Nick Arnett <[EMAIL PROTECTED]>
> One short answer -- risk. Debt financing makes far less sense when the risk
> is high or unknown. Only equity financing offers the potential to yield a
> return that is appropriate to high risk.
That statement is oversimplified. It is straightforward to construct a situation
where the expected return for a debt investment would exceed that for equity,
even when there is a high risk of failure. I think what Tyler was getting at
is that there IS a high risk of failure in this particular bailout proposal, but
there is probably not a high upside potential, so equity does not provide
a favorable return. So equity does not make sense. Neither does debt, he
implies. In other words, the bailout does not make a lot of sense. At least,
that is how I read him.
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