Panama: The Hidden Trillions

Re:Panama: The Hidden Trillions by charlesdm on Tuesday October 11, 2016 @05:26AM (#12682760)

> Can you describe a realistic situation in which you receive a personal loan for $20 million that comes due at once that you cannot pay for by liquidating other assets? This isn't a real scenario. No one will give you this kind of personal loan without collateral or proof of significant unencumbered assets. And at minimum, you'd be doing this through a corporation, or again, you are incompetent.

The most obvious situation is probably where you've invested a certain amount of money in a highly illiquid asset, that can someday (i.e. 10-20 years from now) be liquidated for a significant capital gain. This could, for example, be a business or a plot of valuable land.

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Re:Panama: The Hidden Trillions by dpark on Tuesday October 11, 2016 @09:38AM (#12684221)

How does that work? The bank gives you a noncollateralized loan so that you can buy a $20 million property and then they suddenly call the loan? They gave you the loan without proof of ability o pay? I have trouble believing that this is very plausible. It's so risky to both parties that I can't see why the bank would issue the loan.

I can't deny that it's technically possible. I just think it's extremely far-fetched.

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Re:Panama: The Hidden Trillions by charlesdm on Tuesday October 11, 2016 @10:34AM (#12684709)

Not really. Even if a loan is collateralized by an asset, that doesn’t mean it is easy to liquidate said asset at full value.

For example, let’s say I buy a Monet painting for X million and a bank is willing to give me a collateralised loan of up to 75% of the asset value. If a bank decides to sell that asset tomorrow (i.e. at a suboptimal time) they might not even get 75% of the value back.

Debt is a lever in business and some people make it big by leveraging big.

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Re:Panama: The Hidden Trillions by dpark on Tuesday October 11, 2016 @10:49AM (#12684878)

Sure. But the bank isn't going to give random Joe a loan to buy a Monet. That's why all this is far-fetched. There are scenarios that could result in 20MM loans being suddenly called. People with little assets generally don't get those loans though.

It's doubly far-fetched to talk about loans to individuals for $20MM. If you're applying for a $20MM loan, you should have an accountant and your accountant should have told you to put this kind of thing in a corporation. You'll still lose a lot but it shouldn't bankrupt you personally.

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Re:Panama: The Hidden Trillions by charlesdm on Tuesday October 11, 2016 @11:58AM (#12685600)

Well, it depends on how wealthy you are and the jurisdiction you live in. Loans are not taxable income and if you would have to pay some sort of withholding tax on a dividend (if you would want to borrow against your illiquid shares for example), then it might make sense to take out a personal loan. A bank might also be more keen to give you a loan personally.

But yes, obviously not that common. Random Joe won't be getting these. Random Joe doesn't have $20m in assets either, though.

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