When collateral doesn’t matter

I’m no financial expert, but the way I understand it, when a lender accepts collateral as part of a loan deal, and the borrower defaults on the loan, the lender takes the collateral.

Right? So evaluation of the collateral is an important aspect of the loan deal. The lender has to know that the collateral will make it whole should the borrower default.

So why do I get the feeling from Stockton’s bankruptcy trial that Franklin, the last of the city’s ornery creditors, did not do its due diligence when evaluating the collateral put up by the city of Stockton: two money-losing golf courses, a community center and the recreational facilities in Oak Park, including a money-losing ice rink?

Whatever the value of the collateral, it is clear it is not enough for Franklin. But whose fault is that?

This entry was posted in Uncategorized. Bookmark the permalink. Post a comment

Post a Comment

You must be logged in to post a comment.

We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Rules. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or fill out this form.
  • Blog Author

    Michael Fitzgerald

    Mike Fitzgerald is The Record’s award-winning metro columnist. His column runs in the paper three times a week. Born in San Francisco, he was raised in Stockton. His column covers diverse beats including, sometimes, the offbeat. Read Full
  • Categories

  • Archives

  • RSS Related Content