Fox Business anchor floats bailouts for “smaller” oil companies
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From the March 9, 2020, edition of Fox Business' Mornings with Maria
DAGEN MCDOWELL (FOX BUSINESS ANCHOR): This is a crash, an overnight crash, in the cost of crude oil. This crash in crude -- it actually heightens the fears that we already saw in the bond market. I'm not talking about the selloff in the 10-year as much as the disruption that we have seen among investment-grade corporate debt and even high-yield debt because if these lower oil prices persist particularly below $35 a barrel on west Texas intermediate, you will see companies defaulting on their debts. Some of those shale producers in west Texas. And so you start talking about defaults, that makes banks and people in the bond market less willing to lend, and that's when people start talking about an economy that winds up flat on its back. So, it's all interlinked. But this is where -- as much as people will say, oh, lower gasoline prices are good for the economy, it's good for transportation -- FedEx, UPS, the airlines -- well, the airlines are cutting the number of seats they've got in the sky, cutting capacity, and so they don't really benefit in this coronavirus environment from these lower energy prices.
MARIA BARTIROMO (ANCHOR): Yeah, it's hard to find any silver lining here. (CROSSTALK)
SCOTT MARTIN (FOX CONTRIBUTOR, KINGSVIEW ASSET MANAGEMENT CHIEF INVESTMENT OFFICER): There's not much. I mean, I agree with Dagen, yeah, Maria.
BARTIROMO: And rates as well.
MARTIN: Rates too and, I mean, Dagen is talking about some things that remind us as previous crises, which is credit freezes. You know, credit seizures, really, when it comes to banks not being able to lend, not wanting to lend, not finding reasons to lend and that's really what is the bread and butter of our economy. And I think one thing that's disturbing with respect to where this all started, this selloff, and it started obviously overseas a couple, a few weeks ago and moves to the U.S. And then we talk about the coronavirus impacts and the consumer. But now this is one impact that is starting to roll into other things now, as Dagen said. It's into oil, it's into banks. I mean, who knows what is next? But they'll go after a lot of things. In fact, I think one interesting today, gold is down after being up overnight. And this is in a massive liquidity-driven environment that we are going to see especially given what we've seen this morning. So there's other places in the markets that this will get to and it's just beginning to spread.
BARTIROMO: The other issue which is what Stephanie Pomboy has brought up a lot to us is the fact that there's so much leverage in the corporate sector and Robert Kaplan, actually, the president of Dallas Federal Reserve, said this to us last week that this is one of the key things that he's going to be watching: corporate credit, because it's so leveraged right now, you have got a situation where as you say with the oil companies if they are going to get squeezed and they are going to start thinking -- and we are going to start thinking about defaults, that could trigger other bankruptcies, other credit busts, and that certainly could spiral out of control. You just don't want to see something like that.
MCDOWELL: Goldman Sachs was writing overnight that “the probability that Congress enacts fiscal measures in response to the coronavirus concerns is now increasing. Tax rebates and policies aimed at ensuring credit availability to small businesses likely to become a priority for Congress."
And if this gets much worse, I guarantee you, and this is my prediction, there will be calls for bailouts by the government for travel and leisure companies, for some of these smaller oil producers if this doesn't get contained. But, again, it's all on the government to get their arms around even just testing for this virus so we know how widespread it is. And this is -- Maria, you -- I think the first person who brought up the testing issue. And it all goes back to that. Who has this virus and basically how much of a standstill does the economy, does our country need to come to in order to fight it, and we still don't know the answer.
BARTIROMO: And that's why we are expecting these numbers in terms of the coronavirus to spike huge. I've been saying tens of thousands -- ten thousands, and tens of thousands, and then hundreds of thousands. That's where this is going because as we continue to see these tests get distributed across the country we are going to see more cases, and that's why we shouldn't get scared when we hear hundreds of thousands of cases coming. That's where this is going. Hundreds of thousands of cases in the next couple of months to a year.