Bailouts are coming for Boeing  (BA) – Get Report and the airlines.

Now, the term “bailout” is a somewhat politically motivated misnomer; the money the government provided during the 2008 crisis was repaid with interest. So to be clear: this is a loan. It’s more accurate to think of it as an investment where the government will get exceptionally favorable terms and equity stakes in companies it saves. So while the anger is well understood, please don’t view this though it’s free money for corporations.

However, having the government step in and quasi nationalize companies so they don’t go bankrupt is not capitalism. A competently run business should be situated to weather economic storms as best it can. And what isn’t remotely acceptable is companies without strong balance sheets and cash flows taking capital they may need to survive and spending it on share buybacks.

Companies buy back their shares as a form of returning capital to shareholders, similar to a dividend. When they do so share count is reduced, increasing earnings per share, and driving up stock prices in the process. This is often preferable to sending money outright to shareholders via a dividend because you’re not taxed on unrealized gains when stock prices increase, but you are when a dividend is disbursed.

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