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To: GVTucker who wrote (143845)	9/20/2001 11:39:11 AM
From: ild	Respond to of 186894

GV, RE: Airlines #reply-16381395

To: GVTucker who wrote (143845)	9/20/2001 12:05:41 PM
From: tcmay	Read Replies (2) \| Respond to of 186894

Changes in America, and the stupidity of bailouts and subsidies "Well, we can agree on something after all." "Bailing the airlines out at this point would be rewarding them for being over leveraged. We already have a tested mechanism for corporations that have too much leverage for their current environment--bankruptcy. If you reward a highly levered firm like UAL by keeping them from bankruptcy, there's nothing to prevent them from getting excessive leverage again. The risk has been removed. And in the process, a firm that didn't use excess leverage, such as Southwest Air, gets punished because they had a solid business model with a fraction of UAL's leverage. " Precisely so. A "bailout," either in the form of direct subsidies or loan guarantees, will only distort the normal market and worsen the eventual losses. The Treasury Secretary is making this point forcefully in Senate hearings even as I type this. Plenty of industries are suffering: hotels, restaurants (near tourist and convention sites), maintenance workers, and dozens of other industries. Why bail out UAL when Marriott, the provider of food for airlines and operator of many hotels near airports, is also being hit hard? More generally, the airline problems are a lot more than just due to 3 days for forced shut-down: the problems are deep and systemic. One reason I am so harshly critical of the "sentimentality" surrounding this event is that sentimentality doesn't fix problems. The political correctness that Mary Cluney thinks is a good thing for society is actually a terrible thing: it is censorship and it hides problems under rocks (e.g., it is politically incorrect to talk about the fact that much of the negro population in the U.S. is nonproductive). Talking about bailing out industries because we feel sorry for them is especially insidious. Are we going to bail out Cantor Fitgerald for losing 700 of 1000 employees? How about the New York theater business, which is closing down most performances? Or thousands of restaurants now seeing 20% of normal business? And so on. Fact is, people are not flying. Things are changing in America. People are realizing that maybe saving money for a rainy day is better than having the latest 65-inch bigscreen t.v. And, yes, businesses are telling their workers that travel budgets will be slashed dramatically and that the 600 MHz Celeron PC they have will have to do for the rest of this year. Are the Feds going to bail out AMD and Intel? Nope. Nor should they. --Tim May