A pedestrian walks along the Las Vegas Strip in Las Vegas
The biggest casino operator on the Las Vegas Strip weathered the 2008 financial crisis and a gunman’s rampage nine years later that killed 58 and wounded hundreds. But now, with the coronavirus pandemic, MGM Resorts International is asking for help from the federal government.
MGM’s chief executive officer, Jim Murren, was among the hospitality-business leaders who met at the White House with President Donald Trump. The administration is considering a $1.3 trillion bailout for a range of Americans as the country shuts down to stem the virus’s spread.
For MGM and its staff, the cost of the early days of the pandemic has been stark: The company furloughed 70,000 workers when it closed its resorts this week.
“Las Vegas, as you know, will come back rapidly once you give us the green light,” Murren said at a press conference after the meeting with Trump. “But it’s very important that we keep these people on our payrolls as soon as possible.”
Casinos are asking for grants, loan guarantees or tax credits. The administration is considering an array of responses for the country, including giving every U.S. citizen $1,000 to help weather the virus storm.
But there’s something jarring about the sheer breadth of industries, from movie theaters to cruise lines, lining up with hat in hand seeking federal aid – and being taken seriously. In a crisis that’s sweeping through so much of the economy, every sector can make the argument that it employs too many people and contributes too much to economic growth to be left behind.
No. 1 priority
At a press conference last week, Trump said the airlines were his “No. 1” priority, but that other industries were important.
“We’re also playing with a lot of numbers, a lot of very big numbers and a lot of very small numbers frankly,” he said. “We have to help everybody. It was nobody’s fault this happened. None of these companies that all of a sudden had no passengers on planes, no passengers on cruise ships. They can’t be blamed for this.”
Democrats, including Senator Elizabeth Warren of Massachusetts, said corporate handouts should be accompanied by, among other things, prohibitions on stock buybacks, which are intended to boost share prices but potentially take money away from workers.
“That money should come with serious long-term change to the companies – no more buybacks, a $15 minimum wage, and more,” Warren wrote on Twitter.
New York Senator Chuck Schumer, a Democrat, gave a similar message at another press conference. “The aid has to be workers first, if we’re going to help these industries,” he said. “Not what happened in 2008, where the big boys got helped and the workers and everybody else were left by the wayside.”
Retail and oil
The hospitality industry is hardly alone in asking for help. The requests are flowing in from a range of companies, from retailers to oil drillers and beyond.
According to the National Association of Theatre Owners, “the business model of the movie theater industry is uniquely vulnerable in the present crisis.”
Robert Reffkin, chief executive officer of real estate brokerage Compass, is urging lawmakers to give workers in his industry assistance too. “Shelter in place” policies and social distancing prevent agents from showing properties, curbing their ability to make a living, Reffkin said in a letter to members of Congress.
Obama’s approach
If Trump, a former casino owner, is more interested in aid for gambling companies. that would be in contrast to former President Barack Obama, who was criticized for telling people not to go to Las Vegas during the early stages of the 2008 financial crisis.
In fairness, Obama was speaking to bankers about their expense-account spending after receiving government aid. But some casino operators never forgave him. The Obama administration was also criticized for bailing out banks and automakers, though those moves in retrospect seem to have thwarted a broader depression in the U.S. economy.
Back then, the feeling was that “banks screwed us over. Now we have to bail them out, there’s a of validity to that feeling,” said Bryan Del Monte, president of the Aviation Agency, a marketing group for the industry.
“I don’t right now want to make moral judgments about whether this business serves the national interest,” he said. “We’ve got to make sure the U.S. economy doesn’t bleed out.”
Not everyone want to see checks just fly out the door to casino operators or any others. Four Democratic Senators, including Edward Markey of Massachusetts and Connecticut’s Richard Blumenthal, sent the Senate leadership a letter last Wednesday asking that strings be attached to federal handouts, including ending airline baggage fees and requiring doctors on cruise ships.
‘Money for nothing’
Greg Mankiw, an economics professor at Harvard University, said he agreed money should come with restrictions.
“I would not bail out any company in the sense of handing them money for nothing,” he said. “Providing loans makes more sense, as was done with the banks in 2008-2009. These loans often came with warrants for the government, and the taxpayer ended up making money on the deals.”
The pressure is intense. The U.S. Travel Association, which helped organize the meeting with Trump, said the industry could see its revenue fall by $355 billion, or 31%, this year – more than six times the drop after 9/11.
“The cold reality is they can’t support their employees if they don’t have any customers,” said Roger Dow, CEO of the association. “And they don’t have any customers because of the actions needed to halt the spread of coronavirus.” Christopher Palmeri & Patrick Clark, Bloomberg
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