COVID-19 Crisis: Casino Operator MGM Lays Off 70,000 Employees And Is Seeking Bailout From Feds
Thursday 19th March 2020
MGM Resorts International survived the 2008 financial crisis and a murderous gunman who killed 58 concert-goers in 2017 but now the biggest casino operator on the Las Vegas Strip is asking U.S. taxpayers to bail it out.
Gambling in Las Vegas is closed for 30 days due to the coronavirus. MGM furloughed 70,000 workers when it closed its resorts this week. MGM CEO Jim Murren was among the hospitality-business leaders who met at the White House with President Donald Trump, Bloomberg reported.
Casinos are asking for loan guarantees, tax credits or grants, arguing that they need to pay their employees.
"Las Vegas, as you know, will come back rapidly once you give us the green light," Murren said at a press conference after meeting Trump. "But it's very important that we keep these people on our payrolls as soon as possible."
In early March, MGM Resorts International planned a $1.25 billion share buyback after the previous week's sharp decline in the stock market.
MGM had originally announced plans to repurchase shares on Feb. 13 but then lowered the price. This created an opportunity for MGM to buy more stock than expected and could have led to a favorable return for the casino operator, analysts said, according to the Las Vegas Review.
Due to COVID-19 distress, MGM withdrew the $1.25-million share buyback plan.
Sen. Elizabeth Warren of Massachusetts said that corporate handouts should be accompanied by prohibitions on stock buybacks, which are intended to boost share prices but potentially take money away from workers.
Senators Charles Schumer, (D-N.Y.) and Bernie Sanders, (D-Vt) have said that businesses should be required to raise wages and offer more generous benefits before they can repurchase their own shares.
Sen. Marco Rubio (R-Fla) voiced a similar concern -- that stock buybacks might hurt workers. He proposed raising the capital-gains tax rate on repurchased shares to discourage the practice, according to Adam Michel, a
senior policy analyst at the Grover M. Hermann Center.
Corporate handout "money should come with serious long-term change to the companies -- no more buybacks, a $15 minimum wage, and more," Warren tweeted.
The gambling industry supports 1.8 million jobs, according to the American Gaming Association. Many of those jobs have disappeared almost overnight amid the coronavirus outbreak.
The $260 billion gaming industry is at a "near standstill," and additional funds are needed to support casino companies and their employees, the American Gaming Association (AGA) said Monday in a statement to the Washington Post.
In 2018, Nevada casinos hired 409,444 workers, according to Statista. Another 300,000-plus employees worked at other casinos around the U.S.
Besides hospitality industries, other companies asking for assistance include retailers, oil drillers, theater owners and real estate brokers.
Former President Barack Obama was criticized for telling bankers to avoid expense-account spending in Las Vegas after receiving government aid.
"Some casino operators never forgave him," Christopher Palmeri and Patrick Clark wrote for Bloomberg. The Obama administration was also criticized for bailing out auto manufacturers and banks.
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President Donald Trump, a former casino owner, might be more sympathetic to a gambling industry bailout.
The money should come with restrictions, said Greg Mankiw, an economics professor at Harvard University.
"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."