If ever there was a case of moral hazard, this is it: Profitable companies that failed to save money for a downturn now want help from the government. If they get a bailout today, what's to stop them from being even more reckless in the future, knowing the feds will ride to their rescue?
If we're going to bail out the airlines, that $50 billion should be in the form of a loan secured by the companies' physical assets. Then that $12.5 billion of stock they bought back during the past decade gets sold to the government at a 30% discount to the repurchase price or to the current share price, whichever is lower. The industry will kick and scream, but if they can get better terms from what the private-equity funds might offer instead, they should take them.
This is but one troubled sector. Will hotel chains be next? Automakers? Restaurants? The entire economy is suffering from cash-flow problems. How can we bailout one sector but ignore most of the others? And that’s before we discuss small businesses, hourly workers and people in the gig economy.
The least we can do is avoid many of the same errors we made the last time.
Barry Ritholtz is a Bloomberg Opinion columnist. He founded Ritholtz Wealth Management and was chief executive and director of equity research at FusionIQ, a quantitative research firm. He is the author of “Bailout Nation.”