One of the biggest questions surrounding the government’s efforts to help businesses struggling amid the coronavirus pandemic is whether the programs are constructed in a way that will prevent a wave of bankruptcies, keeping a short-term shock from turning into drawn-out economic pain, the New York Times reported. A new analysis from a group of Harvard University researchers suggests that the answer, should markets turn ugly again, might be no. Highly indebted public companies that employ millions of people are largely left out of the major direct relief options that Congress, the Federal Reserve and the Treasury have devised to help companies make it through the pandemic. Much of that is by design. Policymakers have prioritized getting help to businesses that came into the coronavirus crisis in good health, lowering the chances that taxpayers will wind up bailing out big companies that loaded up on risky debt. It could also help officials avoid the kind of angry criticism that surrounded 2008 bank and auto company rescues. But it leaves a slice of America’s companies fending for themselves amid the sharpest downturn since the Great Depression, putting them at greater risk of bankruptcy and their workers at greater risk of job loss. Publicly traded firms that employ about 8.1 million people — roughly 26 percent of all employment at tracked publicly traded companies — are all or mostly excluded from direct government relief, based on an analysis by Samuel Hanson, Jeremy Stein and Adi Sunderam of Harvard, along with Eric Zwick of the University of Chicago. Not all of those companies are likely to run into trouble, some have deep-pocketed investors behind them and others made poor financial choices that left them vulnerable to shock. But excluding a broad swath of employers could affect how successful the government is at preventing wide-scale bankruptcies if virus-related economic pain lingers, the researchers warned.
