On 3/29/07, David B. Shemano <[EMAIL PROTECTED]> wrote:
What is an unearned profit? To the extent it is a product of rent-seeking, I agree that it is a bad thing.
I am pleased that we are making a lot of progress in finding significant points of agreement :)
If it wasn't so risky, there would have been a line of people out the door to make the investment, but there obviously wasn't.
I guess this is the key issue. Fact: Ford was only able to obtain financing under adverse terms. From this you conclude that the private equity players offered Ford something unique that was extremely valuable (to the tune of $2B). I disagree. I personally see it as self-evident that they did not provide $2B of value to Ford or to Hertz. So why was Ford unable to find other buyers? Frankly I don't know. I consider it a puzzle (especially considering the global liquidity glut that you mentioned). Maybe the private equity players had the institutional affiliations to obtain lots of debt financing that Ford was unable to obtain. Or maybe they were pals with the Ford BoD and made a corrupt (but completely legal) deal with them. Is such activity worth $2B? In other words, did that money fundamentally come from the creativity and industriousness of the financiers or was it just luck and political/family connections? -raghu.
