DealBook: Here Come the Bailouts

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A week ago, major U.S. airlines said that they could absorb the costs of the coronavirus pandemic. Now, after travel bans around the world, they’ve approached the government for help.

They’re asking for over $50 billion, the WSJ reports. And carriers like Delta and American are also asking banks for billions in loans. That’s not including the $10 billion that U.S. airports reportedly want, or the unknown amount that Boeing is said to be negotiating for itself and its suppliers.

“We’re going to back the airlines 100 percent,” President Trump said at a news conference yesterday. But Treasury Secretary Steven Mnuchin said the assistance wouldn’t be a bailout. “If you’re providing liquidity to good businesses that just need liquidity for three to six months, where you’re taking collateral and you have security, that’s not a bailout,” he said.

The thing is … The five biggest U.S. carriers spent 96 percent of their free cash flow over the past decade on stock buybacks, according to Bloomberg.

• The NYT columnist Tim Wu writes that any bailout should require the airlines to cap fees for itinerary changes and baggage, halt the drive for ever-smaller seats, and generally treat customers and employees better. “We cannot permit American and other airlines to use federal assistance, whether labeled a bailout or not, to weather the coronavirus crisis and then return to business as usual,” he writes.

Are bailouts for people or companies? Bloomberg’s Joe Nocera senses a change in attitude in the economic response to the virus, with companies going out of their way to pay workers during downtime. “For once, ‘shareholder value’ is a secondary concern,” he writes.

• Republican Senators Mitt Romney and Tom Cotton have proposed direct cash payments for all Americans, a very different approach from the one pursued after the 2008 financial crisis, when banks and auto companies received the bulk of bailout funds.


Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York and Michael J. de la Merced and Jason Karaian in London.


Concerns about the financial health of banks and the broader business world are being reflected in credit markets.

Major banks plan to borrow from the Fed’s discount window, heeding a call from the central bank to keep credit flowing. Several big banks said in a joint statement that they “individually have substantial liquidity and multiple sources of funding,” but wanted to destigmatize using the Fed’s short-term funding facility. (This was previously done during the 2008 financial crisis.)

• That said, new accounting rules could force banks to book losses on loans in full earlier than in the past. Analysts say that’s unfair, but they don’t expect any easing of the guidelines in the middle of a crisis.

Policymakers were urged to broaden access to the discount window to non-financial companies with more than 500 employees. Companies have already been drawing down credit lines — Anheuser-Busch InBev and Kraft Heinz among them — while demand for short-term unsecured bonds known as commercial paper dries up. And oil companies like Chesapeake have reportedly hired advisers to help them figure out what to do about their hefty debt loads.

Yesterday brought one of the worst one-day declines in U.S. stock market history, rivaled only by the crashes in 1987 and (gulp) 1929. As the economic damage of the coronavirus outbreak becomes clear, data and forecasts are being produced that would have been scarcely believable just a short time ago.

• Increasingly strict restrictions on activity are shutting down large parts of the economy, resulting in G.D.P. forecasts that will make your head spin. Pantheon Macroeconomics, for instance, expects U.S. growth to fall 10 percent in the second quarter, driven by a collapse in discretionary consumer spending (which accounts for more than a third of G.D.P.).

• The outlook for jobs is equally grim: Kevin Hassett, a former White House economic adviser, expects March payrolls to fall by one million. “Nobody is going to get hired next week,” he told CNN.

• Unprecedented volatility in the markets pushed the VIX index — Wall Street’s “fear gauge” — to a record high. Some think automated trading strategies are making market swings more violent. Belgium, France, Italy, Spain and South Korea have introduced curbs on short-selling in an effort to calm their markets.

• Transportation accounts for two-thirds of global oil demand. With practically nobody traveling, trade slowing, and the Saudi-Russian price war flooding the market with unneeded crude, the Eurasia Group says global oil consumption could fall by 25 million barrels per day in the second quarter, to 75 million.

• Many of these assumptions depend on how widely the virus spreads, and especially its mortality rate. The NYT Upshot team put a range of estimates and assumptions into an interactive tool, putting the numbers in context.

One of the most sought-after commodities these days is the alcohol-based goo, and businesses are responding to shortages of the stuff.

• Air Liquide, which was already in the process of selling a division that makes sanitizer, has reportedly upped its asking price for the business, Kaye Wiggins of the FT reports.

• Distilleries are making their own hand sanitizers — they already have the necessary base alcohol, after all — and are giving them away. In addition to clean hands, these varieties feature the aromas of juniper, citrus, coconut and piña colada.

More coronavirus news:

• Amazon is hiring 100,000 delivery and warehouse workers to keep up with demand from people ordering things from home. (WSJ)

• Silicon Valley execs held a conference call to discuss pooling their resources to fight the virus. (CNBC)

• Universal Pictures will no longer give theaters an exclusive period to play new movies, releasing them for simultaneously for home streaming. (NYT)

• Can the internet handle so many people working from home? (NYT)

• Norway’s prime minister, Erna Solberg, held a news conference specifically to answer children’s questions about the coronavirus. “It is OK to be scared when so many things happen at the same time,” she said. (Reuters)


• Finablr, the owner of the Travelex chain of currency exchange outlets, warned that it may collapse after discovering questionable payments to third parties. (FT)

• Renaissance Technologies recorded one of its worst months in a decade. (FT)

• Oura, the start-up that makes the Ouraring sleep tracker, plans to announce that it has raised $28 million in new funding.


• Google disclosed that it began reporting YouTube’s financial results after a request by the S.E.C. (Reuters)

• Apple was fined $1.2 billion by French antitrust regulators over sales agreements the company made with two wholesalers. (NYT)

• Tech giants are buying up most of the promising A.I. start-ups. (Bloomberg)

Best of the rest

• A New York Stock Exchange executive took one for the team and rang the Big Board’s opening bell yesterday — alone — as markets were poised for a disastrous open. (@NYSE)

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