By the time companies are discussing bailouts, “they're already toast, and you're just trying to resurrect them from the dead, if you will,” said Deborah Lucas at the MIT Sloan School of Management.
Bailouts can have a bad reputation, she said, but there are some cases where there is some justification.
“Where the whole economy is really disruptive, and there's this view that if you let a particular company fail, that failure is going to lead to other firms to fail, and it’s just gonna deepen either a recession or a financial crisis,” she explained.
That’s why, Lucas added, there was a lot of support for bailing out the banks in response to the 2008 financial crisis.
In the past, bailouts were discussed with Congress, according Tad DeHaven, a policy analyst at the Cato Institute.
“But that's different with the Trump administration's second term,” he said, “which signaled pretty much from the outset that it had little regard, interest and time for Congress' thoughts, feelings, or anything else.”
DeHaven said the challenge with any kind of bailout is the precedent it sets. “Eventually, it is likely that a future administration, a future Congress will use those past bailouts as justification for a new set of bailouts, even though those bailouts don't fit that category of being an emergency.”
And that, DeHaven thinks, is exactly what’s happening with Spirit now.
