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Comment by sfj | Hacker News Reader

Why aren't we letting them fail instead of allowing these idiots to stay in business? Say American Airlines went bust. It's debtors would get its planes and other company assets, who would then in turn sell them to other airlines. A new airline might form to take its place, which would probably be a little more prudent than the last one.

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In some indistries, that means thousands of people without work, and hundreds of other companies in the supply chain going bankrupt, and even more people without work. Sometimes it's cheaper to bail out the main company, then to deal with the unemployed, many more bankrupt companies etc.

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).

> In some indistries, that means thousands of people without work, and hundreds of other companies in the supply chain going bankrupt, and even more people without work.

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.

Unemployment relief is a temporary solution because people are usually single skilled. For example an airplane engineer doesn't easily get a new job in another industry.

Wouldn't former AA employees find jobs in the new company formed by whoever bought up the assets formerly owned by AA? Why would they need to change industries? The need for airlines won't go away.

This is where the criticism against too big to fail comes in. We have a lot of eggs (jobs, contracts) in one basket.

> 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

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.

can you explain to me, why we can not regulate the very same companies in the good times then?

In good times, companies work "at capacity" and all the problems are between the owners and the managers. If managers fsck up, the owners will deal with them, or lose their own money. If something fails, people will still excpect those products, other companies will take the workers, etc. (so if you're a pilot, AA goes under, people will still need to travel, so other companies will need more pilots). In the time of crisis (like now), (almost) noone flies, and no company needs pilots (neither their own, nor new employees). In some countries (eg. mine, slovenia), the government has also forbiden flights (and other modes of public transport). In this case, where you have a successful company, and the government says you're not allowed to do your core business, but also not allowed to lay off employees, and they still expect all the taxes, dues and paycheks paid, ...'something' has to be done (either bailouts, or special laws (like here now), where you don't have to pay some government fees, can put workers to "wait for work" (less pay, but still employed), etc.).

> A new airline might form to take its place, which would probably be a little more prudent than the last one.

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.

You think that bailing all these companies out has no effect on how companies run their business going forward? And you claim I have an “innocent view of the world”...

You are speaking about an industry where the margins are so thin that small fluctuations in petrol price or minor geopolitical events are enough to make a dozen companies brankrupt every 2 month.

Also yes, hoping that the coronavirus make them suddenly resilient, it's pretty innocent :)

I wasn't talking about a specific industry. And even if I was, a dozen passenger airlines go broke every two months? I'd like to request a citation on that one.

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?

There’s thinking long term, and then there’s thinking “what if the government shuts down the economy over a once in a hundred year pandemic?” There might not even be an airline industry next time this happens. I honestly think it’s totally unreasonable for the public to limit the finger at these companies and said “you should have planned”

maybe people might realise through the ensuing turmoil what a shitshow business has become actually...

I definitely agree. Companies should be allowed to go bust more! Especially if they're in trouble because they didn't maintain a safety net of capital.

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.

That makes no sense. Do you want future quarantines to fail because the last one needlessly destroyed too many businesses? If people realize that a quarantine will lose them their jobs they sure aren't going to comply and will just ignore future quarantines.

Informing hundreds of thousands of people that a government enforced quarantine took away their job permanently isn't a good way to keep a government. If the government instead helps them stay on pay roll, life goes on

What if the government just pays them instead and lets the company fail?

It's probably much more expensive. The difference is between a loan which will likely be paid back versus paying the salaries of thousands of people for who knows how long.

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.

The salaries will end up back in the economy, low paid workers are unlikely to hoard their bailouts because they need food/shelter/etc. It’s also likely that airlines in chapter 11 would be acquired/restructured as a unit, not necessarily sold for parts.

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