Coronavirus turns corporate America to corporate welfare in its time of need

On Wednesday, with the stock market in the midst of yet another day of historic, coronavirus-induced losses, the billionaire hedge fund investor Bill Ackman gave a nearly 30-minute interview on CNBC that raised some eyebrows for its alarmist tones.

Ackman urged the Trump administration to conduct a “30-day shutdown” of the U.S. economy in a bid to “kill the virus, and kill it now,” and forecasted doom for the airline, hotel, and restaurant industries otherwise. “If we continue the way we are operating…we will go through a Depression-era period in the country,” he said. “No business can survive a period of 18 months without revenue.”

In addition to stringent quarantine measures, the Pershing Square Capital head echoed his suggestion on Twitter that the federal government “mails checks to people” while the economy shuts itself down. He predicted that the likes of Boeing “will not survive without a government bailout,” and even warned that the private equity industry could go “bankrupt” if the dominoes were allowed to fall.

It was a captivating screed that set social media alight and drew the ire of commentators, some of whom even blamed Ackman for subsequent losses that activated the stock market’s circuit breakers and halted trading. But it also shone a light on the extent to which Wall Street—now staring at a potentially devastating economic downturn after a historically lengthy bull run—is looking to the powers that be in Washington to bail it out of yet another jam.

Echoes of 2008

Senate Republicans have finally unveiled a new stimulus package that’s expected to top $1 trillion and, in addition to direct cash payouts to taxpayers, would include $50 billion in loan guarantees for passenger airlines. The measure would also provide $150 billion in guarantees for large businesses—allowing the federal government to take equity stakes in those companies in the process—as well as $300 billion in guarantees for small businesses.

Congress’s attempt to support American businesses and households comes as the Federal Reserve ramps up efforts to ensure that financial institutions have the liquidity they need to keep credit markets functioning. Meanwhile, the Treasury Department is once more looking to backstop money-market mutual funds, a move that brings back unsavory memories of the 2008 financial crisis.

Indeed, 2008 looms large anytime government intervention in the financial markets is broached, given the stigma around measures like the $700 billion Troubled Asset Relief Program (TARP) and the federal bailout of the U.S. automobile industry. None other than White House economic adviser Larry Kudlow—who this week talked up the government’s designs on taking an equity position in the companies it aids—once called the Obama administration’s auto industry bailout “an attack on free-market capitalism.”

Such skepticism also exists among lawmakers of a more economically populist persuasion. Sen. Elizabeth Warren, one of Washington’s most loyal crusaders against corporate America’s influence on American life, has offered a set of conditions to be included in any corporate bailout—including requiring companies to institute a $15 hourly minimum wage, prohibiting them from engaging in share buybacks, and barring them from paying out dividends and executive bonuses for up to three years after they receive relief.

Even Wall Street recognizes the potential controversy that awaits. On Wednesday, Guggenheim Partners cofounder Scott Minerd told Bloomberg TV that in the past decade, the airline sector has used $45 billion to buy back shares. “Today they are asking for approximately $50 billion in aid to bail them out,” he added. “I think that is a political nightmare.”

Bailout restrictions

While acknowledging that “the government has to do something” to ensure that some of the nation’s most vital industries stay afloat, lawmakers should ensure that there are “much firmer restrictions” on the companies that receive federal assistance this time around, according to Peter Nigro, a professor of finance at Bryant University and a former economist at the Treasury Department’s Office of the Comptroller of the Currency.

“Any type of bailout has to come with very strict restrictions,” Nigro told Fortune, floating requirements that companies maintain at least a percentage of their employee payrolls or constraints on stock buybacks as examples. “There has to be a firm set of agreements ahead of time in terms of dividends. Equity holders may have to be wiped out, and employees have to come first.”

Because while corporate America has spent the past decade reveling in a prosperous economic recovery—using the proceeds to enrich shareholders, repurchase stock, and accumulate record levels of debt—it is average working Americans who will almost certainly feel the brunt of the coronavirus outbreak’s economic impact, in the form of jobs and wages lost.

But no matter how sprawling and provision-laded any government assistance programs are, they still may not be enough to save the U.S. economy from the approaching “tsunami,” as Ackman described it on Wednesday.

As he noted, even “the U.S. Treasury does not have enough money to bail out every company.”