Slate Money — "Big Business and Bailouts"

Release Date: March 28, 2020
Host: Felix Salmon with Anna Szymanski and Emily Peck
Guest: Rich Lesser, CEO of Boston Consulting Group (BCG)

Episode Overview

In this "mildly gloomy" episode, Felix Salmon and co-hosts Anna Szymanski and Emily Peck tackle the unprecedented intervention in the U.S. economy as COVID-19 and lockdowns bring business to a halt. The focus is on the massive stimulus package and Federal Reserve actions to keep big business afloat, bailouts (especially for airlines), and how these economic levers are supposed to work. Special guest Rich Lesser (CEO, BCG) shares insights on what big businesses are facing, how government support is structured, and how companies need to plan for both survival and the eventual "reopening." The team also explores the essential role of companies like Amazon, and the challenges facing frontline workers.

Key Discussion Points & Insights

1. Understanding the Scale and Structure of the Bailouts

[00:49-07:04]

• What’s at Stake: $454 billion from the stimulus bill is allocated as backstop for loans, which the Fed can leverage up to $4 trillion for businesses and municipalities.
  • "The 4 trillion as I understand it... that's the power of being able to leverage up that equity into a higher volume of loans." (Rich Lesser, 02:41)
• Why That Much?
  • Losing all or most revenue while costs remain is catastrophic, even for healthy companies.
  • The stimulus serves dual purposes: keep businesses alive for economic stability and prevent mass unemployment.
  • "Even well-capitalized, well-run businesses don't last very long. ...The group I worry the most about are small businesses." (Rich Lesser, 03:47)
• Transparency & Rapid Action:
  • The bill was crafted incredibly quickly. Details and implementation—who gets aid, under what conditions—remain uncertain.
  • "Everybody has been running. This is legislation you would normally think would be crafted over many months or years at this volume..." (Rich Lesser, 06:12)

2. How Bailout Mechanisms Work—Magic of Leverage

[16:09-17:53]

• Explained Simply:
  • Treasury injects capital as a cushion (e.g., $400B).
  • Fed leverages this cushion to lend much larger sums (up to 10x) by creating/guaranteeing loans, thanks to the magic of fractional reserve banking.
  • "The Fed tops up the bucket with another three and a half trillion... that it just invents from nowhere. ...All of that money goes out in the form of loans to businesses who then pay it back..." (Felix Salmon, 16:23)
• Why Not Do This All the Time?
  • Risks of distorting incentives, underpricing risk, misallocating capital.
  • America's global currency position makes this possible in a crisis but would be unsustainable under normal conditions.
  • "You want the market to allocate capital to the businesses that can survive... not just this kind of flow of money coming in." (Anna Szymanski, 19:14)

3. The Challenge for Big Business and Advice from BCG

[11:26-15:15]

• For Big and Small Businesses:
  • Survive by preserving cash and core talent—even if that means taking government loans.
  • Keep employees if possible to allow for faster rebound post-crisis.
  • "It's hard on both a societal dimension and a business dimension... The last thing you want to do is break the bond of trust you have with your employees..." (Rich Lesser, 12:38)
• Planning for the Rebound:
  • Forward plans: Firms in China are already experimenting with new models, online engagement, and supply chain innovations to emerge stronger.
  • U.S. businesses are mostly still in survival mode, but will need to quickly pivot to planning for recovery.

4. Societal Shifts, Unemployment, and How Behavior May Change

[07:04-09:41; 24:29-28:25]

• Enduring Uncertainty:
  • Even after lockdowns end, consumer and business behavior may be permanently altered—less travel, less spending, more caution.
  • "It seems like behavior is going to change. Not only are they probably not going to be flying as much, but they just might not be spending as much..." (Anna Szymanski, 07:04)
• Flattening the Curve vs. Reopening:
  • "Medically induced coma" metaphor: keeping economies shut is necessary to save lives, but reopening risks new waves of infection unless managed carefully.
  • "There are huge unknown challenges... about restarting the economy and still keeping a sustainably flattened curve." (Rich Lesser, 11:03)
• Unemployment Crisis:
  • Terrifying jobs numbers—3.3 million new claims in one week.
  • The contrast between swift and effective Fed action and Congressional infighting is stark.

5. Bailout Philosophy: Should Airlines Be Saved?

[20:07-22:49]

• Airlines as Chronic Bankruptcies:
  • Some argue airline bailouts are unnecessary since airlines regularly go bankrupt but continue to operate.
  • "Is there any particular reason why having the airlines go through... that 15th bankruptcy bout... would be a bad thing right now?" (Felix Salmon, 21:06)
• Counterpoint:
  • Airlines are vital infrastructure. Bankruptcy is not seamless, especially during a crisis.
  • "It's not as though you could just continue to operate while going through bankruptcy, but that's not seamless..." (Anna Szymanski, 21:24)
  • The COVID crisis could be a chance to demand more regulation and accountability in exchange for public money.

6. Lessons from Prior Crises

[22:49-24:29]

• Banking Sector Resilience:
  • Banks survived this crisis better due to tighter regulation after 2008—a clear example of lessons learned.
  • "It's the one part of the economy we don't need to worry about. Like, it worked." (Felix Salmon, 23:49)
• Global Perspective:
  • Countries like South Korea, Hong Kong, and Singapore responded quickly and effectively to COVID because they had learned from SARS and MERS.

7. Amazon (and Essential Workers) as a Bellwether

[29:01-33:21]

• Amazon's Essential Role & Problems:
  • Hiring 100,000+ to meet demand, but lacking PPE and proper policies for worker safety.
  • "Given all that, the company should be doing everything in its power to keep its workers as safe from this virus as they can. And... they're not." (Emily Peck, 29:57)
  • Poor sick leave policies push workers to choose between health and income.
• Implications for All Businesses:
  • Amazon's experience now will inform expectations and regulations for employee safety during health crises in the future.
  • "This is a little bit a precursor to what we were talking about with Rich Lesser... the exact conversation that pretty much every reopening business is going to be having..." (Felix Salmon, 31:57)
• Walmart and Sick Leave:
  • Problems aren't limited to Amazon; frontline retail workers across America face similar challenges.

Notable Quotes & Memorable Moments

"The group I worry the most about are small businesses. ...But we need to keep big businesses going too, and loans should help—hopefully they'll be able to be around once we come out the other end of this."
— Rich Lesser (BCG), 04:08

"It’s fine right now, I am not criticizing what the Fed is doing right now. This is a crisis. But long term you want the market to allocate capital to the businesses that can survive; you don’t just want this kind of flow of money coming in."
— Anna Szymanski, 19:14

"The way you restart the economy is by saving lives."
— Felix Salmon, 28:23

"For those companies like Amazon ... we're now very much seeing is also a vital part of our economy in many ways, is going to have to figure out how to make this work—not only for this crisis, but... every single company is going to have to show how in the next crisis they will be able to keep their workers safe."
— Anna Szymanski, 32:47

"Life comes at you fast." (referring to Boris Johnson’s quick turnaround from downplaying COVID to testing positive)
— Emily Peck, 36:55

Timestamps for Key Segments

• [00:37] — Guest intro: Rich Lesser, BCG CEO
• [01:49-07:04] — Explaining the $4 trillion stimulus and leverage mechanics
• [07:04-11:26] — Long-term behavioral change, public health, and economic rebound
• [11:26-15:30] — Survival strategies for businesses (advice from BCG)
• [16:09-20:00] — Fed lending explained; magic of leverage and its limits
• [20:07-22:49] — Do we need airline bailouts?
• [22:49-24:29] — Lessons from the banking crisis; responses from South Korea, Hong Kong
• [24:29-28:25] — Unemployment surge and the Fed vs. Congressional response
• [29:01-33:21] — Amazon, essential workers, and ongoing workplace risks

Numbers Round Highlights

• $5 — Instacart workers’ demand for hazard pay per order (Emily Peck, 34:21)
• 24 — Days between Boris Johnson’s "I'm shaking hands" comment and his COVID diagnosis (Felix Salmon, 35:41)
• 1.3 billion — Number of people under lockdown in India, underscoring global scale (Anna Szymanski, 37:09)

Tone & Final Thoughts

The conversation throughout is thoughtful, occasionally dryly humorous, and often candidly critical—especially regarding the limits and contradictions in the U.S. government and business sector response, and the socioeconomic pain already being felt. The hosts are not afraid to call out wishful thinking, governmental failures, or business shortcomings, yet they acknowledge the unprecedented nature of the crisis and praise the effectiveness where due, especially at the Fed. Rich Lesser’s commentary is practical and grounded, reflecting the very real tension between business survival and social responsibility. The episode closes with a recognition of the global and deeply human toll of the crisis.

For listeners seeking a clear explanation of what the $2 trillion+ bailout means, how the Fed's financial wizardry works, and why frontline businesses like Amazon are suddenly the model for future workplace safety, this episode provides both practical financial insight and a sobering look at the deep, unresolved problems facing American workers and institutions.