Balance Sheet

Companies keep balance sheets.  It's a list of all their assets and all their debts.  It also shows owner equity and net income.  It is a snapshot of a business's figures at a given time such as month end or year end.

Among the listed debts would be things like withheld payroll taxes due to be remitted to government; amounts owed on credit cards and lines of credit; mortgage balances at that exact time; and others like balance of gift cards outstanding and all amounts due to bond holders.  A bond holder is a lender to a company.

Many thousands of people hold corporate bonds in their retirement funds and IRAs and 401(k) plans.  The rates paid to these lenders is often higher than government bonds; therefore, the holder faces higher risks but not without some protection.

These bond holders hold claim to assets of the company in the case of a bankruptcy.  There is a pecking order.  There are levels of bonds that stand in line ahead of others at claiming assets in the case of a bankruptcy.

Understand?  So when a bankruptcy is filed, all creditors are identified.  Their claims are satisfied ahead of stockholders.  Stockholders own a piece of the company, all of the company.  Debts and assets.  Once all creditors are fully satisfied, then leftovers are divided among the stock owners.

Of course the White House in the case of Chrysler's bankruptcy, bypassed the rules and dissed the bond holders.  A case brought by the Indiana State Teacher's Retirement Fund went all the way to the Supreme Court in 2009 but the rules were broken and those bond holders lost everything including claim against assets.


Keep all this in mind as the case of  California based Solyndra Inc.  unfolds.  We will learn more and more in the future about how a "deal" was struck to move stockholders ahead of bond holders (in this case We The People).  We have no claim to the $535 million we lent them.  Once again, besides fraud, the law was broken when this deal was made.  


Stay tuned.


'til later