 weeks of hardship and they are ready to fold? REALLY? Does that not tell us something about how they are being run? Time to figuratively flush the shit and get a fresh start.

This is my feeling on the topic as well, curious as to what others thought. It's going to be painful for some of these retailers to close, but it's been coming.

Not that I'm in favor for more regulation, but it seems that companies should have to have some sort of cash reserves for bad times just like the rest of us.

 

[Florida Tiger]

Even with the stimulus bill, there will no doubt be companies that go under. Some of them are teetering on the edge anyway (retailers), and companies like Macy's furloughed 110,000 people yesterday. Do they deserve a buyout?

If no, how about the transportation industry? That feels more like infrastructure, but they've had their share of troubles for a long time too.

How about hotels or cruise lines?

We’re about to find out

 

[The Orange Wave]

It's amazing how many people ragging on Berie just a month or two ago are now full on socialists looking for that government tit (this is not an attack on you OP, just an observation on the point you bring up). My feeling is that if a company provides some service to the public or country that is not easily replaced (Airlines for instance), then we should consider bailing them out. Otherwise, **** them and let them go under. If there's demand for the product and a profit, another company can step right in and pick up the slack.. you know.. CAPITALISM.

Man, these companies. We have been on a 10+ year journey of growth as far as the economy goes under Trump/Obama. AND these companies got the biggest tax cut EVER just a few years ago. Now they have 2-3 weeks of hardship and they are ready to fold? REALLY? Does that not tell us something about how they are being run? Time to figuratively flush the shit and get a fresh start.

The only thing that is socialist is the government having the ability to force your company into bankruptcy. I just don't see how people can be for a government forced shut down then argue for letting the those impacted companies go bankrupt. If you support the quarantine measures then you should support the relief that is a consequence of it.

 

[Jwilliamsiii]

Surely that's not the only other option, 401k and government pension??

I'd like to see things go back to the way they were back in the 50's. And by that I mean doing away with the absurdly huge wage gap between the "normal workers" and upper management. There should be a gap, of course, but it doesn't need to be as large as it is.

And the other thing is I'd like to see more companies promote from within. That is something that has pretty much gone away.

I get it, but, just as a coach in football that is gifted and works his tail off to be successful, the market dictates their value. I wouldn't want to see a ceiling or salary cap on specific jobs. There is great motivation in striving to be the best. One of those motivations is getting paid like the best.

 

[kgwillison]

Here’s my thinking about cruise lines: if they operate under an American flag, I would help them through these times. If they operate under a Panamanian or other foreign country flag (in order to avoid American taxes), let those countries bail them out. Fat chance of that happening but if you want to avoid US taxes, that’s the price you pay.

 

[TigerEE91]

Here’s my thinking about cruise lines: if they operate under an American flag, I would help them through these times. If they operate under a Panamanian or other foreign country flag (in order to avoid American taxes), let those countries bail them out. Fat chance of that happening but if you want to avoid US taxes, that’s the price you pay.

Yeah that's the nail in their coffin as far as I'm concerned. Still, it's hard to really think about how what they're providing is anything but a purely nonessential, leisure activity. To me, it's like saying we should have a national bailout to rescue AMC Theaters and Six Flags of America.

Just watch though....Trump has some sort of weird Mar-O-Lago swampy special affinity for these cruise lines - money will be flowing to them, and they'll continue to avoid any U.S. taxes.

 

[fatpiggy]

No bailouts.

If a company is dying, let it die. If demand remains, then the company will be replaced by a better one. That is progress.

I see that viewpoint, but what if every company has to consistently plan for a random period of time, say 3 months, where they will have no revenue. The result, I would argue, will be that capital is inefficiently distributed.

Maybe there is a market for pandemic insurance, but the insurers won't touch it because it is too expensive to insure against.

Is it better to make every company plan for 3 months (longer?) of not a penny of revenue OR to have a central bank that serves as a re-insurer?

Arguing that companies that fail, when the rules were changed mid game, would be better off going through bankruptcy .... i just disagree.

 

[vatiger1]

I don't look at this as a bailout. Its basically the government bridging the time that the time that the company can't work because the government said people aren't allowed to use your services.

Hotels...maybe. The stay in place orders and limiting travel have certainly impacted their business. A lot of them are actually small businesses.

Cruises...maybe not. They have been floating cesspools forever.


If they fail later due to an extended recession after the COVID crisis is over, the let them.

I say No to the Cruise lines. They are not U.S Companies I believe.

 

[fatpiggy]

It's amazing how many people ragging on Berie just a month or two ago are now full on socialists looking for that government tit (this is not an attack on you OP, just an observation on the point you bring up). My feeling is that if a company provides some service to the public or country that is not easily replaced (Airlines for instance), then we should consider bailing them out. Otherwise, **** them and let them go under. If there's demand for the product and a profit, another company can step right in and pick up the slack.. you know.. CAPITALISM.

Man, these companies. We have been on a 10+ year journey of growth as far as the economy goes under Trump/Obama. AND these companies got the biggest tax cut EVER just a few years ago. Now they have 2-3 weeks of hardship and they are ready to fold? REALLY? Does that not tell us something about how they are being run? Time to figuratively flush the shit and get a fresh start.

Demanding that businesses shut down and then claiming they should be forced into bankruptcy is the equivalent of changing the rules in the middle of the game.

 

[cred0021]

Here’s my thinking about cruise lines: if they operate under an American flag, I would help them through these times. If they operate under a Panamanian or other foreign country flag (in order to avoid American taxes), let those countries bail them out. Fat chance of that happening but if you want to avoid US taxes, that’s the price you pay.

Exactly, the cruise lines are not US companies - no bailout...

https://www.nbcnews.com/business/business-news/most-cruise-lines-don-t-pay-taxes-u-s-just-n1172496

 

[scott in nashville]

Exactly, the cruise lines are not US companies - no bailout...

https://www.nbcnews.com/business/business-news/most-cruise-lines-don-t-pay-taxes-u-s-just-n1172496

I didn't have much sympathy for the cruise lines anyway, but these types of things seal the deal for me.

 

[clemsontyger04]

Yeah that's the nail in their coffin as far as I'm concerned. Still, it's hard to really think about how what they're providing is anything but a purely nonessential, leisure activity. To me, it's like saying we should have a national bailout to rescue AMC Theaters and Six Flags of America.

Just watch though....Trump has some sort of weird Mar-O-Lago swampy special affinity for these cruise lines - money will be flowing to them, and they'll continue to avoid any U.S. taxes.

One of Trumps buddies owns Carnival cruiselines

 

[steele-tiger]

It would take years for new airlines companies to replace the old airlines companies and airlines are a vital part of the economy that helps it function.

Cruise Lines can get screwed. They are a leisure activity and are in no way vital for the overall economy. The are not American companies and pay ~.8% tax and hire foreign workers for an overall pay of ~$2 an hour.

 

[FloridaTigerFan]

• Oil & Gas: Maybe/Probably
• Hotels: Absolutely not
• Cruise Lines: LOL Absolutely not
• Major Financial: Yes
• Major Food Producer: Yes
• Automobile Manufacturing: Maybe
• Aircraft Manufacturing: Yes
• Utilities: Yes
• Telecommunications: Yes

The one industry that everyone ignores when these discussions comes up is Cloud Computing. Talk about shutting the entire world down if that stumbles...

My wife works for Microsoft. I can tell you that cloud computing will not fail with the big players. She services the top 7 oil & gas companies here in the US.

All of these energy companies are looking to cut costs as they are bleeding, as you can imagine. However, MSFT feels they will grow Azure in this economic downturn bc more companies will look to outsource as they reduce costs and head counts.

With AI, IoT, and 5G growing there will be a major need for more and more storage. Amazon and MSFT will be fine.

 

[rjohn19]

No bail-outs for companies that used the last stimulus to buy back stock to boost share prices. All that money has now evaporated to absolutely no avail leaving only increased national debt to show for it

 

[cred0021]

With the hospital ships now in service in NY and CA - if I'm Carnival, I'd wonder if some money could be made turning some of their cruise liners into floating boutique hospitals. Retrofit to add more balcony rooms, use interior rooms for doctors offices and surgery centers, better food than normal hospitals. You could sail to other countries with cheaper medical fees and non-FDA approved surgeries/medicines...

 

[CUFam98]

Here’s my thinking about cruise lines: if they operate under an American flag, I would help them through these times. If they operate under a Panamanian or other foreign country flag (in order to avoid American taxes), let those countries bail them out. Fat chance of that happening but if you want to avoid US taxes, that’s the price you pay.

I say No to the Cruise lines. They are not U.S Companies I believe.

I'm 99% sure that Carnival, Disney, and Royal Caribbean are all US based companies. I think a number of the other major ones are also. Where they choose "flag" their ships is different than where they have their corporate headquarters/domiciled. I don't think its always a corporate tax reason, but the taxes they pay at the ports that those ships are likely to enter or the rules that they have to employ the staffs. Carnival flags its boats in several different countries (I looked that up 2 years ago in Mexico because I noticed that 2 Carnival ships in port had different flags)


All that being said, I'm still not sure I'd bail out the cruise industry. The majority of the workers certainly aren't American. And if they did a good job of screening before boarding, a cruise would be the safest place, but they don't. They just know they can't control any disease on the boat anyway. Plus, I don't think the government shut them down. If you could get to a port, you could technically still go.

 

[Baloney_Pony]

On the cruise ships, I have a somewhat educated opinion as I am in the industrial marine industry.

We could have told the cruise industry to re-flag their vessels to US flag and they could get some aid and future tax breaks. Why could this become useful? Well, we have to keep our merchant mariner numbers up for national security. This is why we have several maritime colleges around the country. But there are very limited opportunities on cargo vessels because the vast majority of cargo vessels on the ocean use the practice of "flags of convenience" to lower tax bills and to get the most lax regulations. This is why you see "Liberia" under the name of a bulk vessel. We do have US flagged vessels but they are only to carry cargo to our territories (PR, for example) and to take US aid cargo/exim bank cargo. Its crazy expensive to have a US flagged vessel for numerous reasons and therefore we can't compete unless we have special circumstances that are more or less subsidized.

But cruise ships are interesting. The US dominates the cruise industry. But all the ships are foreign flagged and have all foreign crews. We would create massive amounts of jobs if we forced them to have a US flag. All the crew on board would have to be Americans. They would have to use shipyards in the US for repairs. They would pay taxes. They would have to abide by much stricter environmental regulations. And before you call me a liberal or tree hugger, you should absolutely be concerned that cruise lines dump all their waste just offshore of the US with no penalty. Yes, your cruise would be more expensive. The fats would have to just deal with it.

Here is the best part, IMO. Our merchant mariner pool would be exponentially larger. This is huge for national security. If we have a pandemic or a war, we could call all those cruise ships home and use them however we saw fit. We could also direct all those merchant mariners to operate the military's fleet of "readiness vessels" which stay in a laid-up state until some shit happens in the world.

 

[Zothras]

The only thing that is socialist is the government having the ability to force your company into bankruptcy. I just don't see how people can be for a government forced shut down then argue for letting the those impacted companies go bankrupt. If you support the quarantine measures then you should support the relief that is a consequence of it.

And another angle to the discussion would be....if there's a "just let them die" approach across the board...period...no exceptions --- then who exactly is likely to sweep in and buy so much infrastructure and critical supply chain pieces? Much less buy them for steep discount when multiple companies are left rotting on their own perhaps is desperation and/or backbreaking debts from being shutdown for too long? How about China? They don't have any money just sitting around do they? No danger at all in certain segments of this nation being cornered by such a country, right?

Just a thought. One can't bail everyone out or even most everyone. It's why so many are going to eventually stop caring what the government says when they're told they can't conduct certain industry/business and going bankrupt is on them. Same with folks who lose their jobs. The longer and longer shutdowns lead to unemployment, bankruptcy, and lost hope --- the less IMO folks will care about the infection risks. They'll lean towards feeling they need to take care of themselves b/c nobody else will. It's the corner a lot of folks will get backed into the longer this pandemic goes on.

Wouldn't China just fall over themselves to buy some targeted businesses in the United States when restrictions are going to be the most pliable and questioned? Oil? Pharmaceuticals? Building materials? Food/grocery perhaps? How about maybe a media company? Movie studio? Communications/cell phone company? Doesn't have to be the biggest in an industry or even with some obvious Chinese name to it....just enough to get a sound foot into a door of interest. You know....to "help", right? Not some mom and pop sandwich shop, but something strategic a think tank perhaps had come up with in some wargame scenario. It's no coincidence China stops exporting face masks during times like this. What if they owned a tighter grip on other natural resources, medicines, computer parts, network gear, etc?

Just some additional perspectives. Too big to fail is an oversimplification IMHO. Who cares if you fail is as well IMHO.

 

[Casa_del_Tigre]

Even with the stimulus bill, there will no doubt be companies that go under. Some of them are teetering on the edge anyway (retailers), and companies like Macy's furloughed 110,000 people yesterday. Do they deserve a buyout?

If no, how about the transportation industry? That feels more like infrastructure, but they've had their share of troubles for a long time too.

How about hotels or cruise lines?

No. People in 2020 reject common sense business logic. If Delta goes bankrupt the bank doesn’t crush all their planes. If Hilton goes bankrupt the bank doesn’t demolish all the hotels.

Bankruptcy is a necessary way to reallocate resources. (What socialist want.) It is also a check on dangerous business practices.

Take Boeing. The coronavirus didn’t bankrupt them. Them buying stocks back at over 300 dollars a share bankrupted them. The reason they took such a dumb risk was due to government policy that promotes reckless unsound business decisions.

Every time you save a corporation you are encouraging unprofitable business. The “negatives” in a free market are actually good. The government removing these risk creates this state protected capitalist system we are in.

 

[Clemblack]

I see that viewpoint, but what if every company has to consistently plan for a random period of time, say 3 months, where they will have no revenue. The result, I would argue, will be that capital is inefficiently distributed.

Maybe there is a market for pandemic insurance, but the insurers won't touch it because it is too expensive to insure against.

Is it better to make every company plan for 3 months (longer?) of not a penny of revenue OR to have a central bank that serves as a re-insurer?

Arguing that companies that fail, when the rules were changed mid game, would be better off going through bankruptcy .... i just disagree.

Fair points. I was considering normal economic conditions, and the current conditions are definitely not normal.

 

[The Orange Wave]

No. People in 2020 reject common sense business logic. If Delta goes bankrupt the bank doesn’t crush all their planes. If Hilton goes bankrupt the bank doesn’t demolish all the hotels.

Bankruptcy is a necessary way to reallocate resources. (What socialist want.) It is also a check on dangerous business practices.

Take Boeing. The coronavirus didn’t bankrupt them. Them buying stocks back at over 300 dollars a share bankrupted them. The reason they took such a dumb risk was due to government policy that promotes reckless unsound business decisions.

Every time you save a corporation you are encouraging unprofitable business. The “negatives” in a free market are actually good. The government removing these risk creates this state protected capitalist system we are in.

Common business sense logic does not include a government forced shutdown. Boeing does not have to go bankrupt, they are advocating on behalf of their suppliers. Boeing could very easily look out for themselves and cut production and expenses to preserve capital, but it would mean hundreds of thousands of jobs in the supply chain would be lost. In any other circumstance I am for business not being bailed out but this is a unique circumstance that is out of the hand of businesses. Should we let all the local restaurants also go bankrupt over the next 2-3 months?

 

[hopefultiger13]

Demanding that businesses shut down and then claiming they should be forced into bankruptcy is the equivalent of changing the rules in the middle of the game.

One thing you can count on in a free market is that shiit happens. And sometimes that shiit is government. It's been true since the 1st strongman put a tax on whatever and it hasn't changed. Sometimes the government starts a war, businesses make bank or suffer. Sometimes government fuuck up the oil supply... ditto. The government may put environmental requirement on a product or choose any number of items that effect business. That's part of the world we live in and always has been. Good well run companies survive and find a way to profit. Bad ones don't. Free market working as intended.