| Khuutra said: @TheRealMafoo: But wouldn't that kill almost every bank in the country? I mean, unless everyone in the country all agrees to declare bankruptcy all at once and we just start fesh... |
No.
When you go to file bankruptcy, the courts look at your books, and adjust what you need to do accordingly.
So lets say you ran a business making taco shells. You make $100 million a year, and your expenses were $95 million a year. So you profited $5 million a year, and employed 1,000 people.
You have been growing at a good rate, and to keep going, you decide that you need to redo your IT department. So, you higher a contractor for 15 million, to come in a redo everything.
So all that's done, and then the market falls out, and you only sell 90 million in sales the next year. Now you have debt you can't afford to pay.
If you file bankruptcy, the courts will look at your business model, and could say "well, you keep 1000 people employed, and have a strong model for success. If you just didn't have this 15 million dollar bill, you could be a strong company", and remove that debt all together.
The IT company is screwed, but they would be screwed anyway, because if you devolved, they weren't getting payed anyway (not much anyway).
Now if you were losing money because your operational costs were to high, the courts would just close you down, sell off your assets, and pay as many of your creditors as posable.
So if Bank of America files bankruptcy, it would be obvious that they know how to run a bank, they just have to much debt they can't pay. BoA would not go out of business, they would be just fine.
The real reason we just gave them a lot of money, is because if you do file Bankruptcy, the courts get to set all kinds of things, like executive pay. Bush and Obama are very much influenced by those with money, so they do what they can to keep those with money... well.. with money.
