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Strategies & Market Trends : Classic TA Workplace
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To: stockman_scott who wrote (32883)3/1/2002 8:48:06 PM
From: skinowski  Read Replies (1) of 209892
 
Perhaps I’m naïve, but I never realized clearly certain things about bank financing of businesses until I heard Skilling’s testimony. It appears there are usually numerous contingencies that the banks can use to call in their loans, like credit downgrade, etc. In other words, whenever a business is having serious difficulties, their bank will come in and remove any remnants of liquidity. My CPA tells me that that’s the way it’s done, and that all parties know about the deal in advance, but IMHO this system is totally crazy. No leveraged growth business has a chance of surviving a downturn.

Imagine that whenever someone’s wife/husband looses a job, the bank immediately calls in their mortgage. The approach is designed to exacerbate trouble.
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