Corporate bustouts have been around a long time

Looting – Akerlof, Romer

tags: banking akerlof looting bankruptcy economic underworld

Sure, some of the details have changed, and managers with an ownership stake have gotten in on the deal as well, but they really do lay it all out. If you can get the government to guarantee your debts (or a government-sanctioned rating agency to give them a AAA rating) sometimes/often running a business into the ground is way more profitable than doing things honestly — even more profitable than just running crazy risks in hope of making them pay off. The math is simple and fairly irrefutable, and the cases are nicely done.

I also hadn’t known (shows how uninformed I am) how fraudulent S&Ls and junk bonds tied together. Without which there wouldn’t have been much of the merger madness that destroyed corporate governance.

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