Trump says he would support government taking stake in certain companies
Reuters
Published Mar 19, 2020 09:44PM ET
Updated Mar 21, 2020 09:55PM ET
By Alexandra Alper
WASHINGTON (Reuters) - President Donald Trump on Thursday opened the door to a radical shift in the U.S. government's relationship to private industry as the coronavirus outbreak upends the nation's economy, saying he would back the government taking stakes in certain companies.
Asked if he supported the federal government moving to take an equity stake in some companies, Trump said: "I do. I really do."
Trump, speaking at a news conference at the White House, added: "We will be helping the airline industry. We will be helping the cruise ship industry. We probably will be helping the hotel industry."
The White House did not immediately respond when asked if purchasing shares in battered companies was really under consideration. The U.S. government rarely invests in public companies except in the case of bailouts to save ailing firms and jobs.
The COVID-19 disease caused by the novel coronavirus, which originated in China late last year, has sickened more than 11,000 people in the United States and killed more than 180, upending American life as it shutters schools, restaurants and businesses across the country.
Bailout requests related to the spread of health crisis, in the form of direct grants, loans, loan guarantees and tax relief, have topped $2 trillion. Companies generally do not welcome government ownership for fear they would lose control of their business, however.
PRECEDENT
Taking stakes in companies is not without precedent in times of crisis.
The Bush and Obama administrations loaned the auto industry, including General Motors (NYSE:GM) and Chrysler, which is now controlled by Italy’s Fiat, $80 billion to avoid the collapse of the industry that they felt would result in the loss of millions of U.S. jobs.
The U.S. government spent about $50 billion to bail out GM alone. As a result of the company’s 2009 bankruptcy, the government’s investment was converted to a 61 percent equity stake in the Detroit-based automaker, plus preferred shares and a loan. The government no longer has a stake in the company.
Just last month, U.S. Attorney General William Barr said the United States and its allies should consider taking a "controlling stake" in Finland’s Nokia (HE:NOKIA) and Sweden’s Ericsson (BS:ERICAs) to counter China-based Huawei’s dominance in next-generation 5G wireless technology.
The Trump administration accuses Huawei of being able to spy on customers and has led a global campaign to convince allies to keep the blacklisted company out of their 5G networks.
Even if the idea of ownership stakes is ultimately discarded, sweeping measures to mitigate the economic fallout from coronavirus seem inevitable.
Treasury Secretary Steven Mnuchin on Thursday urged Congress to pass a $1 trillion economic relief measure by early next week, adding the government was focused on being able to provide liquidity to companies.
Get The News You Want
Asked if a trillion dollar stimulus is enough, Trump said: "We will know about that later. We'll see what happens. It depends how long, so much depend on what's going on in this room, in terms of the medical. If we can stop it in its track the virus, it's plenty. If we can't, we'll have to go back and talk."
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.