Tyler Too

They Are Both Borrowers and Lenders

By Gus Tyler

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The classic warning was that “Thou shalt neither a lender nor a borrower be.” At this moment, there are mighty financial moguls who are both borrower and lenders. Here’s the way they play the game:

They are known as “leveraged” take-over artists. The term “leveraged” means that they borrowed the money for their operation. With the borrowed money they buy up enough shares in the desired corporation to establish their control. But — a big “but” — the company is now loaded with the burden of paying interest on the money that was borrowed to get controlling shares in the company.

The May 8 Wall Street Journal featured the many ramifications of the growing trend to take over giant corporations with borrowed money. No longer is it confined to a given country. “Three banks from across Europe have assembled nearly $100 billion to dismember Dutch bank ABN Amro Holding,” the Journal reported.

Ironically, The Wall Street Journal itself is not immune to hostile takeovers. Rupert Murdoch’s News Corp is offering $5 billion for Dow Jones & Company, the publishers of the Journal. Should this happen, the consequences could be ideological if Murdoch turns the Journal into an instrument for his super-conservative views.

One of the most ironic developments concerns the aluminum industry. Alco Inc. has made a $26.9 billion offer to buy Canada’s Alcan Inc. That move, notes the Journal, “would recreate an aluminum giant” of the sort that the U.S. government has for the past four decades been trying to break up.

All of which is part of the ongoing development for fewer and fewer to own more and more of the world’s instruments of production and exchange.


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