The Enron Scandal - Unmoderated Message Board

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Non-Tech : The Enron Scandal - Unmoderated

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To: The Duke of URL© who wrote (2417)	7/31/2002 1:01:22 AM
From: Raymond Duray	Read Replies (3) of 3602

Duke, Help me out here. You said that the banks could run construction companies. I'm not seeing that in this quote: The Interim Rule clarifies the Act’s authorization for FHCs to engage in "merchant banking activity" by defining the permissible types of "merchant banking investments" as interests, including the acquisition or control of shares, assets or ownership interests of any type in any non-financial entity (portfolio company) engaged in activities not otherwise permissible for a FHC. In order for a FHC to hold assets of a company, as opposed to shares or other ownership interests, it must establish a separate portfolio company to hold those assets in order to limit the liability of the FHC for associated financial obligations and operating risks. coudert.com What it seems to be saying is that the BHC, bank holding company cannot be liable for the failures of a non-financial business like a construction company. What am I missing here? Is there some other section that permits what is obviously a "moral hazard" as you describe it? TIA. -Ray

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