◼ COVID-19 / GOVERNMENT Bloomberg Businessweek March 16, 202025Should webail
out companies
left reeling?
○ Covid-19 will cause some companies to fail and
will push entire sectors to the brink. The ques-
tion is how much the federal government—and, by
extension, the American taxpayer—should do to
rescue companies felled by the economic effects
of the virus. It’s treacherous territory. Bailouts of
financial institutions damaged by the 2008 crisis
provoked populist anger on the left and the right.
Donald Trump owes his presidency in part to the
public’s revulsion over taxpayer funds going to Wall
Street while ordinary citizens suffered.
Now it’s the Trump administration that has to
decide which companies and sectors merit help,
how much, and in what form. On March 10 the pres-
ident pitched Republican senators on economic
relief for the travel and hospitality industries,
Lindsey Graham of South Carolina, who attendedtokeeppeopleentertained.Instagram,WhatsApp
chatgroups,andTelegramchannelshavebecome
hubsfor plague jokes and at-home exercise
tutorials. In a country where dancing in public is
officially discouraged, videos of dancing nurses
have become a phenomenon: Nurses filmed them-
selves swirling their hips and wrists to pop songs,
their identities shielded by hazmat suits, masks,
and hospital gowns.
Trust in the government, never high among a
large share of Iran’s populace, may be at an all-time
low. A visibly ill Harirchi assuring the nation on
live TV on Feb. 24 that the government had every-
thing under control did little to inspire confidence.
Memes ridiculing official responses to Covid-19 have
gone viral. “The first Friday without wishing for the
death of other nations,” went one joke, shared on
social media after Friday prayers were canceled on
March 6. “Well done to the people of Iran.”
Jokes aside, the outbreak in Iran is deadly and
shows no sign of abating. Infections in the area
are going up “exponentially,” says Gholam Ali
Jafarzadeh, an MP for the city of Rasht in Gilan
province. “We will witness a humanitarian catastro-
phe if serious measures are not taken.”�Arsalan
Shahla, Golnar Motevalli, and Marc Championthe meeting, told Bloomberg News. Graham said
Senators John Hoeven of North Dakota and James
Lankford of Oklahoma suggested a federal bailout
for the shale drilling industry. “I don’t know at this
point if that will be in any final package,” Senator
JohnThuneofSouthDakotasaid.
Theargumentinfavorofbailoutsisthatthe
Covid-19 pandemic is an out-of-the-blue disaster that
no company could reasonably have been expected
to prepare for, and if companies fail, there will be
serious harm to their employees, customers, sup-
pliers, lenders, and the overall economy.
The argument against bailouts is that companies
can and do continue to operate even if they require
protection from creditors in federal bankruptcy
court. True, shareholders may lose everything with-
out a bailout, and creditors will take a haircut, but
that’s how capitalism works. “Capitalism without
bankruptcy is like religion without hell,” says Jeffrey
Miron, an economist at Harvard and the libertar-
ian Cato Institute, quoting an economists’ bromide.
The key question in assessing whether to bail out
a firm is whether its failure would cause harm to
the overall economy. Timothy Geithner, who was
President Obama’s Treasury secretary, argued that
saving financial institutions in the 2008 crisis was
crucial because they were too big to fail and too
interconnected. If one defaulted, it could trigger a
cascade of defaults that would shut down lending
and destroy the economy.
In other industries, though, the failure of one
company can help competitors. If one airline shuts
down, its rivals pick up its customers, and with
one less rival, their prices can rise to more profit-
able levels. So letting weaker companies go under
could save an industry.
Another question is who wins from a bailout.
Afterthefinancialcrisis,someDemocratsargued
thatthegovernmentshouldhavedonemoretohelp
homeowners pay their mortgages, rather than helping
banks that recorded losses when they foreclosed on
the loans. Similar arguments may be made this time
around. Dean Baker, senior economist at the liberal
Center for Economic and Policy Research, says the
quid pro quo for any bailout should be a hard cap
of $1 million in annual compensation for the compa-
ny’s chief executive officer and other officers. (“I’m
confident that they can find good help for under a
million bucks,” he says.)
Whoever wins from a rescue, though, some-
oneelseis goingtolosebycomparison.That’swhy
mosteconomistsurgecaution.“Oneshouldbevery
hesitant about bailouts,” says Harvard’s Miron. “Once
you do it, it gets harder not to do it again the next
time.” �Peter CoyWhat I’m
telling my
medical
school
students
Dr. Judith Aberg, the
Dr. George Baehr
professor of clinical
medicine, Icahn School
of Medicine at Mount
Sinai, New York
For me, there’s no
single sentence for
the medical students,
as they have so much
to learn. They should
learn all they can about
SARS-CoV-2. The more
you educate yourself,
the more you’ll be able
to educate and inform
others. What is this
virus? How is it similar
or different than other
respiratory viruses?
Why is it spreading
so fast? How do you
protect yourself and
others? How do you
screen and diagnose
people who may be
at risk of Covid-19?
What are the best
infection prevention
practices? How do
we treat someone
with Covid-19? What
are the potential new
therapies?
I think many would
say wash your hands or
stay calm, but in reality,
[medicalstudents]
needtoknowsomuch
more.——As told to
Cynthia KoonsARASH KHAMOOSHI/POLARIS