Apple has more cash than Uncle Sam

Jul 30, 2011 By David Sarno, Los Angeles Times

LOS ANGELES - Apple Inc. may not have more money than God. But it's got more cash than Uncle Sam.

As the government struggled to reach an agreement on raising the , the U.S. Treasury's cash balance fell to $74 billion this week. That's less than the $76 billion that now has in cash.

It's not terribly likely that the government will ask Apple Chief Executive Steve Jobs for help. But it wouldn't be the first time the government has asked for a bailout from an industry mogul.

In the mid-1890s, with the U.S. economy still recovering from the financial panic of 1893, the U.S. Treasury was in danger of going bankrupt as worried investors clamored to collect what they were owed from U.S. gold reserves. With few options left, President Grover Cleveland met with New York financier J.P. Morgan, who pledged a whopping $60 million in gold. Adjusted for inflation, that would be about $1.5 billion today.

"The fact that Morgan had become a cosigner on the federal debt was what impressed the markets," historian H.W. Brands wrote in his account "The Upside-Down ." "Within days the Treasury's condition stabilized; within weeks the dollar's danger had passed."

To be fair, comparing Apple's cash reserves with the Treasury's is not exactly apples to apples.

Apple's billions are essentially the funds in its bank accounts, while the federal number represents the amount of money the government has left before it hits the legal debt limit - a figure that can be changed by Congress.

At about $362 billion, Apple is the second-largest company in the world by market value (behind Corp. at $395 billion) - big by any standard, but still far smaller than the U.S. government, which will spend close to $3.8 trillion this year, 10 times what Apple is worth.

Still, Apple's reasons for keeping such a giant cash stockpile may well be related to worries about the stability of the U.S. government's finances.

"One of the reasons U.S. companies have amassed so much cash is that it provides them financial flexibility in times of heightened uncertainty," said Laurie Simon Hodrick, a professor of business economics at Columbia University's business school. "It might seem ironic, but as the risk of a government default grows, bringing with it the specter of higher interest rates, the incentives for firms to finance with internally generated cash grows as well."

Explore further: Study shows banks that have good working relationships with their customers reduce loan defaults

5 /5 (1 vote)
add to favorites email to friend print save as pdf

Related Stories

Apple CEO Jobs favors flexibility of cash hoard

Feb 25, 2010

(AP) -- Apple Inc., buoyed by the success of the iPhones, iPods and computers it churns out to breathless buyers, could give some of its $25 billion in cash back to shareholders. But CEO Steve Jobs said Thursday that he ...

Cash hoarding nothing new for businesses, scholar says

Sep 08, 2010

The U.S. economy is experiencing anemic growth, yet businesses are sitting on a mountain of cash worth nearly $2 trillion, according to Federal Reserve estimates. But this trend is nothing new for firms, who have been steadily ...

Google launches $3 billion debt offering

May 17, 2011

Google Inc. added to its cash hoard Monday by issuing $3 billion in corporate debt at low interest rates. It's the first time Google has tapped the corporate bond market for money.

Cisco to start paying a dividend by next summer

Sep 14, 2010

(AP) -- Cisco Systems Inc., the world's largest maker of computer-networking gear, said Tuesday that it would pay its first dividend by July, the end of its current fiscal year.

Are corporate bailouts effective?

Nov 17, 2010

(PhysOrg.com) -- Do corporate bailouts actually work? According to a recent study, some bailouts work better than others, depending on the conditions surrounding them.

Recommended for you

'Patent trolls' jeopardize innovation, study finds

Sep 23, 2014

(Phys.org) —New research co-authored by a Naveen Jindal School of Management accounting professor suggests that companies that don't manufacture goods or products but sue companies that do threaten innovation and economic ...

User comments : 0