Thursday, September 25, 2008

You buy a bankrupt company for $1 not $700 billion

When you takeover a bankrupt company it is for a nominal fee, £1 or $1, and you take on the debts that it owes. The people who owned the bankrupt company get nothing. And you get the good parts and the bad, you don't just take the failed parts of the business and leave them with the rest. They go out of business. Whatever is done along these lines to rescue banks shouldn't be any different: nobody who has any share in the banks or any position in the banks should get any money in return for the state taking over their liabilities. The very definition of bankruptcy is being worth less than nothing. The $1 is only a token, a legal nicety to validate the contract whereby the new owner takes over the debts. There should be no transfer of public money to the owners or bosses of bankrupt organisations, zero - unless they wish to split $1 between them.


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