Re:The real cause of the financial crisis -- An MIT Blackjac...
by antiismist on Wednesday January 14, 2009 @01:06PM
(#433946)
Junk bonds are not a pyramid scheme. Junk bonds are really high yield bonds, and they were perfectly useful and successful in unwinding the strange corporate conglomerations made during the 60's and 70's.
Even if they were a pyramid scheme, the Peltzes, Icahns, etc didn't hold the bond themselves. They would want to take over a company and sell the parts. So they would front some capital, and get other people to buy the bonds which was used to fund the takeover. So they were running the pyramid, not actually in it (if you think junk bonds were in fact a ponzi scheme).
Even if they were a pyramid scheme, the Peltzes, Icahns, etc didn't hold the bond themselves. They would want to take over a company and sell the parts. So they would front some capital, and get other people to buy the bonds which was used to fund the takeover. So they were running the pyramid, not actually in it (if you think junk bonds were in fact a ponzi scheme).