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The damage from airlines going under (to other sectors of the economy) is greater than bailouts. It would set off a chain reaction, the airline industry support

The damage from airlines going under (to other sectors of the economy) is greater than bailouts. It would set off a chain reaction, the airline industry supports hotels (all the pilots and flight attendants stay at hotels) and tourism.

rednerrus 7y ago
Then the airlines should have to borrow the money. We can not afford to have industries that are too big to fail that are not nationalized.
- JMTQp8lwXL 7y ago
  When banks were bailed out, they paid back every penny. Holding the airline industry to the same standard would be equitable.
  - lovich 7y ago
    Did they payback every real penny or nominal penny? The paybacks weren't instantaneous and iirc they were given low interest loans.
    - spaced-out 7y ago
      This is not mentioned enough. I see people often state that the government made money on the TARP bailout, without taking into account inflation. As this Wikipedia article points out, with multiple citations, the government made a 0.6% annualized return on TARP, at a time when inflation was ~1.5%. https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program#Timeline_of_changes_to_the_TARP_program https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program#...
      - philwelch 7y ago
        I would suspect that the entire world economy not collapsing even further than it did would make up for that last 0.9%.
        spaced-out 7y ago
        There are 2nd order effects to consider, though. We've created a huge moral hazard in the financial markets by rewarding financially risky behavior and cementing the idea that if a company gets large enough it's not allowed to fail. Airlines spending every spare penny they had, and in some cases taking out debt, to gamble on the market and keeping nothing in the bank as a safety net is one such side-effect.
        philwelch 7y ago
        The fact that Lehman Brothers, Bear Sterns, and Washington Mutual no longer exist somewhat refutes that narrative.
        spaced-out 7y ago
        The people who ran those companies retired rich. Do you really think anyone going into business or finance looks at those people's careers as a cautionary tale? I know I'd trade my career for theirs in a heartbeat.
ericd 7y ago
Why? Their assets will be bought up in bankruptcy by another company that has deeper stores, and the planes will continue flying. Shareholders will be wiped out, but that’s expected if the company you invest in doesn’t save for a rainy day, and returned all its profit to you instead. Moral hazard is real.
- altoidaltoid 7y ago
  "Moral hazard is real" On my next tshirt
dlp211 7y ago
Consumers are supposed to have 3-6 months cash on hand in case of a downturn otherwise they are irresponsible. Big business just has to turn to the Government. Airliners made $28 Billion in profits last year and held onto none of it. When do we hold these companies accountable? For the record, I would bail these fuckers out, but it would come with some hefty costs. Loans at 12%, reserve requirements, no ability to carry forward losses, more leg room, emissions requirements, and no more share buy backs. You want to return money to investors, you do it through dividends.
- JMTQp8lwXL 7y ago
  It's not irresponsible of some consumers to not have three to six of months of savings. See my other comment on this thought: https://news.ycombinator.com/item?id=22588933 https://news.ycombinator.com/item?id=22588933
  - Retric 7y ago
    Conflating poverty with multi billion dollar companies is disingenuous. Leveraged stock buybacks are essentially a bet that the company will fail as it maximizes investor ROI to fail with as much debt as possible. That destabilizes the economy and should be flat out illegal due to moral hazard. It’s really simple. If companies can’t issue buybacks or dividends with outstanding debt or unfounded pension liabilities society is simply better off. Compromising to say cash on hand + 1/2 the value of physical property > debt is probably fine. Notice how neither of them would change the theoretical stock price of a company and thus invested returns, yet it’s a significant difference in reality.
    - Ntrails 7y ago
      > If companies can’t issue buybacks or dividends with outstanding debt or unfounded pension liabilities society is simply better off. This is just the sort of fun financial engineering challenge that will not end the way the rulemaker intended...
      - 7y ago
JohnJamesRambo 7y ago
So they use this knowledge to pump their own stock with 96% of their profits. See the horrible feedback loop here?
tclancy 7y ago
I assume the proof of this is securely stored with the papers proving new sports stadia are money winners for the communities.

rednerrus 7y ago

Then the airlines should have to borrow the money. We can not afford to have industries that are too big to fail that are not nationalized.

JMTQp8lwXL 7y ago
When banks were bailed out, they paid back every penny. Holding the airline industry to the same standard would be equitable.
- lovich 7y ago
  Did they payback every real penny or nominal penny? The paybacks weren't instantaneous and iirc they were given low interest loans.
  - spaced-out 7y ago
    This is not mentioned enough. I see people often state that the government made money on the TARP bailout, without taking into account inflation. As this Wikipedia article points out, with multiple citations, the government made a 0.6% annualized return on TARP, at a time when inflation was ~1.5%. https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program#Timeline_of_changes_to_the_TARP_program https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program#...
    - philwelch 7y ago
      I would suspect that the entire world economy not collapsing even further than it did would make up for that last 0.9%.
      - spaced-out 7y ago
        There are 2nd order effects to consider, though. We've created a huge moral hazard in the financial markets by rewarding financially risky behavior and cementing the idea that if a company gets large enough it's not allowed to fail. Airlines spending every spare penny they had, and in some cases taking out debt, to gamble on the market and keeping nothing in the bank as a safety net is one such side-effect.
        philwelch 7y ago
        The fact that Lehman Brothers, Bear Sterns, and Washington Mutual no longer exist somewhat refutes that narrative.
        spaced-out 7y ago
        The people who ran those companies retired rich. Do you really think anyone going into business or finance looks at those people's careers as a cautionary tale? I know I'd trade my career for theirs in a heartbeat.

ericd 7y ago

Why? Their assets will be bought up in bankruptcy by another company that has deeper stores, and the planes will continue flying. Shareholders will be wiped out, but that’s expected if the company you invest in doesn’t save for a rainy day, and returned all its profit to you instead. Moral hazard is real.

altoidaltoid 7y ago
"Moral hazard is real" On my next tshirt

dlp211 7y ago

Consumers are supposed to have 3-6 months cash on hand in case of a downturn otherwise they are irresponsible. Big business just has to turn to the Government. Airliners made $28 Billion in profits last year and held onto none of it. When do we hold these companies accountable? For the record, I would bail these fuckers out, but it would come with some hefty costs. Loans at 12%, reserve requirements, no ability to carry forward losses, more leg room, emissions requirements, and no more share buy backs. You want to return money to investors, you do it through dividends.

JMTQp8lwXL 7y ago
It's not irresponsible of some consumers to not have three to six of months of savings. See my other comment on this thought: https://news.ycombinator.com/item?id=22588933 https://news.ycombinator.com/item?id=22588933
- Retric 7y ago
  Conflating poverty with multi billion dollar companies is disingenuous. Leveraged stock buybacks are essentially a bet that the company will fail as it maximizes investor ROI to fail with as much debt as possible. That destabilizes the economy and should be flat out illegal due to moral hazard. It’s really simple. If companies can’t issue buybacks or dividends with outstanding debt or unfounded pension liabilities society is simply better off. Compromising to say cash on hand + 1/2 the value of physical property > debt is probably fine. Notice how neither of them would change the theoretical stock price of a company and thus invested returns, yet it’s a significant difference in reality.
  - Ntrails 7y ago
    > If companies can’t issue buybacks or dividends with outstanding debt or unfounded pension liabilities society is simply better off. This is just the sort of fun financial engineering challenge that will not end the way the rulemaker intended...
    - 7y ago

JohnJamesRambo 7y ago

So they use this knowledge to pump their own stock with 96% of their profits. See the horrible feedback loop here?

tclancy 7y ago

I assume the proof of this is securely stored with the papers proving new sports stadia are money winners for the communities.