LawBeefaroni wrote:GreenGoo wrote:I don't understand why getting loans precludes the possibility of also liquidating all personal assets. If I start a business and liquidate my assets for startup capital and then subsequently (or concurrently) borrow a million dollars to help fund that business, have I not put everything on the line? Am I not also on the hook for the million dollars? Is that more of a sacrifice or less to go into debt for my business?
I guess I don't see it the same way as outlined in the quoted comments.
Because he has a net worth of a few million. If he liquidated everything, that's a pretty good 4 years. Or, more likely, he didn't liquidate everything.
And don't you think it's odd that someone with no assets would be loaned $1M by banks?
Either way, the story stinks but it's most likely that he took out the loan instead of purging all his assets. On paper he could claim he
risked "everything" and be technically correct, if $1M was all he had, but it's very different than the story he told.
Someone with no assets wasn't loaned $1MM. I loathe Ted Cruz, probably as much as I have loathed any politician ever, but my understanding is that he said he took out loans *against his assets.*
The way I think it worked is that he would have an investment account, or a retirement account or something at Goldman, and depending on the amount (usually at least a million,) investment banks will basically extend lines of credit that can be called in against the funds in your account.
So to say that they "liquidated" everything probably isn't literally true, but at the same time their actual net worth could have been zero because of the loan to value of holdings.
Why would someone do this, you might ask? Because, he can get access to the cash *while still profiting on his investment income.* Basically for the same reason that, when someone proudly claims that they *never* would take out a loan on a car, I shake my head.