They gambled and they lost, and now they have to pay. Live by the capitalism sword, die by the capitalism sword.
And better they should pay with their hard assets than my tax dollars.
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Hocking the Family Jewels
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Selling heirloom assets is frequently a last-ditch alternative. In instances in which assets have appreciated massively (such as SunTrust's Coca-Cola stock or Merrill's stake in Bloomberg), the sales can generate hefty tax bills. Such moves are also recognitions that management has screwed things up so royally in the core business that it has no alternative but to sell the remaining assets that the market still likes. But in this climate, many banks may find they don't have a choice. The worst of the housing debacle may be behind us, but there's plenty more trouble to come in loans to builders and corporations, and in the vast consumer finance sector. And with outside investors leery of jumping in again, executives will be scouring the basement for stuff to sell. Corporate headquarters and conference centers, corporate art collections and fast-growing foreign units that can be severed with relative ease—pretty much everything that isn't nailed down. Except the fleets of private planes! If big-shot bankers can't have access to Gulf Streams, there's really no point in being a big-shot banker.
© 2008
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