French companies benefiting from state aid can't buy back shares
uk.reuters.com
uk.reuters.com
Devil is in the details. Maybe French government has good conditions for the aid, but the article is not giving details.
Aid should be exchangeable debt for public companies. No dividends and buybacks. No executive bonuses or options until the debt is paid full. After (5-7) years the remaining debt is exchanged into company stocks in a rate that leaves the government in the neutral position or with small profit. I think it would be OK to give compensation package to executives if it's tied to the profit that the government makes from the aid.
The aid should be available to everyone with same conditions. Not doing so punishes companies with good finances.
Having right incentives as a whole is the issue, not some implementation details.
If the directors and bosses stopped caring about the share price, the shareholders would be more likely to kick them out and recruit some more co-operative people.
If you want companies to care less about share prices, you'll have to structure companies differently.
Increasing the value of the company? Awesome, go ahead. That's what the bailout is supposed to be for.
Buying back stock? No. No value is created.
There two sides to a buyback transaction, and saying it creates no value is BS. Someone is SELLING.
If the issue is just using debt to buy equity, then there is some discussion to be had, but even then, the result looks more like a need for a stress test/capital buffer rather than a ban. Alternately, just modify the tax treatment of buybacks to look exactly the same as dividends.
Or GE could invest in increasing wages, particularly for the lowest-paid workers. Return capital to the actual producers of the capital.
There is an interesting problem where if workers get a 401k or IRA, then buybacks probably help them by driving asset appreciation in a tax free investment vehicle. BUT, if you don't get that, then appreciating equities doesn't do you any good.
In general, the answer is probably a moderate amount of all proposals. Increasing wages is certainly something that companies should be doing.
Finally, some portions of buybacks are used for equity awards to employees, so it is possible that buybacks might end up as tax-privileged payments to workers, albeit not to the ones who are most dependent on wages.
(So maybe therefore the CEOs won't increase the wages unless people start resigning?)
Stocks/dividends/buybacks are a system designed to capture all profits. No surprise and nothing really wrong there, but what annoys me is that shareholders like to pretend that __unless all profit goes into dividends/buybacks, it's a waste and a sign that the company is making poor decisions__, which is not the case. It does not take into account the lives of employees beyond the cost to company. That is also a perfectly reasonable investment for a company to make and, in fact, is one that it has a duty to invest in.
Stock value is reduced because petty shareholders refuse to acknowledge that workers deserve growth from company profit just the same as they do.
A company generating demand for its own stock does not create value, it creates liquidity. I hope you understand the difference.
As for the solution, I think we're on the same page. Government debt should not be used for creating liquidity for shareholders holding a shitty asset.
There's a line of thinking which says either a) buy all your equity and go private when the innovation runs out, or b) issue bigger and bigger dividends from FCF and then eventually go out with a bang. IMO, those are strategies that should be specific to a business model. E.g. a gas pipeline may love to pay out dividends since the business model is quite steady. A big electronics manufacturer might want to buy back its shares in the hope that it can eventually go private to restructure.
my point is, the mechanic of a buyback is not inherently evil, and does provide value. I agree that the government should not be creating that liquidity. Though, in reality I don't have a specific problem with letting the government issue convertible debt if companies want a long-term counterparty. the irony is that buybacks are often seen as short-termist, but bailouts should have a long-term lens.
Dividends seem also like the correct way to distribute profits back to shareholders. Buybacks on the other hand, I agree, are extremely shortsighted. If not used to go private and restructure the company, buybacks are a tool to provide liquidity to the more well-informed shareholders at the expense of other shareholders. Any sort of public debt financing of buybacks should be completely off the table.
Convertible debt seems like a good structure. If companies want to take the chance on the debt and they fail, the company would be effectively nationalized. In any case, a condition of any such note should be to prevent dividends and buy-backs. Any reasonable investor would probably include such terms.
And yet, if people want to liquidate it does drive the price down, but, the market is about price discovery and valuation - the company may have different beliefs about its value and different preferences, hence buybacks.
Returning value to shareholders isn't nefarious.
For example a common argument to ban buybacks is that they were illegal prior to 1982. We also had no good place to park savings before 1982, where at the same time we had seen enormous inflation the stock markets had been on steady decline since the mid 1960s. People weren't just losing money due to inflation, they had fewer options about where to put it reliably.
And when it comes to regulation I don't know what the best way to do it is other than letting companies that made bad buybacks die, or bail them out by diluting shareholders in some kind of bankruptcy proceeding.
That still has the perverse incentive of gambling with other people’s money.
If these companies are in such dire straits they need the infusion of cash provided by a government bailout, where did the money to pay dividends come from? Shouldn't they use that money to pay employees and fund their operations?
If companies need money they can sell shares, and then people have more money to buy the shares with. If that's what they want. If everybody has the money and nobody thinks a particular company is worth saving, why are we saving it?
Why is bailing out a compay different from "investing" in it? What is an investment besides a non-emergency bailout?
Edit: Why don't companies raise money by issuing more stock? Isn't that what the stock matket is for?
Bailing a company out is just a euphemism for making a very high risk investment that the market is unwilling to do. Putting aside whether that is the correct thing to do or not, the option would likely (in a recession) be mass unemployment, so there's an incentive from the state, that likely wishes to avoid that scenario, that doesn't exist in the same way for "regular" investors.
That said, it makes sense that if you pull the emergency lever and request a state bailout, you should pay future dividends back to the state for at least a decent amount of time since they basically gave you a loan that no-one else would.
This sounds like it should be a similar mechanism as startups' liquidation preference schemes. Investors that provided capital when others wouldn't are in a position to request that they get paid back in priority. For startups, it's (usually) if it fails. For mature companies, it could be a tweaked form like dividend priority or payback priority. Basically a mechanism to balance out the risk.
That depends on the particular form of bailout, which can anything from equity/debt financing as you describe, to a one-off form of bankruptcy, to an outright gift of funds, and often combines elements of all three.
Buying new shares from the company in exchange for bailout money dilutes the value of existing shares (not necessarily a bad thing, the investors bet on a company that wasn't prepared for such a downturn). Of course companies that have done stock buybacks could sell stock on the open market with roughly the same effect.
Buying debt from a company likely means future dividends will be lower, share prices are also likely to go down.
Plain bailing out a company with no payback is essentially an investment in jobs and a healthy economy, I can't see any reason why at the very least it shouldn't be exchanged for equity.
Of course in all these cases it's all of us who are doing this collectively (very socialist!) we should expect that companies that are bailed out by the taxpayers repay their bailouts eventually, from that point of view investing in companies that don't pay their fair share of taxes (by playing accounting games, moving profits offshore etc) are particularly poor investments
"Very" seems like a generous adjective since actual socialism would require the company to be run by the employees. It's more like "almost" socialism.
Here businesses that may otherwise be perfectly sane are temporarily prevented (or limited) by the state from operating for the public good.
It's analogous to the state paying for the property they seize under eminent domain.
The way shares work is a way for a publicly traded company to obtain a loan. It does this by issuing shares which can be bought by investors. Shareholders are not liable except for their initial investment.
After selling shares, these can be traded i.e. on NASDAQ, but any price on the shares there only reflects the public perception of value of any given company. It's a high risk lottery.
This is also the reason that companies pay out large dividends to shareholders. They're obligated by law to payout dividends. Think of it as interest on a loan.
It disincentivizes responsible financial management. Why not spend 95% of profits on buybacks if the government is ready to catch you?
The only thing that makes it a question at all in my view are the potential social consequences of a bunch of huge companies failing at the same time. If it wasn't for that, I'd say let them fail and let the investors pay for it in negative ROI.
By "cost more" I mean not just in sheer money, but also counting the overall impact on the population.
Bailing out is privatizing the benefits but mutualizing the risks.
It's taking what favors you from both capitalism and socialism, call that a free market, and pretend it's for the common good. You always win.
People says communism didn't work looking at Russia and China. But the ruling class will abuse any system to the point it doesn't look like the original idea at all, if not kept in check. It's true for capitalism as well, as we can see.
To me, being able to do this is proof we are still not in a democracy.
We enjoy a lot of freedoms, so we are not in a dictature. But we are still not in power. We're just told we are.
One difference between them is that a dangerous concentration of power is inherent to communism. It's intentional. In capitalism, it's an unintended consequence that can be mitigated by regulations (anti-trust laws, subsidies to startups, etc.)
[1]https://en.wikipedia.org/wiki/Dictatorship_of_the_proletaria...
So that doesn't say anything about how it's unintentional, if anything it just underlines it.
Radical economic egalitarianism implies a (strong) governmental system. If capital can be sold/transferred, capitalism (i.e. concentrated control of the means of production) will naturally recur. If capital cannot be sold/transferred, someone has to decide how it's distributed, and the only body that can do that is a (governmental) central planning authority. That gives the government enormous power, whether it's a dictatorship or not.
> You can have a dictatorial communist system. You can have a democratic communist system.
This is unrelated to what I wrote. The US is essentially an oligopoly, but it's also a democratic republic.
A governmental system is affected by the dynamics of the economic system. After many generations, the governmental system may be utterly different from what was originally established or intended (as is the case in the US).
Please define "naturally", because I don't see anything natural to that. For me, it's a tautology to say that in a capitalist culture and education environment, capitalism will "naturally" occur. That doesn't convince me that the same human genetic pool (which I guess is the natural part ?) in another environment would behave the same way.
You mean in opposition to a system that promotes the concentration of capital, which is power ?
Or do you think non capitalist systems don't have laws and a group of dictators must be at the top?
Empirically, for 100% of the sample size, socialist systems always turned into dictatorships after a few years at most.
Capitalism + regulation + social safety net != socialism.
You see, buybacks are "that one weird trick" where you can steal from the market, by inflating the EPS and hence your employee stock options, and not go to jail.
Executive total compensation is a wider problem, but shareholders seems generally satisfied with letting boards have almost as much of the company money as they want. Only people who really take it too far like Carlos Ghosn get punished.
They changed this a while back, didn't they? "Qualified dividends, on the other hand, are taxed at the capital gains rates, which are lower." [1]
AFAIK the only tax advantage of dividends now is that you're forced to pay tax every year, rather than being able to pay tax only once when you actually sell your shares. (Do let me know if there's something I'm missing.)
I think those French conditions are entirely reasonable and sensible.
What people are complaining about is that previously these companies did buy backs. Boeing did buybacks (when they were profitable, though they cancelled them when the 737 MAX disaster began). The airlines did buybacks. Etc.
People are complaining that if these companies all sat on enormous war chests they wouldn't need help now. But that has never happened and will never happen like that because it would be ludicrously inefficient for the market at large.
One can't spend half the money and have one but not the other.
[0]: https://www.businessinsider.com/airlines-coronavirus-bailout...
In a way it's similar to dividends, but not taxes in the same way.
Basically the logic behind the French government reasoning is "we're giving you money to support your business and your employees, not to give it away to shareholders".
Note that this wasn't the initial plan of the French governement, initially the plan was to pose no conditions, just saying "please be responsible in your choice". It's after the public backlash that they finally put conditions.
The real beneficiaries of buybacks are executives and employees with vested stocks. They both lose money on dividends and directly benefit from the contraction in available shares.
I wouldn't necessarily refer to this as "stealing" but it is a sneaky way to increase your compensation as an executive. It also causes a conflict of interest when a company is deciding whether to issue dividends or do a stock buyback.
Buybacks are just tax efficient dividends, and all of the hate against them is from people who don't realize this and haven't thought through the math.
In the article it says this rule applies to dividends, too. So at least it's not pure pandering.
If bailouts are normalized, there is no disincentive against such reckless behavior. I would like there to be permanent cash buffers to fund 1 year HR costs before any form of shareholder returns are allowed.
Also, it might be worth probing the cause of bizarrely low rates, or wondering if it's a good idea for a high corporate tax rate that distorts behavior so much. (If you're going to reply that the effective corporate tax rate is actually low because they engage in complex schemes X, Y, Z, to reduce their effective rate, then you're agreeing it's distortive and encourages socially-wasteful activity.)
The entity "pricing" the consequences has few consequences if they get it wrong, so why wouldn't they err on the side of doing more business and making more money?
No, the issue people have is not with the buybacks themselves but the massive debt binge many companies went on in order to buy these shares back. It's precisely because people have done the math.
No, a lot of it is from people who aren't too keen on capitalism or the means by which corporations return capital to the capitalist class in general, and particularly when it is “tax efficient”.
Or from people who do exactly realize this and have though through the math. I mean, its not like there is no reason why dividends tend to be taxed ...
A company can issue new shares and raise money when they need it.
A company can buyback shares when they have extra money they can't efficiently use (see: AAPL, MSFT, GOOG).
There is absolutely nothing nefarious about this mechanism, and if tax treatments vary blame the government (don't hate the playa, etc).
Buybacks are only a problem when cash-poor companies do buybacks. Either they're depleting a small contingency reserve, or they're even utilizing debt to do it.
But what about prioritising partial nationalisation of these companies by injecting cash in exchange for shares? That way it would have no impact on the net public debt, as the gouvernement assets increase at the same rate as the debt.
French detected. We spell it as "government" in English.
Another argument is that we cannot guarantee letting them fail will happen due to political influence etc so it is better to put in place rules to stop bad behavior in the first place as there is always a risk of corruption when it comes to bailouts.
Yeah, but that's kinda the point. If a company wants to buy high, sell low, that's their choice. But if they want to waste their cash buying high (and dodging taxes on dividends), they shouldn't expect to be able to successfully get easy money from the public when they need it.
In my view, this is radically different from, for example, buying the whole public stock and going private.
So yes, this announcement was really expected
There was a huge public backlash, which is why the government changed their plan.
> The tax payers are taking a risk, so they should also have the possibility to join the rebound, when it comes, and get some of that money back.
And regarding dividends:
> If you take part of different forms of state financed support, of course it will look bad if you at the same time give out large dividends.
[1]: https://www.dn.se/ekonomi/magdalena-andersson-oppnar-for-oka...
Once any pattern is formed and determined, there are always some people who will attempt to exploit it, and those people are often the ones who would eventually ruin all the good things for everybody else.
They won't deliberately cause crashes, because those are not profitable, but they will deliberately make risky bets that benefit them if things go well, and get bailed out if they fail (riskier bets have more upside for the kleptocrats looking out for Number One).
Given the odds, crashes are nearly inevitable. This is undistinguishable from deliberate crashes.
The policies enacted after the 2008 crisis have actually made the banking sector even more concentrated and increased the likelihood of another such crash caused by moral hazard in the Too Big to Fail financial institutions. The procedures to fight against that, like "living wills", will likely have the same effectiveness as bulletproof vests made of wet toilet paper.
The dance between supply and demand in a market enforces a number of unavoidable consequences. When an outside influence artificially influences a change in one side, a contraction often occurs in the other. That reaction can often overcorrect. Theoretically, a small downturn in supply could cause a proportional contraction in demand as price rises. But what usually happens is the response is driven both by the proportion of downturn and a measure of future value confidence based on additional factors. Subtle changes can game the system a little, but every change carries an added risk of flight to substitutes.
At a low point, the ROI on trying to game market share or other factors quickly narrows.
https://hbr.org/2020/01/why-stock-buybacks-are-dangerous-for...
https://www.nytimes.com/2018/08/23/opinion/ban-stock-buyback...
https://mebfaber.com/2019/08/05/faqs-on-share-buybacks-for-l...
These two paragraphs have all the key concepts IMHO (there's even redundance). You understand this, you have a comprehensive 10,000ft view.
> “Stock buybacks made as open-market repurchases make no contribution to the productive capabilities of the firm. Indeed, these distributions to shareholders, which generally come on top of dividends, disrupt the growth dynamic that links the productivity and pay of the labor force. The results are increased income inequity, employment instability, and anemic productivity.”
> “Stock buybacks made as open-market repurchases make no contribution to the productive capabilities of the firm. Indeed, these distributions to shareholders, which generally come on top of dividends, disrupt the growth dynamic that links the productivity and pay of the labor force. The results are increased income inequity, employment instability, and anemic productivity. [...] because of corporate tax cuts, in 2018 taxpaying households were burdened with about 38% of the combined government and business debt that enabled corporations to do buybacks.”
I'm a fierce capitalist, I love human sweat and I admire those who create value. Whether Jane the CEO or Rob who makes delicious cookies, value is value, value is good, value is shared (or should be).
Stock buyback is stealing though, plain and simple. It's a legally, cleverly twisted, inverted Robin Hood mechanism at the private level. It's basically everything that's wrong with finance in abstraction of value.
Expect tighter regulation promoted by Central Banks in the 2020s or we're heading for another income inequity-snafu. For those who haven't read much economy, the gist is this: not enough income inequity, and society stagnates (underperforms relatively to others under comparable conditions). Too much inequity, and the system chokes on itself (not enough consumer liquidity ⇒ you know...— and if you don't, think: consumer liquidity is the difference between pre-WWII and post-WWII global economies.
I'm not an economist and absolutely not an expert (I only did 2 short years of econ in university, and self-taught some financial-survival skills). But this is like 101 to me, the basics of a macro-econ intro. It's not even controversial, or hasn't been since post-Keynes basically.
I mean there are other ways to extract money from a company than paying dividends or doing share buy backs.
Are they also going to cap salaries for employees? Are they also going to stop companies paying out large fees to related companies? What about investing in expensive but highly speculative projects?
But some regulation should be put in place... if a CEO fscked up the company so much, it needed government bailout, they don't deserve a bonus, no matter what their contract says. A good system would also be, to turn a bailout into a 'long-term loan' from the government, and have a mandatory percentage of the companies profits go to repaying the 'loan', with some regulation on internal business (to prevent dumping everything to a new, 'clean' company, and letting the old shell fail).
A popular counter-argument is that governments should plan to spend money on unemployment relief for individuals if it looks like a lot of big companies won’t make it. Let companies fail but cushion the blow for people affected.
What the CEO really is, is a marionette for the shareholders. That's why all the CEOs act in the same way and that's why they always get their bonuses. Also they got lots of bonuses in the previous year for running these schemes.
It's a pretty innocent view of the world.
Or the new company would just behave exactly like the old one because it is the best short term strategy for shareholders.
And anyway, in case of new crisis, their new high executive will sell their share right before (exactly like Jeff Bezos did https://www.theguardian.com/business/2020/mar/27/jeff-bezos-...) and look for a new job.
Any public company stopped to think long term a while ago. Prudent means less profitable.
Also yes, hoping that the coronavirus make them suddenly resilient, it's pretty innocent :)
And I wrote more prudent, not “suddenly resilient”. Why don't you argue against what I actually wrote, rather then a straw man you made up?
Unfortunately companies are often able to convince politicians, and the public that they're critically important, or too big to fail. They say that many other companies depend on them, and if they're allowed to go bust they will be "the next lehman brothers" with many other companies cascading and failing.
So I think bailouts are going to continue be a thing indefinitely. And if we can't stop bailouts from happening, making them come with conditions - like safer capital ratios - that make bailouts less likely in the future would be a good thing.
Also, good luck taking a plane in the few months following the crisis. Creating back airlines from the ground up is far from instant, even if you have the planes and crews just laying around.
"Enfin, les employeurs bénéficiant du dispositif de chômage partiel, lui aussi financé sur crédits publics, sont appelés à « la plus grande modération » en matière de dividendes."
The article clearly states that _initially_ companies were called to moderation, and that _now_ a law project will be passed to strictly forbids this.
"Le président de la République Emmanuel Macron a franchi un cap, vendredi matin, lors d’une rencontre téléphonique avec les partenaires sociaux, en annonçant que M. Le Maire soumettrait au premier ministre Edouard Philippe un projet pour encadrer strictement le versement des dividendes. Ils devront être suspendus quand les sociétés bénéficient des reports d’échéances fiscales et sociales"
> French companies benefiting from state aid can't buy back shares
You stated "That's a false statement"
However it is in fact a true statement, since a law is effectively passed to forbid the very thing the post title describes.
Hence stating "That's a false statement" is "strictly false", and quoting a part of an article that explains that the exact thing you're quoting is now outdated doesn't make it less false somehow.
If you want to mean that companies "can" still buy back shares, although it's now illegal, well, that's just refusing to give the post title an honest interpretation of what it means.
> Toutes celles qui auraient bénéficié de reports de charges sociales ou fiscales et qui auraient versé des dividendes se verront obligées de rembourser cette avance de trésorerie sur les charges sociales et fiscales, avec une pénalité d’intérêt.
So, he asked the all companies whose employees are being partially payed by the state to be very moderate in paying dividends. But they will force all companies which are getting direct aid from the state to stop paying dividends, or pay back the aid they got, with interest.
Ramp up risk in your businesses operations, and you'll either make a lot of profit or loss. If you make profit, pay back the governments loan and give the rest to shareholders. If you make a big loss, close up shop and the government looses out.
Dans le meme article.
https://www.francetvinfo.fr/sante/maladie/coronavirus/bruno-...
J'invite (...) toutes les entreprises qui ont accès aujourd'hui au chômage partiel, c'est-à-dire qui ont leurs salariés payés par l'Etat, à faire preuve de la plus grande modération en matière de versement de dividendes"
Media seems to portray it as some sort of evil trick, but I don't see it. It's not that different from distributing divs
Instead of saving cash for emergencies or investing in new equipment, research or product lines, the cash is just 'wasted' on manipulating a share price in order to boost quarterly targets.
A lot of the time, management is then rewarded for the increased share price, which doesn't necessarily reflect the performance of the business in terms of their ouput, number of widgets sold or whatever.
I agree that some of these recent stories about evil buybacks feels like fabricated outrage. For requesting state aid, buybacks are largely the same as dividends: if you need public support, you should definitely not do buybacks after that, just as you should pay dividends.
Whether you believe they shouldn't have done buybacks in the past, ever, should not be much different than whether they should have paid out dividends in the past. Higher level, it's about what kind of equity buffers companies should retain in normal times.
What they should do is companies benefiting from state aid have to give a lot of shares or options to the state in return. Maybe near 100% in bad cases.
For a small business like a dog groomer or a restaurant, we expect the fraction that aren't viable to go out of business with some probability during small economic shocks, and we expect that this will be a small fraction. So we let them go. But in a crisis where an entire sector will be mostly wiped out, such as restaurants in the current pandemic, some attempt at preserving the sector makes sense because otherwise you send shocks through everything connected with it. For example, if a restaurant occupies the bottom floor of an apartment building, and the building's cashflow depends on that space not being unoccupied for more than two months, then you can have a sequence of events that result in mass evictions unless you control those side effects as well. It's probably easier to try to maintain the web of cashflow.
Now, you may be able to get side effects that you like in some sectors, such as restaurants turning into food kitchens for the duration as part of the direct injection of cash. On the other hand, a bar or a salon probably just shuts down. But even there, most stylists rent a chair in a salon, so you need to make sure that web of cashflow isn't broken by an owner pocketing it. It still gets very complicated. For some areas like farms we already have large measures in place, since bad seasons tend to affect large swathes of farms. Thus reserve boards, farm subsidies and the like.
Others have pointed out that such structural maintenance can be gamed by having a barely-viable company that is too big to fail. Then even small shocks can be turned into structural crises. Someone else suggested requiring capital reserves the way we do for banks, and for large companies that makes sense. If you're that big and structurally risky, you should be required to derisk yourself.
One discussion I hope we will be having as a society during and after this is what disaster preparedness looks like. We should have the regulations for what putting the economy on such a footing looks like, run simulations every few years for a week, and have adversarial gaming on an ongoing basis to try to find loopholes and close them.
What will happen with that excess money? Option 1 (The capitalist) : Trust the companies that they will handle them properly by planning for a rainy week (apparently nobody does), or investing in their business. Option 2 (The socialist) : Tax heavily the earnings and redistribute them in democratically approved way.
This dramatic spike in jobless claims is an American peculiarity. In almost no other country are jobs being destroyed so fast. Why? Because throughout the world, governments are protecting employment. Workers keep their jobs, even in industries that are shut down. The government covers most of their wage through direct payments to employers. Wages are, in effect, socialized for the duration of the crisis.
Instead of safeguarding employment, America is relying on beefed-up unemployment benefits to shield laid-off workers from economic hardship. To give just one example, in both the United States and Britain, the government is asking restaurant workers to stay home. But in Britain, workers are receiving 80 percent of their pay (up to £2,500 a month, or $3,125) and are guaranteed to get their job back once the shutdown is over. In America, the workers are laid off; they must then file for unemployment insurance and wait for the economy to start up again before they can apply for a new job, and if all goes well, sign a new contract and resume working.
And: There is nothing efficient in the destruction of businesses that were viable before the virus outbreak. The crisis cannot be blamed on poorly managed corporations. Government support, in the case of a pandemic, does not create perverse incentives. Bankruptcies redistribute income, but in a chaotic and opaque way. And while bankruptcy might be a way to deal with the economic fallout of the pandemic for large corporations, it is not well adapted to small businesses. Without strong enough government support, many small businesses will have to liquidate. The death of a business has long-term costs: The links between entrepreneurs, workers and customers are destroyed and often need to be rebuilt from scratch.
Instead, tax corporations for excess profits later:
Windfall profits have a fair, comprehensive and transparent solution: The government should impose excess profits taxes, as it has done several times in the past during periods of crisis. In 1918, all profits made by corporations above and beyond an 8 percent rate of return on their capital were deemed abnormal, and abnormal profits were taxed at progressive rates of up to 80 percent. Similar taxes on excessive profits were applied during World War II and the Korean War. These taxes all had one goal — making sure that no one could benefit outrageously from a situation in which the masses suffered.
https://www.nytimes.com/2020/03/30/opinion/coronavirus-econo...
However, I'm not sure what would prevent the Hollywood accounting trick in that scenario.