Via Atrios, Bloomberg reports on one modern looting technique:
Bank of America Corp., the second-biggest U.S. bank, said it may not guarantee $38.1 billion of Countrywide Financial Corp.’s debt after taking over the mortgage lender, increasing the likelihood of a default.
“There is no assurance that any such debt would be redeemed, assumed or guaranteed,” the bank said in an April 30 regulatory filing, adding that no decision has been reached. Investors had grown more optimistic the bank would back Countrywide debt. Ratings firm Standard & Poor’s cut the mortgage-lender’s debt to junk today after saying it would raise the grade earlier this week.
…
“This confirms how tenuous this transaction is,” said Christopher Whalen, managing director at Institutional Risk Analytics, a banking research firm in Torrance, California.
Whalen expects Bank of America to absorb the best assets, including Countrywide Bank, while the debt remains with a new company created by the merger, Red Oak Merger Corp. Red Oak may then file for bankruptcy, shielding Bank of America from liability, Whalen said.
So bankruptcy law allows this? You can strip out the assets and isolate the debts in a shell company before declaring bankruptcy for the shell company?
If this is legal, we need some new laws.
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