WASHINGTON (Reuters) - U.S. Senate Majority Leader Mitch McConnell on Thursday defended plans for Congress to aid airlines, saying it was not a bailout but loans that would be need to be repaid, while U.S. President Donald Trump backed the idea of the government taking equity stakes as part of corporate rescue packages.
“We’re not calling about so-called bailouts for firms that made reckless decisions,” McConnell said. “We’re not talking about a taxpayer-funded cushion for companies that made mistakes. We’re talking about loans which must be repaid.”
Trump did not say what companies he thought the government should take stakes in. He noted companies were seeking money after “buying back stock.”
“We will be helping the airline industry. We will be helping the cruise ship industry. We probably will be helping the hotel industry,” Trump said Thursday.
The Trump administration on Wednesday proposed $50 billion in secured loans for airlines.
Passenger airlines had asked earlier this week for $25 billion in cash grants and $25 billion in unsecured loans and another $8 billion for cargo carriers. They are still pressing for grants as part of a rescue package.
Trump said he opposed companies using taxpayer funds for executive bonuses or stock buy backs.
“Conditions like that would be OK with me,” Trump said Thursday.
Earlier, U.S. Treasury Secretary Steven Mnuchin said that equity stakes could be a part of the hundreds of billions of dollars in aid to airlines and larger companies that Trump’s administration is proposing.
Asked on Fox Business Network whether the government would consider taking equity stakes in companies, Mnuchin said: “As it relates to the big companies like the airlines, we’re looking at making secured loans on market terms. So, you know, we’ll see whether that includes equity or doesn’t include equity, and again, we’re not going to force things on people.”
Mnuchin said that in helping firms that need liquidity, the administration will “make sure that the taxpayers are compensated fairly.”
White House economic adviser Larry Kudlow on Wednesday also said equity stakes were a possibility, referencing the U.S. government’s equity stake it acquired in General Motors Co in 2009 as part of a government bailout.
The Treasury Department on Wednesday proposed a $1 trillion rescue plan, which included $50 billion in financing aid for airlines and $150 billion for other industries, $300 billion for small and mid-size businesses and $500 billion for payments to individuals. [nL1N2BB1KW]
Byron Callan, managing director with Capital Alpha, said equity stakes in airlines were one option.
“We are in unprecedented territory so anything is possible and it’s prudent to consider all tools that could be used,” Callan told Reuters. “The U.S. government buying direct equity stakes may seem extreme but if it keeps a national airline system afloat, it’s conceivable.”
Reporting by David Lawder and David Shepardson; additonal reporting by Andrea Shalal; Editing by Will Dunham and Marguerita Choy