Any broke person can afford a trillion dollar loan, if they can convince the bank that their house is worth 1.8 trillion dollars. But is that really possible?
Loan companies do due diligence so if GameStop is $A and eBay is worth $A + $B, then so long as $A/$B remains the same, the acquiring company owns two assets worth the full price of the loan.
It doesn't seem to be a scam to me. Am I missing something?
That is simply not the case and lawmakers can make any kind of law to shape the society how we wish. If leveraged buyouts are creating problems for the country, then it’s totally valid to make them illegal in certain cases.
And yes, I do think laws should be based on consistent principles. I'm surprised you consider that a controversial point...
No one is worried about the bank making the loan in this situation. They are concerned that PE is buying up large parts of the economy using debt they aren't responsible for, which makes them irresponsible owners because they do not face consequences when the moves fail
Again, isn't that entirely the bank's problem? They're responsible for the debt if the company can't pay it, right? I agree on the surface this seems like a bad deal for the bank, but what makes you think you know better than the bank so much so that they shouldn't even be allowed to take that risk?
If a lender builds a pattern of lending to people that can't make the payments, that lender will take a hit. If we think that isn't happening, why? And how could we return us to that?
Or, back to my question, how would you structure a legal framework where some loans can be done this way, but others could not? (I can think of a few ways, largely curious if I have a blind spot here.)