Politico: Washington Is About to Pick Which Companies Survive
https://www.politico.com/news/magazine/2020/03/22/bailout-coronavirus-congress-crisis-142961
A practical viewpoint we can get behind:
“The first rule for getting out of a hole is to stop digging, and that means throwing money at any business that can make more tests, masks or ventilators, provide more hospital beds or medical supplies, or otherwise help get the pandemic under control.”
This one’s a little more slippery:
“It may seem unfair to send other blameless industries to the back of the line, especially after Washington approved $700 billion for too-big-to-fail banks that actually caused the cataclysm in 2008, but it really reflects the same principle. The crisis in 2008 was a financial panic, an all-out run on the financial system that props up the economy; the only way to end the panic was to assure depositors and creditors that their money would be safe in the system, and the only way to do that was to have the government stand behind the banks.”
And while we agree “Jubilee” would come with its own set of moral hazards, we’d be short of calling it any more “crazy” than the alternatives (I mean, relatively speaking):
“This is why one Main Street solution floating around, a “Jubilee”-type mandate where the government suspends all payments on mortgages and rent and other loans for a couple months, could freak out creditors and destabilize the financial system yet again. “That. Would. Be. Crazy!” another crisis veteran told me.”
Unfortunately, it comes down to the simple fact that some will get their money back (and then some) for the risks they took, while others will not. And who or what will determine which category you fall into? It won’t be the quality of your planning & execution, or the efficacy of your risk management protocols, or even your simple prudence. Rather, it will be a decision made by a government bureaucrat. As such, how likely will you be to ever take that risk again? Regardless of the quality, merit, or potential value of your ideas? Probably depends which category the government put you into. From this point forward. #MoralHazard