Banks are happy to lend to you when you don’t need the money. For many companies that’s exactly what’s happening as today’s rates are too low to pass up. The Wall Street Journal reports here on the current releveraging.
Five years after excessive debt propelled a housing-market collapse into a financial crisis and recession, similar bets are being placed across the U.S. The crisis ignited on Sept. 15, 2008, when investment bank Lehman Brothers collapsed under a mountain of highly leveraged mortgage debt. Despite a government bailout of financial firms that totaled hundreds of billions of dollars, 8.8 million jobs and $19.2 trillion in household wealth were lost.
The conventional wisdom has been that Americans learned an important lesson—that you shouldn’t take a loan just because one is available. Banks, companies and consumers aggressively dialed back borrowing in what was dubbed “the great deleveraging.”
But some experts say the deleveraging is over and releveraging is well under way, with corporate borrowers taking new loans hand over fist from investors hungry for higher returns.
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