No one has ever explained how bankers are losing. They say they’ve lost money. Yet the only details are Musk has to make payments and put up Tesla stock as collateral. That a no lose for the banks. They don’t care if Tesla stock crashes, they are making money from selling it.
The bankruptcy scenario is correct but the first part isn’t: you don’t have X shares as collateral that you can liquidate. Instead, you have collateral to cover sum Y.
As long as the collateral contract covers enough stock positions the bank won’t lose.
That said all of this is assuming standard contracts. If y bank wrote “0% interest and instead 50% of the revenue growth of Twitter” then this would be an easy way to lose money.
Haven’t heard of a stupid banker yet, though, so what would the chances be?
No one has ever explained how bankers are losing. They say they’ve lost money. Yet the only details are Musk has to make payments and put up Tesla stock as collateral. That a no lose for the banks. They don’t care if Tesla stock crashes, they are making money from selling it.
If Tesla’s stock crashes, then the value the banks could get from selling it is much lower.
If Twitter and Tesla go bankrupt, the banks will have loaned out billions to own something worthless.
At least I would assume that’s how it works.
The bankruptcy scenario is correct but the first part isn’t: you don’t have X shares as collateral that you can liquidate. Instead, you have collateral to cover sum Y.
As long as the collateral contract covers enough stock positions the bank won’t lose.
That said all of this is assuming standard contracts. If y bank wrote “0% interest and instead 50% of the revenue growth of Twitter” then this would be an easy way to lose money.
Haven’t heard of a stupid banker yet, though, so what would the chances be?
Ah! Thank you for the explanation
Careful there, bud, you’re singing the siren song of bank bailouts.