>They return the $1.02m owed for the loan and pocket the rest as profit.

This makes sense. Reduction in debt with the proceeds. Just like the other poster, you are concocting a strategy that is not happening. You hypothetical does not apply.

Instead, the companies are simply taking on debt and keeping it on their balance sheet.Now that there is a downturn, they cannot service the debt and need funding to operate (e.g. bailout) They are betting that the government will keep rates low or fund them in a time of crisis because they are too big, too important to fail. They've also bought up competition so they cannot just " go away" and let new entrants enter the market.