[tfehring]

In addition to all of this, part of the reason that the cost of debt has been so low to begin with is because this implicit backstop compresses credit spreads (a measure of the riskiness of corporate debt). If it weren't for the assumption that the government would bail out shareholders, companies would have had less debt and more equity, and the bailouts might not have been necessary to begin with. (Buybacks are just the mechanism by which corporations increase their debt to equity ratio).

I wouldn't go so far as to liquidate the assets. (That's probably not what would happen in the absence of government intervention - creditors would likely recoup more through a restructuring than a liquidation). But the equity needs to be wiped. Full stop. If you own shares in US passenger airlines (as I do, through index funds), those shares should now be worthless.