Actually banks take collateral that is normally not what the private equity firms target and that actually seems to work, but the consequence is that hard assets of the firm (offices, buildings, hardware, cash, etc) are essentially given up
you sell it to someone for a nice price thinking the other one wants to ride the horse just like you did. but they are actually a butcher and make horse sausage out of it.
So you mean that banks are dumb and give away money for free and then just take the losses and repeat thr process?
Actually banks take collateral that is normally not what the private equity firms target and that actually seems to work, but the consequence is that hard assets of the firm (offices, buildings, hardware, cash, etc) are essentially given up
so think of your company as a horse
you sell it to someone for a nice price thinking the other one wants to ride the horse just like you did. but they are actually a butcher and make horse sausage out of it.
Yes and it hurts.
They’re not dumb; this is the “moral hazard” we were warned of during the 2008 GFC.