Bank sold for 1 dollar, airlines for 2

Today I was hanging out with my friend, we were talking about news. He told me that a Bank sold only for 1 dollar, if he knew earlier he could have bought like 100 of such banks.

Well I was unable to convince him, he is looking out for a similar opportunity in near future, i will not break his dream.

I have some information about it so let me clarify this for you, yes reader, for you.

It is like buying a car from owner who have not paid his EMIs. He will sell it only for the downpayment he paid to the dealer. You have to pay back the EMIs and any penalty associated with it.

When a Bank is sold for 1 dollar, the bank is actually saying that i cannot payback my liabilities and please come and take this responsibility from me.

A sell contract cannot have a transaction with 0 dollar, it will come under gift and another set of laws will be applicable for this gift scenario. So they take a dollar as a token, so it becomes a financial transaction and the sell will be complete.

So in short , when you buy such bank for 1 dollar. You are buying actually for 1 dollar+ any liabilities that bank had – which means it is a billions dollar deal.

But what happens is when such a big guy take over a Bank. The depositor will not panick and withdraw their money. So no liability will appear immediately. For example – if SBI buys a regional bank , no one will panick and withdraw the money, but I buy the same bank (just imagine OK), everyone will panick and withdraw their money and send me to hell.

So, hold your horses, there is no such thing as one dollar bank sell.