After Blowing $4.5 Trillion on Share Buybacks, Airlines, Boeing, Many Other Culprits Want Taxpayer & Fed Bailouts of their Shareholders

Chapter 11 bankruptcy that wipes out shareholders is the correct solution for collapsing share-buyback queens. US airlines already know this from experience. It works.

By Wolf Richter for WOLF STREET:

The Trump administration is putting together a rumored $850-billion stimulus package that will include taxpayer funded bailouts of Corporate America, according to leaks cited widely by the media. Trump in the press conference today singled out $50 billion in bailout funds for US airlines alone. A bailout of this type is designed to bail out shareholders and unsecured creditors. That’s all it is. The alternative would be a US chapter 11 bankruptcy procedure which would allow the company to operate, while it is being handed to the creditors, with shareholders getting wiped out.

So get this: The big four US airlines – Delta, United, American, and Southwest – whose stocks are now getting crushed because they may run out of cash in a few months, would be the primary recipients of that $50 billion bailout, well, after they wasted, blew, and incinerated willfully and recklessly together $43.7 billion in cash on share buybacks since 2012 for the sole purpose of enriching the very shareholders that will now be bailed out by the taxpayer (buyback data via YCHARTS):

Share buybacks were considered a form of market manipulation and were illegal under SEC rules until 1982, when the SEC issued Rule 10b-18 which provided corporations a “safe harbor” to buy back their own shares under certain conditions. Once corporations figured out that no one cared about those conditions, and that no one was auditing anything, share buybacks exploded. And they’ve have been hyped endlessly by Wall Street.

The S&P 500 companies, including those that are now asking for huge bailouts from taxpayers and from the Fed, have blown, wasted and incinerated together $4.5 trillion with a T in cash to buy back their own shares just since 2012:

And those $4.5 trillion in cash that was wasted, blown, and incinerated on share buybacks since 2012 for the sole purpose of enriching shareholders is now sorely missing from corporate balance sheets, where these share buybacks were often funded with debt.

And the record amount of corporate debt – “record” by any measure – that has piled up since 2012 has become the Fed’s number one concern as trigger of the next financial crisis. So here we are.

In 2018, even the SEC got briefly nervous about the ravenous share buybacks and what they did to corporate financial and operational health. “On too many occasions, companies doing buybacks have failed to make the long-term investments in innovation or their workforce that our economy so badly needs,” SEC Commissioner Jackson pointed out. And he fretted whether the existing rules “can protect investors, workers, and communities from the torrent of corporate trading dominating today’s markets.”

Obviously, they couldn’t, as we now see.

Enriching shareholders is the number one goal no matter what the risks. These shareholders are also the very corporate executives and board members that make the buyback decisions. And when it hits the fan, there is always the taxpayer or the Fed to bail out those shareholders, the thinking goes. But this type of thinking is heinous.

Boeing is also on the bailout docket. Today it called for “at least” a $60-billion bailout of the aerospace industry, where it is the biggest player. It alone wasted, blew, and incinerated $43 billion in cash since 2012 to manipulate up its own shares until its liquidity crisis forced it to stop the practice last year, and its shares have since collapsed (buyback data via YCHARTS):

If Boeing’s current liquidity crisis causes the company to run out of funds to pay its creditors, it needs to file for chapter 11 bankruptcy protection. Under the supervision of the Court, the company would be restructured, with creditors getting the company, and with shareholders likely getting wiped out.

Boeing would continue to operate throughout, and afterwards emerge as a stronger company with less debt, and hopefully an entirely new executive suite and board that are hostile to share buybacks and won’t give in to the heinous clamoring by Wall Street for them.

No one could foresee the arrival of the coronavirus and what it would do to US industry. I get that. But there is always some crisis in the future, and companies need to prepare for them to have the resources to deal with them.

A company that systematically and recklessly hollows out its balance sheet by converting cash and capital into share buybacks, often with borrowed money, to “distribute value to shareholders” or “unlock shareholder value” or whatever Wall Street BS is being hyped, has set itself up for failure at the next crisis. And that’s fine. But shareholders should pay for it since they benefited from those share buybacks – and not taxpayers or workers with dollar-paychecks. Shareholders should know that they won’t be bailed out by the government or the Fed, but zeroed out in bankruptcy court.

The eventual costs of enriching shareholders recklessly in a way that used to be illegal must not be inflicted on taxpayers via a government bailout; or on everyone earning income in dollars via a bailout from the Fed.

The solution has already been finely tuned in the US: Delta, United, American, and other airlines already went through chapter 11 bankruptcies. They work. The airlines continued to operate in a manner where passengers couldn’t tell the difference. The airlines were essentially turned over to creditors and restructured. When they emerged from bankruptcy, they issued new shares to new shareholders, and in most cases, the old shares became worthless. The new airlines emerged as stronger companies – until they started blowing it with their share buybacks.

Companies like Boeing, GE, any of the airlines, or any company that blew this now sorely needed cash on share buybacks must put the ultimate cost of those share buybacks on shareholders and unsecured creditors. Any bailouts, whether from the Fed or the government, should only be offered as Debtor in Possession (DIP) loans during a chapter 11 bankruptcy filing where shareholders get wiped out.

In other words, companies that buy back their owns shares must be permanently disqualified for bailouts, though they may qualify for a government-backed DIP loan in bankruptcy court if shareholders get wiped out. Because those proposed taxpayer and Fed bailouts of these share-buyback queens are just heinous.

The eeriness of the whole situation may leave permanent marks on consumers and business-decision makers. ReadLockdown in San Francisco, Silicon Valley & the East Bay: We’re to “Shelter in Place.” What it Means Now & Long Term

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  225 comments for “After Blowing $4.5 Trillion on Share Buybacks, Airlines, Boeing, Many Other Culprits Want Taxpayer & Fed Bailouts of their Shareholders

  1. Raymond Rogers says:

    Saw this with Chris Martenson (who has done a phenomenal job covering covid-19)

    Every share bought by the companies needs to be sold, before any consideration. Then only low cost loans should be given with strict guidelines on pay and compensation. These buybacks should be made illegal once again.

    • 2banana says:


      Dividend suspended

      No executive bonuses

      • Michael Fiorillo says:

        And public equity stakes in every company that receives a bailout, and criminal penalties if the money is not spent on maintaining employment and investment in the business.

    • Shiloh1 says:

      I just joined Greta’s church. Nothing better than to let Boeing and the airlines go to zero.

    • Trinacria says:

      not only make buy backs (known as “Treasury Stock”) illegal…it should be kept illegal.

      Also, wondering what will be the ramifications of pretty much eliminating Glass Steagall….what could eventually bubble up to the surface??? Any ideas ???

      Finally, this is what happens when debt is encouraged and savings is discouraged – makes the whole system vulnerable, especially after we pile on abuse after abuse after abuse.

      • Trinacria says:

        Oh, I almost forgot…what about serious jail time for the management, especially at Boeing as they seem to have covered up major flaws in the 737MAX.

        • Michael Fiorillo says:

          And a new Pecora Committee, to investigate how the malfeasance took place.

      • Tom says:

        Totally agree! Even if these companies go into bankruptcy, the new management teams will restart share buyback programs as soon as possible. We need to make buybacks illegal and permanently!

      • sierra7 says:

        It didn’t take a genius to know that the “jig was up” when Glass-Steagall was trashed. My friends thought I was “around the bend” when I fomented at the thoughtlessness of our political system to allow such a move.
        And, it is part and parcel of where we are today.
        “Unbridled capitalism” will eventually destroy society. Believe it.

    • 911Truther says:

      I am short AAL, GE and BA. I have read comments on this topic for days now, not just here, but also at Seeking Alpha and Zerohedge.

      I have yet to read one comment in favor of the bailouts.

      A government for the people and by the people? If you believe that, you are purely delusional.

      • MC01 says:

        To be honest those websites aren’t exactly an indication of the average voter. And even among those folks how many are taking the time to write to their Congressman or Senator to oppose the bailouts?
        It takes minutes to type a coherent email saying “I am completely opposed to bailouts”. Sure, it will be probably read by an underpaid intern and forgotten, but sometimes you get a reply and, much more critically, politicians will start to take notice the silent majority is not so silent anymore.

        Ah, and don’t listen to all the folks saying “it’s useless” or “it won’t change a thing: Simón Bolívar and Benito Juárez probably heard those phrases a billion times during that lifetime.

        • polecat says:

          I would venture to guess … well, more then guess, actually .. that those ‘vaunted’ and ‘esteemed’ Congress folk of which you speak have their deflector shields up to the max, via their staff, or just ignoring the plebian’s inquiries entirely ! At the most, one will receive a bland, ‘cover my ass’ letter stating zilch.
          These people are craven jackals. They represent Themselves, and themselves only .. almost to a one !

      • exiter says:

        1. Nationalize at least one of the banks and re=open it as a part of a public-banking initiative.
        2. Bring back the workable US Postal Service Bank that LBJ killed abt i966.
        3. Set an example of fairness/justice by cancelling the charters of a dozen medium and large companies bec they simply violated the public trust that was behind all corporation charters from the beginning of legal fiction called the CORPORATION, [a limited liability creation to enable persistence/continuity beyond an owner’s lifetime].
        4.Return to the workable tax system that limited personal profits ,
        4a. Force divestiture of existing wealth accumulations over $xxx Millions, by some societal-benefitting plan/
        with a cut-off date.
        5. Empanel 25 or so very intelligent* humans to propose ideas that benefit all citizens of this country.
        {*select these only by vetting the individuals and enumerating their talent only by experiences and past demonstrations that can be documented to show their integrity and abilities to produce valuable workable contributions to society, as opposed to academic papers and silver-tongue jawboning blather].

    • Ron says:

      Government Funds should only be used as equity in the form of a rights offering backstopped by the Feds. If Boeing needs, say, $50 billion then maybe 5 billion shares at $10 would have to be issued. Ch. 11 is too slow and woud only enrich “middlemen”
      Existing shareholders would be given the right to participate, but if not would be diluted to less than 10% of the new equity.
      These companies need equity not loan guarantees. The equity was wasted through share buybacks

      • Earl Smith says:

        Even before the 737 and corona mess Boeing had a negative net worth. Its’s book value per share is presently around MINUS $14 so why even give them (or their banks) anything.

        So let the government take over the military / space portions in a bankruptcy and let the banks have the remainder.

    • Jerry says:

      Campaign contributions prevent the return of share buy backs ever being made illegal again.They also prevent Medicare for all or a decent minimum wage.

    • mike says:

      The massive share buy backs are only a symptom: they raised share prices so officers’ stock options could be exercised at a profit and so share owners did not have to pay taxes on dividends but could get capital gain tax rates by small stock sales. Companies were overleveraged and many gave out huge dividends or made huge stock buy backs in the expectation of bailouts, because the ongoing financial collapse was predicted for years.

      The coming, gigantic social security shortfall means that we should require all recipients of bailouts to give in exchange convertible bonds that are convertible to 999% of outstanding shares to the social security administration, which can then convert the good companies’ bonds. The average American can then also benefit from these bailouts to companies owned by the rich, which is only fair because the Fed, bankster cartel has been funnelling money to their ultra-rich, bankster owners for decades.

      This would reverse the effects of our massive, national corruption and massively transfer wealth back to most Americans. Unless Bill Ackman’s recent advice for a 30 day, mandatory, nationwide lockdown immediately is followed, I predict huge numbers of or most businesses in the US will be bailed out or bankrupted.

    • mike says:

      Chapter 11 bankruptcy means that all creditors in a class, such as unsecured creditors, vote and approve a plan whereby they get ownership of all corporate shares of a company in exchange for their claims. They will be getting windfalls, because many very viable companies will be wiped clean of debt and can later get massive revenues, once the coronavirus goes away.

      All good, US companies will receive some kind of direct or indirect bail outs, e.g., Boeing– you will see. We should capture such windfalls for most Americans by requiring that government bailout good companies in exchange for convertible bonds worth 999% of outstanding shares instead– which can then be converted and held to pay the gigantic, seldom disclosed, US government liabilities of over 100 trillion, e.g., for medicare/medicaid andsocial security.

    • Mark Healy says:


  2. NARmageddon says:

    Preach it, Wolf!!

  3. HR01 says:

    Amen, brother!

  4. Concerned American says:

    Here’s a radical thought. The airlines and Boeing should only be given interest free loans from the government that must be paid in their entirety before allowing any recipient to perform a future share buyback!

    • Cas127 says:

      “before allowing any recipient to perform a future share buyback”

      I think a similar restriction was placed on all bailed out banks’ distributions of any kind post housing bubble.

      Plus they needed Gvt ok and passed stress tests.

      The precedent probably makes it more likely to be applied here too.

      Wolf’s fervor is prudent but it may be premature.

      The G is broke and knows it (ZIRP/NIRP act as a wealth tax to cover this up – for 20 yrs…) so I don’t think the normal Corp lobbying will work here.

      They’ll try but everyone has seen this (horror) movie too many times…

    • John says:

      Loans? Ef that. Does nobody recall the talk after all the bailouts in 08? They were preaching from here on out it would be BAILINS instead of bailouts. So make those who received all the benefits cough it up, or have an auction for the assets.
      Didnt donny levy tarrifs as punitive punishment on the europeans for subsidizing and bailing out airbus? He’s a frickin hyprocrite as well as a first class moron.

      • Jed says:

        “Didnt donny levy tarrifs as punitive punishment on the europeans for subsidizing and bailing out airbus? He’s a frickin hyprocrite as well as a first class moron.”

        Gee, he sure did as a result of the case that Mr Obama started against Airbus.

        Childish name calling shows who is the the moron.

  5. Leser says:

    You’re nailing it on the head Wolf and one couldn’t agree more. Those people are utterly shameless.

  6. MarkinSF says:

    And the shift to 401k retirement plans from pension plans insured that the little folks wouldn’t complain or even notice what was taking place…because it benefited them as well. But eventually those retirement funds end up in some CEO’s bank account while the US ends up in chapter 11.

    • 2banana says:

      Nearly every single pension plan, including public ones “backed” by the local taxpayers, are going bankrupt.

      Better to have the assets in your name and under your control. Even if not as generous as the “promise” of the pension.

      • Shiloh1 says:

        Absolutely. Any mattress better than most fiduciaries.

      • char says:

        Pension plans go broke because they assume that their returns are (way) to high. They simply collect to little pension contributions.

  7. AlbieOK says:

    SNAFU all right. FUBAR too.

  8. nick kelly says:

    ‘That will no be bailed out’ (end of second para) should be ‘now be bailed out’

    Meaning is clear of course but I suspect yr piece will be widely circulated.

    • two beers says:

      Both parties are equally beholden to the corporatocracy.

    • andy says:

      And after they spend more on this and next bailout than even asked or required you will vote for them again..

  9. Joe says:

    Need to put a lawsuit onto the New York Stock Exchange for allowing such blatant thievery of tax payers.

    • Cas127 says:

      There actually are many potential causes of action and parties that can sue, relating to the bust and any bailout.

      The Gvt will probably try to Bigfoot it to provide immunity to rescued parties, pointing to ntl emergency powers…but I only think that will work in a LTD number of cases.

      We’ll see…don’t give up hope…the internet will allow taxpayers to organize and fund suits.

      Another argument the G may make to shield…macro speaking, we’ll recoup via imposed repmt rq, new income taxes, new wealth taxes, etc.

  10. 2banana says:



    Enforcement of fraud and GAAP laws.

    Mark to market.

    Reinstate Glass-Steagall.

    5AM SWAT raids and banker perp walks.

    Clawbacks and audits.

    • Cas127 says:

      Re clawbacks – could require matching private dollar bail-in for every equity/loan dollar from taxpayers.

      A partial way to claw back previous distributions and prove commitment to future of company.

  11. Karl says:

    …. Many Other Culprits Want Taxpayer & Fed Bailouts of their Shareholders???


    No. They want the money for February bonuses. Remember the banks in 08? They had to distribute bonuses to the criminals that caused the problem in order to keep the talent.

    Let them file and send the thieves where they exist to jail. Who’s going to bail me out? No one did in 08 and no one is going to do it now. I have my own economy to consider which as far as I’m concerned is more important than corporations that have not been nearly as prudent as I’ve been in saving for events like this.

    Yes I’m bitter. Give me one reason not to be after all this trickledown economic BS.

    • Pedro says:

      Trump Campaign for 2020: Bail out America Again!

    • Cas127 says:

      20 years of ZIRP (the biggest bail out mechanism of all) has taught the ruling political class contempt for the endurance of suffering Fiat dollar holders.

      Only the start of a dollar exit will ever scare them into decency.

  12. High Up says:

    “So get this: The big four US airlines – Delta, United, American, and Southwest – whose stocks are now getting crushed because they may run out of cash in a few months, ”

    Southwest has billions in cash and very little debt.

    • Wolf Richter says:

      Yeah, it has $4 billion cash and it has $4 billion in short-term and long-term debt; plus it has $6.8 billion in “Misc current liabilities (beyond payroll and not payables); and it has $1.6 billion in “other liabilities.” So that amounts to quite a few obligations.

      All of the four airlines can blow through a couple of billion without toppling. And they’re in the process of doing that, and after a few months of this, that cash is gone.

      Southwest has about $20 billion a quarter in expenses. A big part is fuel, and that’s going the drop, and some other expenses are going to drop too. But not nearly fast enough to deal with the collapse in revenues. And that’s why they’re asking for a $50 billion bailout.

      • Cas127 says:


        This PT highlights something – even after you take out shareholders in BK, you still have to allocate residual worth across many, many levels/types of debt.

        Some mjr corps have upwards of 1000 distinct bonds/loans. Determining the allocation of creditors haircuts will be epic.

        This is another evil of 20 yrs ZIRP – encouraging the creation of the Devil’s wedding cake of infinitely tranched debt – all claiming some slice of collateral.

  13. Willy2 says:

    – Put all the executives that approved those buybacks in prison for a number of years, throw a class action law suite against them and make them re-pay their ill-gotten gains in wealth.

    • Cas127 says:

      Will that apply to dividends too?

      • Noelck says:

        @cas127 The biggest problems with buy backs vs dividends is buybacks affect corporate officer compensation more. To me buybacks are a short term outlook. It is a smokescreen for unlocking shareholder value. It is all about manipulating stock price and increasing officer compensation. Dividends returns a certain amount of profits to stock holders.

        As an owner of stocks I much prefer dividends to buybacks. When companies are borrowing money for stock buy backs I find it counter-intuitive. More than half of all stock buy backs have been financed recently. Most of these companies end up on my short list of stocks with bad balance sheets – Boeing, Carvana, Autozone, AT&T, GM, Kraft, American Airlines, Lowes, HLF etc.

  14. Resjudicata says:

    Totally agree. Thx for writing this!

    Problem is after candidate Trump called it a “big fat ugly bubble” President trump actively pumped the bubble and reckless behavior behind it. Now he’s leading the heist. On tv today I heard him say he plans to bailout Boeing (the company that not only jacked its balance sheet, but also its aircraft). Truth is the republicans are the bigger socialists, except they only believe in socialism for wall street and mega businesses; not Joe Sixpack. This is going to be the biggest transfer of of wealth to the rich in history!!!!

    • Cas127 says:

      You may be right, but the details aren’t out yet.

      Even the TBTF banks (which mostly skated) had some limits placed on later distributions…of course, mystery shareholders came in early and ZIRP has operated as a subsidy for 20 yrs…

      We’ll see…they will try but this is as high profile as it gets.

  15. Iamafan says:

    Where are we going to get the money for the bailouts? The Fed? Really?
    Who will invest at near zero?

    • By statute, the US Treasury issues Federal Reserve Notes to the Federal Reserve Agent from the district making the request. In exchange, suitable collateral is offered from the Federal Reserve Agent, which had been Treasury debt in the past, but likely will expand to other securities.

      These Federal Reserve Notes are ultimately used to buy US Treasury debt, regardless through what middleman they pass. Later, this same debt may be used as collateral to obtain more Federal Reserve Notes. Regardless of how perverse or silly this may seem, it is the foundation of our current monetary system.

      That is how Federal Reserve Notes come into existence, and there is effectively no limit to them.

      Reference 12 USC 411 and 412.

      • Iamafan says:

        What do we have, 1.8T of currency in circulation. They already tried to do more than that for March in QE and repo without the other four-letter programs.

  16. Wes says:

    You are exactly right Mr. Richter. Corporations should be using capital wisely and investing for the future to improve their products and services. Capitalism was created to reward the businesses that could deliver the best products or services at the best competitive price to the consumer. The current business practices of over leveraged corporations only prove that they have NO real vision for their own future. If they have no vision for their own products and services then they deserve to be liquidated.

    • HowNow says:

      ” Capitalism was created to reward the businesses that could deliver the best products or services at the best competitive price to the consumer.” And I just calculated that only 24 angels can stand on the head of a pin.

    • Fledermaus says:

      The buybacks will continue because doing things like developing new products, entering new markets or growing revenues takes time, hard work and at least some knowledge of your industry and the stock gains might not be seen for months or years.

      But buybacks are quick and easy, show instant results and require no specialized knowledge. A chimp could do it.

    • polecat says:

      Well Wes, some BIGBidness .. namely the FANGs and their various off-shoot fanglings, being in cahoots with Congrease … and by extention those 3-letter folks, have THEIR VISION of the ‘future’…with their so-called ‘products’ .. and ‘services’ … and it certainly ain’t ours. I hope that they all slink back into the muck from wence they came, never to emerge.

  17. Willy2 says:

    – I fear that both Democrats & Republicans will support this policy. Something similar happened in 2018 when the Trump administration doled out the taxcuts. Even the Democrats liked the taxcuts.
    – But the real loser is and will be Joe Sixpack.
    – I had a friend who thought that the US had become a banana-republic. For a while I thought he was nuts but when I read this kind of infuriating stuff then I more and more realize that he was right.

  18. A says:

    They better not get a dime of my taxpayer money.

    Billionaires get tax cuts in good times then bailouts of the back of the middle class in bad times. In 2008 the bankers all got taxpayer bailouts to keep their inflated paychecks while the middle class got evicted. If those cronies in Washington do it again I’ll blow my top!

    • Unamused says:

      Enhance your calm, and save your anger. You’re going to need it. The crisis has yet to be exploited politically. Massive corporate bailouts and preliminary assaults on major social programs are just part of the program. The winners and losers have been selected. The courts are already stacked. You know what’s coming. You’ve been watching it happen in real time.

      As nightfall does not come at once, neither does oppression. In both instances, there is a twilight when everything remains seemingly unchanged. And it is in such twilight that we all must be most aware of change in the air–however slight–lest we become unwitting victims of the darkness.

      – William O. Douglas

      I announce the prologue, and retire; after me better players will come.

      Post lux tenebras.

      • Shiloh1 says:

        “Courts are already stacked” – another reason Boeing had the foresight to move to Crook County IL.

      • Greg Hamilton says:

        There will be post lux tenebras but only for a select few. Perhaps you are in that group.

      • exiter says:

        You speak soothe. That’s some tight writing that sums the current scene.

        At least, Wm O Douglas did manage to preserve a big chunk of Alaska as public land. He fought the political tides.

    • Rob says:

      They won’t mind you blowing your top as you will be doing safely at home. Anyone one who may have been inclined to take a pitchfork to these shysters is effectively snookered. Impeccable timing on their part!

  19. Cruiser says:

    Leveraging of corporate balance sheets is merely part of the most extreme global financial bubble in our lives, perhaps even modern financial history, which has been forming for four decades facilitated by central bank accomodation. The current collapse was inevitable. COVID-19 was likely only a partial trigger the primary trigger being normalization attempts by the Fed. Stabilization of the pandemic will not lead to stabilization of financial market collapse.

    With governments already wildly balance sheet insolvent and central banks up against the zero bound on rates we should anticipate four decades of monetary distortion now being wrung from the system through unprecedented debasement of currencies leading to severe price inflation as confidence in global fiat currencies inevitably collapses.

    Tangible assets offer refuge, particularly liquid tangibles…namely precious metals.

  20. TSS says:

    The government has a model of how to handle this crisis … same as 2009 with AIG and GM … taxpayers fund these companies and become creditors/owners until the money is paid back or the government decides to sell their interest. Since the days of AIG, clawbacks are standard in executive contracts and these should be executed as a requirement for any government funding deal.

  21. Brown Mouse says:

    And thus the entire economy was backdoor bot by the Federal government. NO, NO, NO to bailouts of private companies. No to interest rate suppression, no to QE, no to Federal Reserve Bank existence. Don’t like the poison? HAVE SOME MORE POISON. This is insane.

  22. Joe says:

    When too big to fail, does fail…
    The individual company that should be thriving is now brought down by being bought by incompetent companies looking for only bonuses and profits.

  23. wkevinw says:

    Yes, orderly bankruptcy is a key (necessary?) component to modern free markets.

    After all the bailouts (called liquidity injections, QE, TARP, etc.), for every entity from the biggest mega-cap firms to the most humble consumer/household thinks it’s the right way to plan. (happening since the ’80’s in various forms).

    It’s the cause of the distress: no capitalization/cash= bailouts needed.

    I saw the former FEMA director pleading that people should have a 6 months emergency fund and insurance. I would say the same goes for businesses.

    Thanks Wolf.

  24. R2D2 says:

    So… how to fix it?

    1. Ban share-buybacks.
    2. Set maximum-dividend thresholds.
    3. Set minimum-savings thresholds.

    For example, max 10% dividend, and min 30% of annual revenue stored as cash.

    • wkevinw says:

      R2D2- no bans, maximums, or minimums required-IF bankruptcy is enforced.

      People respond to incentives. (Note- see how the FDIC handles bad medium sized banks. They bankrupt them, back the depositors, keep the bank in business, sell to another bank, and kick out the management.)

      If you ban things and set minimum, max, etc., they’ll find a way around it.

      Bankrupt them.

      • IdahoPotato says:

        India just did this to privately owned YES Bank. My deposits were frozen for two weeks.

        They threw out the old management with a sudden announcement. They are being tried in courts for embezzlement and money laundering and the old shareholders got wiped out. Now there are a new set of government appointed managers and a crop of new shareholders who got assigned shares for injecting new capital and everything is back to normal. In less than 14 days.

  25. curiouscat says:

    Capitalism without bankruptcy is like Christianity without hell.

  26. Jeff Relf says:

    Pain has been outlawed.

    Let’s not offend anyone,
    Boeing executives probably feel they deserve
    their 43 billion $ participation trophies.

    Only a war could wake us from our slumber.

  27. Thomas Roberts says:

    Well it seems pretty obvious, who the Trump administration cares most about. I wonder how long this bailout will last these companies, until they need more money? Maybe not even to the end of the year, I bet these same companies will be asking for more bailout money by the end of next year.

  28. Paul says:

    Maybe this a dumb question, but can the companies reissue the stock after a buyback to generate liquidity? Or do they always cancel the shares when they buyback and cannot reissue?

    • Wolf Richter says:

      Sure, all companies can issue stock to raise capital. But this dilutes existing shareholders and when when the stock is already crashing and the airline is trying to raise money by issuing shares, the stock will likely plunge further.

      If AAL for example wants to raise $2 billion, when its market cap is now $6 billion, it would dilute existing share holders by one-third. So share would plunge by a bunch.

      Tesla is one of the exceptions — its shareholders generally don’t mind too much. But they got screwed at the last share sales, when Tesla raised over $2 billion this year at a price of $767. Now Tesla is at $430. Those people that bought those new shares are down 44%.

      • Ron says:

        Wolf, But that is the point. Shareholders who benefitted from dividends & stock buybacks should be offered the chance through a rights offering to participate in a new equity raise backstopped by the Feds. they can maintain their interest by participating in the offering or not. If not, they can sell their rights or suffer extreme dilution. this happens in the UK all the time. Equity capital has been wasted. Its time to raise new.

  29. oliverks says:

    But if the government does bail out Delta, Warren Buffet wouldn’t look like an investment genius. He needs to suck on the government teat just like Elon.

    • oliverks says:

      Sorry I meant doesn’t bailout not does bailout

    • Ron says:

      No. Through an equity rights offering Warren has to decide if he wants to commit fresh equity to Delta. If not someone else will & his interest will be diluted accordingly

    • Steve says:

      Warren Buffet is no genius. Just another rent seeker. I used to think he was someone to be admired. Not so much anymore. Just another hack.

      • wkevinw says:

        Basically correct. “Oligarchs” and “large scale rent seekers” are basically the same thing. These folks also choose a certain political persuasion to deflect scrutiny. It’s easy to see.

        Utilities and other “natural monopolies” (like airlines!), obviously need some significant interaction with regulators/the government.

        Now, everybody wants the government to be their “partner” for bailout purposes.

  30. Humble Pie says:

    when there is no down-side to corporate greed and stupidity what do you expect the sociopaths to do? leave a dime on the table? no way. that would be for fools like, er, you and i.

    over the past 20+ years, greed fueled by debt has been the ultimate get rich quick scheme. from corporations to mortgages, the more you borrow the richer you get. and the sky is the limit.

    i can only pray that reality and sound economics will eventually triumph over stupidity and greed–backed by the corrupt politicians and fed.

    so as you might guess i am delighted that the virus has changed the equation somewhat. . .a good kick to nuts isn’t always a bad thing.

  31. Simon Morahan says:

    Is it true that the main sellers of these shares subject to the borrowed money buybacks were the corporate executives who were paid partly with complimentary and/or cheap shares?

  32. Rcohn says:

    Corporate buybacks have been the ONLY NET buyers of stocks for years.
    Would stock prices have gone to the irrational levels seen last month without buybacks. Obviously NOT
    But buybacks are hardly the only evil in the economy.
    Corporations have shipped millions of jobs overseas to squeeze more profit . This would not have happened without the overt approval of Congress and previous Presidents?
    Why does the IRS allow companies to use non gaap accounting when it benefits them.
    And finally the ultimate incarnate of evil. The FED .Flooding markets with money at rates below the rate of inflation. Below inflation interest rates penalize savers and encourage speculative activities. I can go on on but the underlying basis of my complaints is that the government and the FED is the cause of all evil and will destroy the country within 25 years

    • Cas127 says:


      Thanks for balancing out some of the selective outrage…there is more than enough blame to go around…and there has been for 20 years – bad corporate practices and bad gvt policies have launched us into crisis after crisis, counterproductive response after counterproductive response.

      After to paper it all over, and preserve the power of our incompetent and corrupt elites, the Fed has printed and printed – expropriating between 75 pct and now 100 pct of the earning power of every dollar saved on planet Earth – an unvoted tax in all but name.

      For two decades, the cautious and responsible have been expropriated to save assholes in business and gvt.

    • backwardsevolution says:

      Great post, Rcohn. Whenever people complain about the so-called “free market”, I just shake my head in disbelief. Markets are not free. They’re engineered, manufactured, massaged, gamed, manipulated and defrauded.

      More like “fleece” markets.

      • wkevinw says:

        Markets always have regulation. When entities can succeed or fail (go bankrupt) – there’s a lot of freedom.

        The current situation of financialization of everything (fiddling with debt), is rearing its ugly head.

        The Fed?- as usual, they are part of the problem for sure, but have taken some actions because the governments are dysfunctional.

        Multi-cause dysfunction. When everybody is responsible nobody is responsible. That’s the natural process of large bureaucracies (=governments).

    • MD says:

      “Below inflation interest rates penalize savers and encourage speculative activities.”

      Well the whole nub of the economic system we have lived under for over 40 years is that it’s ‘survival of the fittest’ and if you haven’t got those ‘animal spirits’ (ie you’re a normal rational human being as opposed to a psycho-/sociopath) to enable you to speculate your way to riches, then you deserve to fall by the wayside.

      And there’ll certainly be no safety net if you’re a ‘loser’ because ‘God helps those who help themselves’ [unless you’re mega-rich then there’ll be plenty of state funds to help you out ‘cos we’ll be lost with your trickle-down munificence].

  33. Suzie Alcatrez says:

    I’m pretty sure AA stockholders were not wiped out.

    While the stock did get down to $.22/share, each share was swapped out for .744 shares in AAL.

    AAL is currently at $15.58. If you bought at $0.22 you are still doing great!!!

    • wkevinw says:

      Suzie Alcatrez- true that in this case the shareholders ended up with only about a 90% loss.

      The stock currently is showing essentially the same price it had ~15+ years ago. Yes, if you picked the bottom and timed the prices, you did well. However the stockholders got hit very hard during the bankruptcy.

    • Wolf Richter says:

      Yeah, they got something that turned out to be a relatively sweet deal. Delta’s old shares got cancelled and holders got nothing, which is the typical procedure.

      • Kevin says:

        Wolf ,I think you just wrote the Magna Carta of Capitalism. It needs to be shown to every member of Congress and the President.

  34. Ghassan says:

    The bailout is underway regardless of what you and I think. The richer a company or a person is the bigger their share of the bailout will be.

    • Paulo says:

      Of course it is going to happen. And who gets what depends on their political contributions and club memberships.

      • Ghassan says:

        On Monday 20k claimed unemployment in Massachusetts, in February there were 17000 for the whole month. Would they get any real help from the federal government beyond maybe the $1G promised? don’t thinks so because the free money and the zero interest rate is only for the ultra rich and no one else.

        • Steve says:

          Sure, they get a low interest loan (probable around 5%) to tide them over.

          Government logic should make every mathematician cry.

  35. Arbuthnot says:

    Here’s an idea. Have the IRS conduct an audit of the federal tax returns of all fortune 500 executives who reported AGIs in excess of $1,000,000 during any of the last three years. Then impose a retroactive 10% surtax on all gross capital gains derived from sales of shares of the individual’s employer during those years. Wall Street lawyers and friends on K Street will probably find a way out for these worthies but at least it will deliver a message about the risks of profiting from a form of dishonest self dealing that was illegal in the past and should be again. After all, its just one more form of strip and burn which is now common practice on Wall Street.

  36. K marks says:

    Workers of the world unite

  37. Bob Hoye says:

    BA directors became stock operators without the experience to quit the trade. They ran the scam until it failed.
    Canada’s huge gold company “Barrick Gold” played some sort of derivative game in gold.
    Made huge and then when the trade went the other way the board could not close the game.
    Until they lost–big time.
    Both companies were good in their basic businesses.

  38. Iamafan says:

    So the Fed is getting deeper into the Trash for Cash trap. I believe this time they won’t be able to get out any alphabet soup program they start. The borrower is likely to stay insolvent.

  39. Paul Schuyler says:

    Mr. Wolf,

    A great and vital article. However please spell check/review this document for minor corrections(e.g. end of 2nd paragraph). I’d like to share a link to this document with everyone I know, and such tiny details may tarnish your otherwise sterling reputation among those will read your material for the first time.

    This is a political hot potato, one that should righteously expose the insanity /corruption on Wall St. when it comes to privatized profits and socialized losses.

  40. historicus says:

    All federal bailouts must be conditional.
    Restrictions on share buy backs.
    Restrictions on officer compensations
    Restrictions on partners pulling money out (bonuses, etc ala Goldman Sachs)
    This was missing in 2008….and far be it from the likes of those who now occupy the high positions in Washington to impose such on their former friends, partners, and coworkers.

    • Jimmy Franklin says:

      Yes, yes, and yes.
      That’s what Congresswoman Alexandria Ocasio-Cortez is promoting too.

      Tax the rich proposals exist because they control the corporations and the government causing the debilitating imbalance in the distribution in income and wealth. If they want to suck the workers dry and not share the wealth that they produce, then taxation of wealth, controls on stock buy backs, limits to corporate officers compensation including stock bonuses, and profit sharing with workers become the next recourse.

  41. historicus says:

    The Fed actions these past few days points out the irresponsible stimulations they have been involved in for the past 8 years.
    Pedal to the metal……QEs, massive REPO accommodations, cutting rates below inflation to prompt, push the markets higher.
    What they now are engaged in is more in line with their intended purpose, but it punctuates the reckless unnecessary actions they have needlessly been engaged in for the past 8 years.
    Central Bankers act as if Royalty, dictating and plotting, unelected and impervious to the ill effects of the policies they shove on us…..for they have inflation protected pensions awaiting them….but what of us?

    • Bobby Dents says:

      Dude, the Fed simply wants to look relevant. You overrate them. They do not matter in this case. This is between the owners, the workers and who owns both. 2008 the Fed could swap assets calm financial institutions. That isn’t the issue this time.

      • historicus says:

        Dude, the Fed will now be more active than ever .
        The Fed will have to buy ALL THE DEBT floated for any rescue packages.
        They will continue with massive REPOs and CP purchases…
        The balance sheet is headed for SIX Trillion at least.

  42. Bobby Dents says:

    Bankruptcy is coming. I suspect a change in political ownership is coming as well.

  43. Say It Aint So says:

    Kind of sad to see all the demands for changes to the current rules…these executives, however ruthless they appear, played by the rules. As long as you are going to allow the very same people who conducted similar behavior during the last crisis to be a part of Government you will have the taxpayer funding the bill. As Mr. T would say, “I pity the fool who allows Munuchin to run the treasury…

    Fool us once shame on you…fool us over and over again…and we still pay…whats wrong with this picture? Still a swamp….

    • Petunia says:

      I wonder what the newly pardoned Milken has been up to lately?

    • JF says:

      Did you read the article? Stock buybacks were supposed to limited to certain conditions. The execs and boards sidestepped those rules and the SEC turned a blind eye. How is that “playing by the rules”? Seems more like make up the rules as you go.

      • Tim says:

        Buy-backs were authorised in the early 1980s to enable companies to return surplus cash – and I do mean *cash”, not debt – to stockholders.

        For “companies”, read “Big Oil” – the oil crisis had driven their cash flows sharply higher, and the FDA costs of acquiring new reserves were so high that they were looking for other ways to spend. (That was when Mobil bought Montgomery Ward and CCA, for example, whilst BP bought into nutrition).

        During 2014-18, US buybacks exceeded $2.1 trillion, whilst outside investors, statistically, were net sellers.

        If we’d stuck to a tight definition of returning ‘surplus cash’, this wouldn’t have gone so crazy. But that’s what you get when you combine lax rules with cheap debt, and thereby create malign incentives.

  44. Michael Engel says:

    1) Warren 100B buyback : B buy A for family and friends.
    2) Tesla is cigar butt.
    3) On the way up another billion/ day have a diminishing value for a man like Warren.
    4) On the way down, especially after such a sudden plunge, addition increment a billion loss/day is very scary and painful. Why do people age 90 have to suffer volatile changes like that.
    5) AAPL is down from 327 to 238, or 27%.
    6) BAC is down from 35 to 20, or 43%.
    7) WFC is down from 54 to 26, or 52%.
    8) If the DOW will look like Tesla, Warren will not waste gun powder to buy at low values. At 90 he will not take a risk of becoming a cigar butt.

  45. MCH says:

    Here is the thing, would anyone consider shorting these guys at the moment? I doubt it.

    These bozos are going to come to Congress and their favorite senators and all say the same thing. If we go under, this is how much jobs we’ll lose, and how much of the suppliers get hurt.

    In Boeing’s case, if it goes through bankruptcy, it’ll be death for so many of their suppliers. Now, it wouldn’t be bad to claw back all of the money from HS, JM, DM, and the board, and then send them to the poorhouse as a lesson to other guys who would be so fiscally imprudent…. but then you may as well talk about desecrating the grave of Jack Welch.

    But it’s going to be obvious that these companies are going to get bailed out. But enough about responsibility and all that, let’s buy some put options. :)

    • HowNow says:

      You’re forgetting that Boeing is the #2 military aircraft manufacturer. No, it’s not going out of business.

      • MC01 says:

        That’s why a Chapter 11 bankruptcy makes so much sense.
        First the company will continue to operate as normally for the customers (both civilian and military) and then during reorganization the commercial aviation division can be simply spun off and the defense part handed over to the government or whatever.

        The chief problem with a Chapter 11 bankruptcy is that vendors and contractors will come under close scrutiny from the administrators to see if they are not overcharging their charge. After all their task is to make the bankrupt company financially viable again, and that includes stopping overpaying for goods and services.
        Boeing has no big problems with commercial aviation, but defense is another matter completely. What would happen if all these contractors were sent letters telling them to cut prices by 20-25% or to find a new customer?
        It happened when Airbus bought the A220 program from Bombardier: they found the Canadian company had been overpaying for components for up to 35%! Airbus purchase managers have had their hands full since, especially considering many of these leeches have political ties to the gang of thieves in Ottawa.

        In difficult times everybody has do his bit: we’ve already done more than enough, it’s time for the others to do their as well.

  46. VeryAmused says:

    It would be stunning to watch if they get bailed out soon and then have to get bailed out again when this virus does not go away quickly.

    • Shiloh1 says:

      Wouldn’t be surprised if AIG is a zero again by year end. But the bonuses are sacrosanct!

  47. Wombat says:

    Only bail out companies in proportion to the tax that they have paid.
    Companies that have evaded tax get nowt.

  48. Nodak 65 says:

    Wolf you know one of the movers and shakers in the destruction of airlines(Northwest) is your neighbor Dick Blum! A husband of a sitting senator…..

  49. Petunia says:

    At this point, I just want to know where all the money went. With trillions going into the repo market, nobody should be asking for a bailout, free money should be everywhere. They are pumping 10% of GDP into the money markets once or twice a week. So where exactly is the money?

    • MCH says:

      I’ll just settle for my $1000 from Congress and Trump, thank you very much… In the grand scheme of things, it’ll be about $350 B if they do that.

      I agree with you though, I wouldn’t mind have a fraction of a fraction of a percent of that money going into the repo market diverted to my account

    • VeryAmused says:

      The money is added on one computer screen and subtracted on another. The world is simply digging a hole faster than they can fill it.

    • Frederick says:

      In a small middle eastern country maybe

    • Bobber says:

      I’ll tell you where the money went. 10% of GDP is $2T. The federal tax cut stimulus they enacted in 2017 was $2T, and that went to corporations and shareholders. In other words, it all went to the top 10% of income earners, and top 5% of wealth holders that own 90% of the stocks.

      If the general public is fortunate, they’ll get a measly $1000 check, or $250 billion total.

    • Greg Hamilton says:

      I think you know where all the money went. I don’t think it will ever be reported, and knowing wont make you feel any better.

      • Petunia says:

        I just want to force them to say it.

        BTW, my tax refund was $1K and it all went to buying extra groceries which I doubt will last the month.

    • Noelck says:

      I want to know where the money is going also? I know this is simplifying things but wealth should be a zero sum game. If the stock market, gold/silver, bitcoin, and the bond market are all going down where is the money going. Is it all going to cash? Treasury bills? Wealth isn’t destroyed it is just re-distributed.

  50. Trailer Trash says:

    When buybacks are purchased with borrowed money, are those shares pledged as collateral? So when the share price drops below some minimum, the loan is called, and all that unwanted stock is dumped on a falling market?

    That would be bad. Really bad. I’ve read that margin calls were a huge factor in the big crash in 1929.

    • Cas127 says:

      “When buybacks are purchased with borrowed money, are those shares pledged as collateral?”

      That is actually an interesting question.

      I think no – when the Corp borrows the money it usually (not always) essentially pledges all of the company as collateral (that is why any defaulted lender can usually put a corp intro bankruptcy).

      The Corp uses the loan to buy back shares – which become assets/are extinguished. As such they are now part of the Corp, the whole of which is the collateral.

    • Wolf Richter says:

      Trailer Trash,

      “When buybacks are purchased with borrowed money, are those shares pledged as collateral?

      No, a company cannot use its own shares as collateral.

      But when a company issues bonds, they are guaranteed by definition by the company, even if the bonds are unsecured by specific collateral. So if the company defaults, creditors get the entire company in bankruptcy proceedings, and the old shares become worthless.

      • Trailer Trash says:

        Thank you for the explanation. And thank you for your website. I am finding it to be a good ring-side seat for the current Wall St spectacle.

        I am cheering the Fed as it drives its corrupt, rusty Ford Pinto over the cliff, while grieving for those trapped under the wreckage.

  51. Finster says:


    And the remedy needs to reflect that the insiders who instituted and received stock option compensation disproportionately benefited from buybacks.

  52. James Franklin says:

    Wall Street went nuts over the prospects of Bernie Sanders as the Democratic Party presidential candidate. But the large corporations have their own form of “socialism” that we saw in 2008 and now again: socialization of debt and privatization of profit.

    The CEOs have their faces spread out on the financial page, attract more wealth than they are worth, and then are given golden parachutes and spirited away. It’s time for a major overhaul of this racket that eventually will “bankrupt” us all.

  53. Bobber says:

    Boeing can also raise money by issuing more stock. If they took all those smart people that are lobbying Trump and Congress and re-focus them on a stock offering, they could have money in the corporation’s bank account within a month.

    Or, maybe they should be talking to Buffet or other private investors.

    If they use government money for this sort of thing, I’m afraid Trump will have zero chance of re-election, and socialists will sweep the Congress. That much is obvious. Then it all gets clawed back via massive wealth tax.

  54. Xentago says:

    To be honest, everything I’m reading about this virus suggests that any money spent on bailouts now will be wasted anyway. Many experts now suggesting it will be 1 year or more of ‘social distancing’ to get through this thing (it will take that long to build herd immunity or develop a vaccine). Airlines won’t recover for years and we won’t need any new planes until the current planes are all too old to fly.

  55. KPL says:

    “And when it hits the fan, there is always the taxpayer or the Fed to bail out those shareholders, the thinking goes. But this type of thinking is heinous.”

    Not since 2008. Moral hazard was erased from the english dictionary by Bernanke with his “courage to act”. You have to bail out to save capitalism, giving a new meaning to capitalism.

    “But shareholders should pay for it since they benefited from those share buybacks – and not taxpayers or workers with dollar-paychecks.”

    Not when you have a printing press and you can print to your heart’s content and tax-payers are lined up to foot the bill. Why follow the law when you can benefit by not following it! Rascals.

    Shareholders should know that they won’t be bailed out by the government or the Fed, but zeroed out in bankruptcy court.

    Not gonna happen with the present set of cabal in place. It will hurt mainstreet and they have the courage to act and there are hapless sitting ducks in the form of tax-payers all lined up for easy picking.

    “Because those proposed taxpayer and Fed bailouts of these share-buyback queens are just heinous.”

    Remember the bankers laughing at the mainstreet after their bailout in 2008/2009. Just because it is heinous it does not mean it will not happen. Unless either by law or by force it is made clear to the cabal it will continue.

  56. Bruce says:

    Anyone notice how expensive Puts are on stocks such as Amazon which have been relatively untouched as of yet (you have to figure at SOME point consumer spending could tank)
    For example 1 month out Puts at 1300 should be less than a buck. Instead they’re at 20 bucks and AMZN hasn’t crashed YET….

  57. Jeffrey Heath says:

    The airlines and Boeing as well as the major banks are of strategic importance to the US. The great risk of the coronavirus pandemic is that the Chinese (and Koreans) are going to eat our lunch economically over the next 18 months as they resume business as usual soon while we huddle in bunkers in order to protect our elderly (of whom I am one).

  58. Bruce says:

    Also, Wolf is right on about Boeing, et al, squandering cash and now BEGGING the fed — not much different from a bum on the street asking for a handout. IMO

    And funny thing this, by all appearances the fed is nearing insolvency with debt/GDP now over 100% Pretty soon we’re going to need a wheelbarrow of money just to buy a loaf of bread

  59. DR DOOM says:

    Empires do not have accountability applied to its oligarchy class . Empires do not pause , reflect then redress. Only external power affects their course. To wit , the cash eating mal-investment machine called fracking has been endangered not by an internal moment of clarity but by the external force of Russia and Saudia Arabia. The airlines will get what they want and more. The tax-payer will obey.

  60. fred flintstone says:

    Socialism for corporations is keeping us out of a depression. Keeps the same morons in charge…….daddies boys and girls……..Socialism for the poor is stealing……….yep……….for them its a capitalistic country……. They have this mess so twisted that even the most loyal have to question how its decided who gets what.

  61. tommy runner says:

    Let me ask you a question sir, what is this country doing for the doomed?

  62. Willy2 says:

    – Chapter 11 sounds nice as a solution but the problem is that Boeing doesn’t have any equity anymore or already is in negative equity (on its balance sheet). In that regard not only the shareholders are going to be wiped out but the bondholders as well.
    – Time to long pitchforks ??

    • Wolf Richter says:

      There is a credit hierarchy, with bank loans usually at the top with the best collateral and unsecured bonds at the bottom. Bondholders who get haircuts in situations like these may often get some of the new equity. That is precisely what the court proceedings sort out. A company with a lot of equity capital doesn’t generally need to file for bankruptcy; its the companies that have negative equity capital such as Boeing that run out of options.

  63. IdahoPotato says:

    I am okay with the airlines being bailed out if the distance between the edge of any two seats is mandated to be a foot apart. Forever.

  64. JM says:

    If Trump agrees to do this as the information anticipates he will no longer be re-elected, I hope he does not confirm that he is a fool.

  65. KPL says:

    Comment not exactly relevant to the post completely but then in a way it does, as the bailout may pinch the tax-payer less

    Given below (source:,

    AGE – DEATH RATE all cases
    80+ years old – 14.8%
    70-79 years old – 8.0%
    60-69 years old – 3.6%
    50-59 years old – 1.3%
    40-49 years old – 0.4%
    30-39 years old – 0.2%
    20-29 years old – 0.2%
    10-19 years old – 0.2%
    0-9 years old – no fatalities

    Why isolating above 70 (above 60 may be) in a place (as far away as possible) with access to hospitals and necessities is a worse idea than isolating entire cities. This way the damage to the economy would be significantly reduced.

    • Francesco says:

      These rates are real if and only if ECMO (Extracorporeal membrane oxygenation) is available, otherwise multiply by 3-5. Without ECMO even the strongest will die in case of pneumonia. That’s the chinese and italian experience. Chinese were incredibly good on putting in place thousands of ECMO in a very short time.

  66. Lisa_Hooker says:

    This is not a problem because it’s not our country anymore. It’s their country. We just rent.

  67. Sound of the Suburbs says:

    As a CEO, I can use the company’s money to do share buybacks, to boost the share price and get my bonus.
    Share buybacks were found to be a cause of the 1929 crash and made illegal in the 1930s.
    That was a long time ago and everything is totally different today.

    Are you sure?
    What lifted US stocks to 1929 levels in 1929?
    Margin lending and share buybacks.
    What lifted US stocks to 1929 levels in 2019?
    Margin lending and share buybacks.
    As long as US companies keep doing share buybacks things should be OK, otherwise it’s all going to fall off the edge of a cliff.
    A former US congressman has been looking at the data.

  68. Anmol says:

    They fired bazooka after bazooka, and the markets are still crashing. Amazing…

  69. Iamafan says:

    I think we really have to think this one through. If business and life has changed dramatically, then we cannot expect the status quo to continue. There won’t be enough customers or demand and supply will likely change. Bare essentials will prevail. That’s why any bailout must consider this or we are just going to waste precious resources. I propose we only bailout what is needed to survive and just forget everything else. A bid reset is inevitable. There might be a need for nationalized everything.

    • KPL says:

      “I propose we only bailout what is needed to survive and just forget everything else.”

      The bailout authorities would do exactly this. Their perception might just differ from ours.

      • Gandalf says:

        “bailout authorities” – you mean the same people who pushed for the corporate tax which added nearly $1 trillion to the US Federal debt PER YEAR, much of which was blown away on stock buybacks (did you read Wolf’s article above?)

        Coming soon, an article from Wolf about how Federal Debt Out The Wazoo is going to triple or quadruple

        It’s easier to add now that things are coming in single digit trillions. I’m guessing a Federal deficit this year about $3 trillion minimum

  70. kk says:

    No bonuses for executives and no one paid more the 10x the worst paid.

  71. Iamafan says:

    It is time that we only save PEOPLE. Screw the CEO suite of companies. You can borrow like everyone else. Most companies are toast anyway.
    No reason to waste.

  72. David Hall says:

    Lehman Brothers went bankrupt. Bush and Bernanke started rescuing big banks and insurance companies. So many little banks were allowed to fail. Shareholders were wiped out. The failed bank assets were bought by bigger banks. Obama continued the bailout Bush started. GM stockholders were wiped out, but the company was recapitalized by the US Treasury. Ford took on debt, but did not go bankrupt.

  73. NotA GoldBug says:

    In 2008 they let exactly one company fail before the govt panicked and bailed and tarp-ed everything in sight. This time it’s going to be way worse, the financial systemic risk is still there, amplified even. In addition, there are major threats to the real economy from everywhere. Everyone who could afford to buy a lobbyist or a Congress person will get bailed out. Prepare for more taxes on your income, and currency debasement.

  74. Iamafan says:

    Many so-called experts will now be proven to be fakes. Many leaders will be proven to be ‘bumblers’. We will see who the real prophets are. Skeptics have a heyday.

  75. Iamafan says:

    Repo finished this morning. Weekly h.4.1 estimate is 378.745 billion PLUS they bought 117.014 billion in Treasuries for Q.E.

    So there’s your half a trillion cake for the week.

    • Daily repo is only 85B (so far) and half of that is MBS. History suggests the moment when the Fed pulls away from REPO, or has no takers, the final capitulation move occurs shortly thereafter. Technical level is 2000 S&P. I would be very very interested in what the rally looks like.

  76. Rcohn says:

    The longer bond market reaction is not what the the Fed really wants. Instead of collapsing rates out along the curve rates are zooming the other way

    • Social Nationalist says:

      No, it’s what they want, the yield curve has steepened greatly. The world lacks dollars.

  77. Iamafan says:

    Scott Minerd saying they need $2T to bailout companies to prevent a depression. Well, how much is that per taxpayer? Why should I pay for the bailout when I’m not being bailed out?

    • Gandalf says:

      Because the President you voted for needs the bailout to save his hotels and resorts and remain a billionaire

      • sierra7 says:

        Gandalf (And with Mr. Richter’s permission since this is kind of political):

        No but she would probably have by now invaded another country, murdered and crucified another leader on a sword tip and gleefully, jumping up and down in a ‘safe room’ deep in the WH and on major media: “We came, we saw, he died”.
        Which one would we as a country prefer?
        (Don’t answer that! LOL!)
        Right now we are totally screwed either way!

  78. Eferg says:

    Spot on article and great comments. This is why I regularly read Wolf Street.

    Longer term there needs to be some curbing of the government’s messing up the economy. A suggestion I would offer is to limit what the Fed can do with interest rates. Something like rates cannot be lower than 3% plus current inflation. Borrowing money has to cost something.

    Sure, this is pure lunacy in today’s world and has less than a snowman’s chance in a blast furnace. But, since we are locked down, might as well use the time for a little dreaming.

    All the best to Wolf, those who comment and readers in general.

  79. VintageVNvet says:

    Hey Wolf,
    Did you find your ”DOW 20000″ hat yet??
    How about the ”DOW 12000” one ? Looking like you will need that one in a few more days, eh!!

  80. timbers says:

    So my 401K is in money market or whatever they call it. Making I suppose 0% now.

    When do I move into equities, stocks? I see Amazon is one of the few stock going up lately.

    • The Colorado Kid says:

      Timbers, the DOW is likely to mimic the NIKKEI 225.
      They will most likely reinstate Glass-Steagall along with making share buybacks illegal once again.
      US Stawks are dead money going forward the next decade or more IMO.

      I actually think this will mark the end of the Imperial American Empire and of the US Dollar as the World Reserve Currency.

      Hope everyone makes it through this.

  81. Jdog says:

    How about a plan where all businesses accepting bail outs must contribute 20% of all future profits to the Social Security Trust fund.

  82. grrrmudgen says:

    I want to agree, because it’s completely immoral to bail out shareholders. However, who are the shareholders? In addition to the executives that misuse buybacks to sweeten their portfolios, it occurs to me that pension funds (are forced to) own a lot of corporate bonds and stock. It also occurs to me that the financial repression (artificially low interest rates) that supposedly will encourage economic investment might more accurately be called a tax on the elderly. The common thread is government’s spectacular inability to consider incentives, and its also spectacular ability to turn its screw ups into calls for more government. If you’re poor, or middle class, or elderly (unless very rich,) government isn’t your friend.

  83. GolferDave says:

    Bail out packages only encourage more and future bail out packages. Any action taken now must figure in the larger problem: collapse of Boeings case cancellation of booked sales will be endemic. In the airline industry case (and most others) collapse of consumer demand. In the short term shale oil production must be allowed to collapse through bankruptcy and the bond holders take a much deserved haircut. Alternately invoke the supply side solution by striking the Saudi oil refineries.

  84. DR says:

    Write to your legislators.
    No Corporate Grants.

  85. Linus says:

    Wolf, One of your best comments ever!
    But its 2008 all over again – they will bail out anything – except the ordinary Joe Blow. And then we start again!

  86. Tonymike says:

    No one may see this but I drafted a petition (actually two) about these bail-ins, which I despise since Boeing and the Airlines are coming, hat in hand, to beg for our help (taxpayer dollars) when especially the airlines treated their customers like dirt.

    One was for the airlines to revoke their onerous ancillary fees (baggage, change, seat etc.) for the next 5 years if they receive ANY taxpayer money in the forms of a bailout. The airlines made 100 billion dollars over the last 10 years in these fees. Southwest has no baggage fees and no change fees and is doing financially well compared to its competitors who gouge us. Jetblue just last month raised their baggage fees with others expecting to do the same (but not anymore). Congress has also drafted a bill to address this matter as well. Here is the petition.

    Please sign if you feel you want to do something other than talking in an echo chamber.

    The second petition is like the first, except it is for Boeing to sell its shares, no stock buybacks, sell their military wing of the business, and cut executive pay before they receive ANY taxpayer bailouts. One thing about Boeing is that they could simply increase the price they charge the taxpayer on the weapons they sell to the government. Also, the SLS space program is a disaster with huge cost overruns and poor performance. They can’t get Boeing to provide them a cost for how much this will continue to cost.

    Once again we see socialism for the rich and capitalism for the working class. If you want your voice heard, please sign the petition.

  87. lisa says:

    “But shareholders should pay for it since they benefited from those share buybacks – and not taxpayers or workers with dollar-paychecks. Shareholders should know that they won’t be bailed out by the government or the Fed, but zeroed out in bankruptcy court.”

    In reality, the shareholders DO not gain at all from share buybacks. ONLY, the corporate leadership that has been paid in Options are the ones who WIN, because of dilution of value, in all shares, by increasing the number of shares on the market. Only the corporate board members that churned the shares, and then put the cash into their pockets, that they have effectively stolen from any valuation in the corporate financial ledger. This is theft, or the Ponzi cycle that is so often referenced. Shareholders are only left with the DEBT, because debt is then what is used, due to borrowing of funds that has been used to allow this type of business practice to occur.

    The further legal precedent that was established to recognize the corporate entity legally as a person, has since allowed increasing secrecy of then where the CASH is routed into private individual and corporate shielded PRIVATE funds.

    Shareholders are only left with the debt vehicle, after all value, especially any real LAND HOLDINGS are rolled over into private family funding vehicle control.

    • lisa says:

      Most of the so-called shareholders that are left holding the debt vehicles are primarily the worker pension funds and government worker pension funds that have been desperately still seeking yields. The private funds are the funds and Hedge funds are the price setters by CDS etc. that have gained all the real assets, that are then setting options, trades, puts and calls on maneuvering of the so-called shareholders that are forced into only holding the debt vehicles. These debt vehicles are now crashing into one another, with a few floating on the top of the dollar-derby which are the FAANG’s etc. Flying into the wild blue yonder just is not the option that it was there for an imaginary while ago. TESLA’s truck just is leading a very wimpy, lumpy, parade of tricks.

      • joe says:

        Yes. For example very few who argue for a debt jubilee realize that their pensions are the stuckees.

  88. Tonymike says:

    Isn’t anyone worried that the banks no longer have to carry no reserves as of March 26th? Look at the number of derivatives!!

    From Wallstreetonparade: Pam Martens
    As of September 30, the latest data available from the Office of the Comptroller of the Currency, five of the Wall Street banks held $230 trillion in notional (face amount) of derivatives, which represents 85 percent of all derivatives held by the more than 5,000 banks and savings associations in the United States. Banks that get on the wrong side of a derivatives trade have to regularly post extra collateral to their counterparty. The Fed’s bizarre action in removing reserve requirements at a time when public confidence in the banks is critical raises concerns across Wall Street that at least some of these banks may desperately need access to those reserves to post collateral on derivatives trades.

    We should all be very afraid. I have heard that they well-heeled are taking large sums of money out of the bank. Coming into banks with empty shoeboxes and leaving with full boxes.

    • Wolf Richter says:


      The reserve requirement were cut, not the capital requirements. “Reserves” is cash that banks keep on deposit at the Fed instead of investing it in Treasury securities or lending it out. Capital requirements, which is what a bank needs when loans or derivatives go bad, have not been cut.

  89. NARmageddon says:

    @Wolf and others, do you know any good blogs that specialize in bonds?

    Today I see so many crazy things in the bond market that I don’t know what to think. The bid-ask spread on corporate bonds seems HUGE, and some bonds don’t even have a bid listed (Boeing on Etrade). Vanguard seems a bit better. FINRA/Morningstar has been slow so I didn’t look there. Vanguard has recent trades, and Boeing has some bonds where traded prices had gone from 100 to 82 in a matter of days.

    The bid-ask spread is significant even for UST bonds. Then there is the TNX (10y UST) that has been rising like a rocket today. And probably a lot of other crazy stuff.

    Hence my question. Twitter can be a good source at times but wondering if there are any sane Wolf-like blogs out there that talk about bonds all day long.

  90. Bobber says:

    These numb skull corporate and government “leaders” cannot keep things afloat. If they can’t get a pop with all the stimulus announcements by tomorrow, my prediction is they close the markets until the virus treat is under control and quarantine ends. In the meantime, they’ll put a moratorium on all corporate and individual debt payments, and rent. They’ll start putting rations on food until the quarantine is over. Plus, they send out the $2,000 checks to tide people over.

    If I had put options, I’d be thinking about cashing them out.

    This is a wild just a guess. Things are desperate, and they’ll keep increasing the response until they get a nice pop.

  91. joe says:

    Look even if the airline Corps go bankrupt, the planes are still there, the pilots are still there, the airports are still there, and the passengers will come.
    Why pay the greedy impudent buggers that broke the system to break it again?
    Because the bribes are bigger?
    The corruption. The corruption.

  92. wkevinw says:

    This article was mostly about airlines, but this problem is now “too big to fail”.

    If bankruptcies flow through almost every industry- it will effectively become like a bailout. The Fed/Treasure will supply money and they will re-capitalize through the markets/banking system.

    Bankruptcy might incentivize/disincentivize/reward/punish the right people, however.

  93. Stanley Duquette says:


  94. CreditGB says:

    Did I see that the Fed is accepting stock as loan collateral or did I misunderstand a short article about it today.

    IF true, seems like a good way to borrow on all unicorn shares, take the money and run, default, and let the Fed deal with the worthless shares.

    Oh, wait, that would be a bail out no?

  95. Socal Rhino says:

    Amazon has said they’re limiting their warehouses to immediate necessities to ensure reliable fulfillment, so that branch of government is getting as start on industrial policy.

    • NARmageddon says:

      I think Amazon is lying about the reason for their shift to daily necessities.

      What is really happening is that demand for most of their usual goods (electronics etc) is dropping like rock, and therefore Amazon is trying to put a positive spin on at least having high demand for toilet paper and hand sanitizer.

      Whether Amazon can make a profit on shipping toilet paper remains to be seen. I think Walmart has a much better position for that.

  96. lenert says:

    “No one could foresee the arrival of the coronavirus and what it would do to US industry.”

    We’ve long known the threat from a pandemic and once even had a federal agency to plan and prepare for one. But instead of taxing the airlines to say fund response teams and isolation units at airports and cruise ship terminals, we paid CEOs, CFOs, COOs, CTOs, CMOs, CIOs and all their VPs 1000 times the average worker. Then those same CXOs buy the politicians who tell us all how bad we are for asking to raise the minimum wage for only the second time in 30 years.

    • Winston says:

      “We’ve long known the threat from a pandemic and once even had a federal agency to plan and prepare for one.”

      There remain several huge agencies responsible for that. They all botched it, especially the CDC, for the same reason that despite all of the advance evidence 9/11 wasn’t stopped:

      Price’s Law – “The square root of the number of people in an organization do 50% of the work. As an organization grows, incompetence grows exponentially and competence grows linearly.” – Derek John de Solla Price, physicist and information scientist, credited as the father of scientometrics

      Multiply the effect of that many times over for huge government bureaucracies with no profit incentive to drive efficiency and effectiveness and many times more again when they try to interact with each other.

  97. doug says:

    congrats Wolf, I see this issue is now coming up at other venues by other authors.
    Thanks for all you do

  98. Winston says:

    Let them eat cake… leftovers from in-flight meals. Of course, we all know this will turn out just like the ending of the film “The Big Short.” WE pay.

    Airlines urgently need up to $200 billion to survive as coronavirus pushes industry deeper into crisis

    March 18, 2020

  99. georg vilshofen says:

    Wolf, if you please, a dumb question: if a company buys back a half-billion dollars’ worth of shares over time and then retires those shares . . . where is the money? Still on the balance sheet somewhere? Or only reflected in the now-higher price per share?
    Thank you!

    • Wolf Richter says:

      No, the money went to shareholders. The company got nothing. The shares it buys back become worthless. There are different ways of accounting for it on the balance sheet. Most companies cancel the shares they buy back. They just disappear.

  100. Augusto says:

    What I’ve noticed is that Wall Street is screaming early. While ordinary people are just trying to get through the practicalities of keeping themselves and their loved ones safe, Wall Street is getting to the Central Banks Cash Window FIRST. They want to clean out the cash drawer before the regular people show up. You wait, they will get bailed out and in a couple of weeks regular people will be forced back to work because we can’t afford to have everyone at home. Then the same companies that got this money will lay people off, and give their Execs big bonus’s for getting in line first.

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