> Many corporations took free 0% loans from the government to buy back their own shares; often for the purpose of tax evasion.
[citation needed]
Buybacks and dividends have, more or less, the same federal tax revenue implications. The difference is that dividends incur a taxable event in a window outside the shareholder’s control.
Beyond that, I’m curious where the idea comes from that the government is giving 0% loans to corporations. Yes, the Fed overnight rate is effectively zero, but you can’t have your cake and eat it too. If I borrow from the overnight window, I have to pay it back the next day. Very hard to do that if I already spent it. Or are we talking about the repo market, where banks can get a longer low-interest loan by putting up security in the form of Treasury bonds?
Both of these facilities are to manage liquidity and don’t provide a 0% loan capability to run-of-the-mill corporations.
[citation needed]
Buybacks and dividends have, more or less, the same federal tax revenue implications. The difference is that dividends incur a taxable event in a window outside the shareholder’s control.
Beyond that, I’m curious where the idea comes from that the government is giving 0% loans to corporations. Yes, the Fed overnight rate is effectively zero, but you can’t have your cake and eat it too. If I borrow from the overnight window, I have to pay it back the next day. Very hard to do that if I already spent it. Or are we talking about the repo market, where banks can get a longer low-interest loan by putting up security in the form of Treasury bonds?
Both of these facilities are to manage liquidity and don’t provide a 0% loan capability to run-of-the-mill corporations.