I don't have much sympathy for banks speculating on companies and ending up loaning more than the collateral is worth.
Hopefully this won't be the next bailout
Sometimes no, but sometimes yes. What about employees, services the company provides to people, etc.? For example, is it no problem if a PE buys and runs into the ground businesses like nursing homes, hospitals, rental apartments and homes? What about in smaller communities where there is no substitute?
Nothing we do is in a vacuum, the domain where economic theories operate. We live in a community, economy, society, and all need to think about how we affect them. If not us, there's nobody else to do it. No person - or fictional corporate entity - is an island.
You cannot tell a private owner of a privately-owned nursing home that they should keep losing money year over year.
Considering that there are other, profitable nursing homes, maybe there is a systemic problem with this nursing home that cannot be fixed (for example too expensive real estate, bad company culture, ...). I this case, liquidating it and then re-using the assets (employees, buildings, ... ) in other economic endeavours is the right choice for the individual and also for society at large.
That's the theory (or one theory among many), but it doesn't always work that easily in practice. If you own any for-profit business, you have obligations beyond making money. If you own a nursing home, you have obligations to the residents, their families, the community, etc.
> You cannot tell a private owner of a privately-owned nursing home that they should keep losing money year over year.
Nobody tells them that. First, the choice isn't follow the (stereotyped) PE route or lose money. Second, your job as a business owner is to make money no matter what the conditions. If as a business owner you accept excuses from yourself (or others) about circumstances, you won't last a month - there are always reasons it can't be done. Your job is to balance and solve all those problems, and make money.
Beyond the perversity of using a company's own full faith and credit to eat it dead from the inside out (essentially admitting that the PE firms themselves are not respectable enough to be granted the credit directly), we have multiple instances of the government preempting the purchase and liquidation (and presumably the accompanying halt or even dissolution of production within) of certain companies for antitrust or even national security reasons.
Um, I disagree—there's a lot wrong with that mindset.
These PEs are the locusts of the financial world.
Life is positive-sum.
Fixing a clogged, depends on how they do it I guess.
Companies are all we have for a society in this country; decades of liberalization, mobile work forces, and commodification-as-identification have ensured that.
If the company is going under, it's value to society is questionable.