Junk

This play by Ayad Akhtar is a story of the financial industry in the mid-1980s and the disruption caused by the creation of junk bond financing. The play is loosely based on the career of Michael Milken who perfected the technique of leveraged buyouts funded by high-risk high reward bonds.  It introduced a whole new means of financing outside the traditional options provided by the “white shoe” Wall Street investment firms that had dominated market access.

The play’s leading character describes this financial innovation by his repeated assertion that “debt is an asset.”

As credit unions increasingly push access to “secondary capital” to the top of their regulatory or strategic priorities, it may be useful to remember that “secondary capital” is nothing more than an unsecured term borrowing at rates much higher than credit unions pay their members for shares.

Calling these long term, high cost financial borrowings capital, because of payment priority in the very remote event of liquidation by NCUA, seems akin to calling “debt an asset.”

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