Trump tax cut, buybacks, and bailouts

#1
lawgator1

lawgator1

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#1
When Trump announced the tax cuts and those were passed, we were constantly reassured that the companies benefiting from those cuts would reinvest the money in expanded production, growth, and jobs. Is that what happened?

No. Despite warnings from the left, the companies did what was feared. They took the money and bought back company stock, raising the price of their shares and rewarding management and their largest investors. Whenever Trump was asked about this, he responded, just look at your 401ks. And he was right, because managed funds did well in that they also saw their value increase due to the stock market boom.

But now, with a quick turn measured in days and weeks and the market tanking, what about those same big business that took the tax break money and, rather than reinvest it, enriched their management and shareholders?

Boeing (BA), for example, spent $11.7 billion over the past two years on repurchasing stock before suspending buybacks in April 2019 because of the 737 Max crisis. The aerospace behemoth is now requesting $60 billion in federal assistance as the coronavirus crisis has crushed its customers and forced factories to shut down.
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https://www.cnn.com/2020/03/23/business/boeing-suspends-production-coronavirus/index.html

Southwest Airlines (LUV) spent $2 billion on share buybacks in 2019. Similarly, last year American Airlines Group (AAL)also spent $1.1 billion to repurchase its stock at an average cost of $32.09 per share. American Airlines shares closed Monday at just $10.
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Even in early March, as the coronavirus crisis mounted, Hilton (HLT) announced $2 billion of buybacks. Days later, Hilton withdrew its earnings outlook. The hotel industry is now seeking some $150 billion in federal assistance as the coronavirus has caused occupancy rates to crash.
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Companies that binged on buybacks now seek bailouts from taxpayers - CNN

They want bailouts. They want more money, or they threaten to shutter their doors and fire all of their employees.

Here's the thing. We have no choice. We have to do the bailouts because our economy is too dependent on these corporations to sustain itself if they go under. So I, for one, do support a multi-trillion dollar effort to get us through this.

We cannot legislate corporate morality, if for no other reason than that they will find ways to beat it, including loopholes in the legislation that might try to dictate it. So I see no value in an Elizabeth Warren type of approach. It is Pollyanish to think we could force it.

But, something needs to change in the leadership of corporate America. Some sort of refocus on the long term, on the wisdom of long term growth over short term gain for the betterment of their own interests and the economy long term. Don't know how we do it. But this endless circle of siphoning off public dollars and turning it into private wealth, at the levels we see in the last decade or so, is unsustainable.
 
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#2
#2
lawgator1 said:
When Trump announced the tax cuts and those were passed, we were constantly reassured that the companies benefiting from those cuts would reinvest the money in expanded production, growth, and jobs. Is that what happened?

No. Despite warnings from the left, the companies did what was feared. They took the money and bought back company stock, raising the price of their shares and rewarding management and their largest investors. Whenever Trump was asked about this, he responded, just look at your 401ks. And he was right, because managed funds did well in that they also saw their value increase due to the stock market boom.

But now, with a quick turn measured in days and weeks and the market tanking, what about those same big business that took the tax break money and, rather than reinvest it, enriched their management and shareholders?






Companies that binged on buybacks now seek bailouts from taxpayers - CNN

They want bailouts. They want more money, or they threaten to shutter their doors and fire all of their employees.

Here's the thing. We have no choice. We have to do the bailouts because our economy is too dependent on these corporations to sustain itself if they go under. So I, for one, do support a multi-trillion dollar effort to get us through this.

We cannot legislate corporate morality, if for no other reason than that they will find ways to beat it, including loopholes in the legislation that might try to dictate it. So I see no value in an Elizabeth Warren type of approach. It is Pollyanish to think we could force it.

But, something needs to change in the leadership of corporate America. Some sort of refocus on the long term, on the wisdom of long term growth over short term gain for the betterment of their own interests and the economy long term. Don't know how we do it. But this endless circle of siphoning off public dollars and turning it into private wealth, at the levels we see in the last decade or so, is unsustainable.
Click to expand...

You want permanent change in how corporate leaders behave? STOP DOING THIS:
"Here's the thing. We have no choice. We have to do the bailouts because our economy is too dependent on these corporations to sustain itself if they go under. So I, for one, do support a multi-trillion dollar effort to get us through this".
 
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#3
#3
McDad said:
You want permanent change in how corporate leaders behave? STOP DOING THIS:
"Here's the thing. We have no choice. We have to do the bailouts because our economy is too dependent on these corporations to sustain itself if they go under. So I, for one, do support a multi-trillion dollar effort to get us through this".
Click to expand...


Let Boeing and Hilton go under?
 
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#5
#5
utvolpj said:
Do you truly believe they will without this specific handout? No one else could possibly fill that space?
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The amount of money it would take to gather up all of their hotels and staff and maintain them or get them back up to speed? I don't know. Maybe not.
 
#8
#8
MG1968 said:
It was ok for Obama to bailout the auto industry (and the UAW) but it’s bad when orange man bails out other “too big to fail” corporations.

Why does any partisan think that their side has the moral high ground?
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Honestly, I'm not sure what happened on the buyback issue with those companies, so I am not sure of the comparison.

And as I say, I do not think there is a political solution to this. And for sure the Dems have also enabled this kind of thing, themselves.

The response has to come from the corporations themselves.
 
#9
#9
It’s one or the other on bailouts or bankruptcy too. Last time the auto makers got to wipe out shareholder value via bankruptcy AND got gov backing. That’s bull ****.

If anybody declares bankruptcy here they stand alone. That’s the way it’s supposed to work. If they choose the government teat they don’t buy back one share of stock and the executives waive all salaries until its paid back in full.
 
#10
#10
McDad said:
You want permanent change in how corporate leaders behave? STOP DOING THIS:
"Here's the thing. We have no choice. We have to do the bailouts because our economy is too dependent on these corporations to sustain itself if they go under. So I, for one, do support a multi-trillion dollar effort to get us through this".
Click to expand...

/thread
 
#11
#11
lawgator1 said:
Let Boeing and Hilton go under?
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Yes, just like we should have let GM and Chrysler go into bankruptcy. If we start allowing these major corporations to go into bankruptcy other BODs will start paying attention. I'd like to see the "you're only as good as your last quarter" mentality die a painful death.
 
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#13
#13
NorthDallas40 said:
It’s one or the other on bailouts or bankruptcy too. Last time the auto makers got to wipe out shareholder value via bankruptcy AND got gov backing. That’s bull ****.

If anybody declares bankruptcy here they stand alone. That’s the way it’s supposed to work. If they choose the government teat they don’t buy back one share of stock and the executives waive all salaries until its paid back in full.
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Incorrect. GM and Chrysler never went into bankruptcy. They were allowed to essentially close down and reopen as new companies erasing all debt, screwing the stock and bond holders.
 
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#14
#14
hog88 said:
Incorrect. GM and Chrysler never went into bankruptcy. They were allowed to essentially close down and reopen as new companies erasing all debt, screwing the stock and bond holders.
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My apologies I thought they were forced to use the bankruptcy vehicle to shaft their shareholders.

But that sounds even more diabolical frankly.

It’s one or the other. Either you take money to recover and you recover or you use the bankruptcy courts. You DONT basically go thru the bankruptcy courts with special dispensation government help in shafting your share holders.
 
#15
#15
What were the details of each "bailout" and when did each buy back occur? Buy backs are a valid use of cash for a company with plenty of cash on their books that is growing in value. Repurchased stock could always be reissued at a later date (and for more money if the price is rising)?

Should a compamy be forever barred from purchasing its own stock or paying dividends if they received government assistance in the past?

Putting the 35% corporate tax rate in line with the rest of the developed world at 21% isn't a bailout. It's a measure which was necessary to keep companies domiciled in the US.

Individuals contribute far more to government revenues than corporations. Without jobs created by corporations, they don't contribute any tax revenue.

The proposed legislation includes provisions to hold down executive pay increases and to pause stock buy backs. What is all of the leftist squawking about? Corporations are bad? Boards should be ruled by employees rather than stockholders? The government should control corporations as a condition of providing any economic stimulus?
 
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#16
#16
I'm perfectly OK with them issuing new shares of stock and selling those to the government to raise cash. That's not a bailout, it is an investment.
 
#17
#17
I'm not in favor of any stimulus package that is going to basically guarantee buybacks for big corporations and definitely not in favor of bailing out the cruise industry, piss on them. I however have no problem with a well thought out package that helps the small business owner that in a time of crisis is busting their ass to simultaneously feed or help supply his fellow man in need and struggle to keep their employees on the payroll.
 
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#19
#19
hog88 said:
Incorrect. GM and Chrysler never went into bankruptcy. They were allowed to essentially close down and reopen as new companies erasing all debt, screwing the stock and bond holders.
Click to expand...

GM went into chapter 11 bankruptcy in 2009. They emerged after the stockholder value was erased. They didn't stop operating. That would have been a chapter 7 (liquidation) bankruptcy.
 
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#21
#21
Thunder Good-Oil said:
GM went into chapter 11 bankruptcy in 2009. They emerged after the stockholder value was erased. They didn't stop operating. That would have been a chapter 7 (liquidation) bankruptcy.
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My mistake, however the filing was merely procedural.
 
#22
#22
lawgator1 said:
When Trump announced the tax cuts and those were passed, we were constantly reassured that the companies benefiting from those cuts would reinvest the money in expanded production, growth, and jobs. Is that what happened?

No. Despite warnings from the left, the companies did what was feared. They took the money and bought back company stock, raising the price of their shares and rewarding management and their largest investors. Whenever Trump was asked about this, he responded, just look at your 401ks. And he was right, because managed funds did well in that they also saw their value increase due to the stock market boom.

But now, with a quick turn measured in days and weeks and the market tanking, what about those same big business that took the tax break money and, rather than reinvest it, enriched their management and shareholders?






Companies that binged on buybacks now seek bailouts from taxpayers - CNN

They want bailouts. They want more money, or they threaten to shutter their doors and fire all of their employees.

Here's the thing. We have no choice. We have to do the bailouts because our economy is too dependent on these corporations to sustain itself if they go under. So I, for one, do support a multi-trillion dollar effort to get us through this.

We cannot legislate corporate morality, if for no other reason than that they will find ways to beat it, including loopholes in the legislation that might try to dictate it. So I see no value in an Elizabeth Warren type of approach. It is Pollyanish to think we could force it.

But, something needs to change in the leadership of corporate America. Some sort of refocus on the long term, on the wisdom of long term growth over short term gain for the betterment of their own interests and the economy long term. Don't know how we do it. But this endless circle of siphoning off public dollars and turning it into private wealth, at the levels we see in the last decade or so, is unsustainable.
Click to expand...

Yes, this did happen. Wages grew, we were at full employment, companies were competing ($$) to attract workers, there was growth and high demand. Many companies did reinvest in their business also. I do take issue with some of the boardroom decisions that have been made and I don't believe you are entirely wrong. Speaking wrt my employer, I did take exception the the level of stock buybacks, but not entirely. No one saw this coming.

While I'm more financially conservative and probably would have done things differently if I were CEO for a day, it's only 20/20 hindsight that lets us look back and say that was reckless, they should have done "x". As I've watched the discussion over the financial package currently being debated in Congress, I do think 1) it should be a loan, not a bailout 2) corporations should be regulated to what extent/purpose the money is used especially in regard to their workforce and 3) the climate change/diversity mandates/renewable fuels, etc. the dems are trying to force into this bill are complete crap and does not belong in this bill. It's a cheap shot.

Airlines, hotels, cruise lines, etc. have massive capital expenditures and costs. When you go from 100 to zero and your revenue gets eviscerated in weeks, your options are few. Their bills continue to mount and they continue to burn the fair amount of cash that they did keep on hand. I think it's possible that we see some sort of oversight bill come out of all this similar to the Dodd/Frank post financial crisis, maybe, but it better be written much better than Dodd/Frank that crushed small local and regional banks in it's wake.
 
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