The Trump administration is putting together a rumored trillion-dollar-plus stimulus package that will include taxpayer funded bailouts of Corporate America, according to leaks cited widely by the media. Trump in the press conference today singled out $50 billion in bailout funds for US airlines alone. A bailout of this type is designed to bail out shareholders and unsecured creditors. That’s all it is. The alternative would be a US chapter 11 bankruptcy procedure which would allow the company to operate, while it is being handed to the creditors, with shareholders getting wiped out.
So get this: The big four US airlines – Delta, United, American, and Southwest – whose stocks are now getting crushed because they may run out of cash in a few months, would be the primary recipients of that $50 billion bailout, well, after they wasted, blew, and incinerated willfully and recklessly together $43.7 billion in cash on share buybacks since 2012 for the sole purpose of enriching the very shareholders that will now be bailed out by the taxpayer (buyback data via YCHARTS)
Share buybacks were considered a form of market manipulation and were illegal under SEC rules until 1982, when the SEC issued Rule 10b-18 which provided corporations a “safe harbor” to buy back their own shares under certain conditions. Once corporations figured out that no one cared about those conditions, and that no one was auditing anything, share buybacks exploded. And they’ve have been hyped endlessly by Wall Street.
The S&P 500 companies, including those that are now asking for huge bailouts from taxpayers and from the Fed, have blown, wasted and incinerated together $4.5 trillion with a T in cash to buy back their own shares just since 2012
And those $4.5 trillion in cash that was wasted, blown, and incinerated on share buybacks since 2012 for the sole purpose of enriching shareholders is now sorely missing from corporate balance sheets, where these share buybacks were often funded with debt. – READ MORE
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