WASHINGTON — President Trump said on Thursday that he supports measures that would prohibit corporations that receive federal bailout money in the coronavirus emergency from buying back shares of their own stock. That is also the position of congressional Democrats — and some Republicans — who want assurances that corporations will use government bailout funds to support workers, not bolster their earnings reports.
“Let’s get this money to people,” said an aide to a leading Senate Democrat.
Congress is deliberating several measures, including direct disbursements of $1,000 to all Americans. But many industries have been hard hit by the unexpected sweep of the coronavirus across the globe. Reeling sectors include restaurants and hotels, as well as the auto industry, which shut down factories this week out of concern for workers’ health.
The effects of the pandemic could be “worse than 9/11,” Rep. Peter DeFazio, D-Ore., who heads the House Transportation and Infrastructure Committee, said earlier this week.
Airlines have asked for $50 billion in help from Washington.
But what DeFazio and his Democratic colleagues — along with some Republicans — don’t want is the kind of no-strings bailouts that would allow corporations to enrich themselves without benefit to workers. “It’s not just Democrats calling for conditions” on a corporate bailout, said the Senate aide. “It’s in the bloodstream on both sides.”
That point was illustrated by President Trump on Thursday afternoon during a press conference with the coronavirus task force at the White House, when Jonathan Karl of ABC News asked him if he could “guarantee” that the billions potentially spent on a corporate bailout “will not go to executive bonuses or more stock buybacks.”
A corporation accumulating its own shares is a popular means of bolstering its stock price, but the practice does little for long-term corporate health. Nor does it have any benefit for workers — airline mechanics, for example, or hotel employees. A Bloomberg analysis conducted last week found that the “biggest U.S. airlines spent 96 percent of free cash flow last decade on buying back their own shares.”
Trump said he was opposed to allowing corporations to enrich themselves with federal aid without benefiting workers, who are now being laid off in various sectors of the economy.
“Well, we don’t want that,” he said in response to Karl’s question. “I was never happy with that,” he said of companies that have engaged in stock buybacks in the past.
“People are coming in for money, in some cases through no fault of their own, but in some cases where they did certain things over the course of the years, including buying back stock,” he said. “Maybe I view that as a little bit different than somebody who didn’t, or somebody that built plants all over the United States, which there are plenty of them too.”
He did not say which companies he had in mind.
In response to another question, Trump said he was open to the idea that the government could take an equity stake in companies that receive federal bailout money.
“I do” support the idea, he said. “I really do.”
President Barack Obama was criticized by progressives because the measures he and his treasury secretary, Timothy Geithner, took in the wake of the 2008 housing and financial crisis were seen as overly deferential to banks and other segments of the financial industry. That sector, and others, rebounded much faster than the overall economy. Workers’ wages remained depressed for years afterward.
Trump said he “wouldn’t mind” making a prohibition against stock buybacks part of a corporate bailout bill, which is expected to occupy Congress in the coming days.
Democrats have been pushing for protections to ensure that the bailouts do not amount to corporate giveaways. “These buybacks, they infuriate me,” Senate Minority Leader Chuck Schumer said in an MSNBC appearance on Thursday, nothing that in the last two years, airline companies have spent $13 billion on buybacks.
“Buybacks are a menace,” he said.
Sen. Elizabeth Warren, D-Mass., meanwhile, has called for a “grassroots stimulus package” that would help workers instead of corporate executives. She has also listed eight provisions she wants to see incorporated into any coronavirus corporate bailout, one of which is an injunction against stock buybacks.
Republicans are also determined to make this bailout more equitable than the one that followed the financial crisis more than a decade ago. “I’m going to be very leery of doing something like in 2008,” said Sen. Mike Braun, a conservative Republican from Indiana, whose words could be taken as a warning to Senate Majority Leader Mitch McConnell. McConnell’s office said it would notify Yahoo News if the majority leader takes a position on the matter.
The White House did not immediately respond to requests for clarification on the president’s comments on a stock buyback prohibition.
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