Trump says he would consider government equity stakes in companies seeking bailouts

U.S. President Donald Trump speaks speaks on the latest developments of the coronavirus outbreak, while flanked by White House coronavirus response coordinator Debbie Birx (L), and U.S. Surgeon General Jerome Adams (R), in the James Brady Press Briefing Room at the White House March 19, 2020 in Washington, DC.

Chip Somodevilla | Getty Images

President Donald Trump said Thursday he would consider having the federal government take equity stakes in companies accepting federal aid in a bailout geared toward blunting the economic impact from the widening coronavirus outbreak.

When asked by a reporter whether he supports the government taking an equity stake in certain companies, he responded: “I do. I really do.”

He would not say specifically which companies he would want the government to take a stake in, but did expand on the kinds of companies in which the move might make sense. 

“People are coming in for money, in some cases through no fault of their own, but in some cases where they did certain things over the course of the years, including buying back stock,” he said.

Trump earlier in the briefing said he would not oppose barring companies that receive federal assistance during the coronavirus pandemic from conducting stock buybacks.  The four biggest U.S. airlines  — DeltaAmericanSouthwest and United — have collectively spent about $39 billion over the last five years buying back shares, according to a tally from S&P Dow Jones Indices. U.S. airlines are seeking more than $50 billion in aid.

“Maybe I view that as a little bit different than somebody who didn’t, or somebody that built plants all over the United States, which there are plenty of them too,” Trump said.

Other industries, such as automobile companies, have also been struck by the pandemic. General Motors, Ford Motor and Fiat Chrysler will temporarily close all U.S. factories. The halt in production could create an immediate cash crunch for the automakers as demand for cars declines amid the COVID-19 outbreak. 

An equity stake is unlikely to be the companies’ preferred form of relief. The move is often dilutive to shareholders and gives the government greater ability to oversee a company.

General Motors gave a stake in its business to the U.S. government during the auto bailout in 2009. When it ultimately paid back the government, it had to wipe out shareholders in return. 

Many industries, including the airlines, have therefore sought relief in the form of direct grants and other means. The hope for many lobbyists was that any bailout look more similar to that which the government offered the airline industry after 9/11. The package originally offered airlines a total of $5 billion in direct grants and $10 billion in loan guarantees.

Congress is currently hashing out a stimulus plan with the administration that could top $1 trillion. On Thursday Trump did not rule out the idea that more aid could be needed if the disease is not contained. 

The administration has in recent days floated a proposal that would include $50 billion for the ailing airline industry, as well as $150 billion for “other distressed sectors.” It was not immediately clear which industries would be covered, but Trump has called out the cruise and hotel industry multiple times for their ails, saying they are to blame.

— CNBC’s Leslie Josephs contributed to this report.

Leave a Reply