Mar 25, 2020 - Economy & Business

Corporate America balks at potential strings attached in relief package

An illustration of someone cutting the strings off a hanging money sign.
Illustration: Sarah Grillo/Axios

Uncle Sam today will become Corporate America's lender of last resort, but it's still unclear if it also will become its activist shareholder.

Driving the news: We're still awaiting full text of the bipartisan deal struck last night between the White House and Senate leaders, including if there will be any straight equity or warrants tied to financial help for affected industries and companies.

  • Airlines and big companies like Boeing have fought hard against such a move, arguing that interest payments would be adequate financial upside for taxpayers.

Boeing CEO Dave Calhoun, a former private equity executive, yesterday told Fox Business that his company would refuse government assistance if it came with equity strings attached: "If they force it we just look at all the other options, and we’ve got plenty of them."

  • Boeing declined to tell Axios what any of those other options were. Weird, since there are "plenty" of them. It also couldn't reconcile the existence of such options with Calhoun claiming the government needs to support credit markets.

Ben Baldanza, former Spirit Airlines CEO and current JetBlue director, yesterday rejected proposals for Treasury taking equity in airlines during a CNBC interview, but repeatedly dodged when asked why.

  • We do know there will be stock buyback and CEO bonus prohibitions on the airline package. Plus added oversight, transparency, and worker protection provisions.

The bottom line: Corporate America is right that it didn't directly cause this problem, as Wall Street caused the 2008 crisis, so there is no need to be punitive. But neither did taxpayers, and they're the ones footing the bill after years of corporate stock buybacks and mediocre wage increases. It will be interesting to see where the Senate sided.

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