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Donald Trump would support US gov’t stake for company bailouts

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 $US2 trillion ($3.4 trillion). Companies generally do not welcome government ownership for fear they would lose control of their business, however.

Taking stakes in companies is not without precedent in times of crisis.

The Bush and Obama administrations loaned the auto industry, including General Motors and Chrysler, which is now controlled by Italy’s Fiat, $US80 billion to avoid the collapse of the industry that they felt would result in the loss of millions of US jobs.

The US government spent about $US50 billion to bail out GM alone. As a result of the company’s 2009 bankruptcy, the government’s investment was converted to a 61 per cent equity stake in the Detroit-based automaker, plus preferred shares and a loan. The government no longer has a stake in the company.

Airlines have been hard-hit by the impact of coronavirus.

Airlines have been hard-hit by the impact of coronavirus.Credit:AP

Just last month, US Attorney General William Barr said the United States and its allies should consider taking a “controlling stake” in Finland’s Nokia and Sweden’s Ericsson 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.

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