Sunday, December 04, 2005

The money problems with controlled demolition

Let me again summarize briefly why a conspiracy to somehow make money off the controlled demolition of the WTC towers is impossible. Banking syndicates lend money on the security of real estate. Money was lent to buy the WTC, and no doubt full security was taken, including a loan agreement and charges over all the assets. One of the main pieces of security which is always taken (for obvious reasons) is an assignment of the insurance. When the buildings fell down, that event would have triggered a default in the loan agreement which would have enabled the banking syndicate to call its loan and enforce its security. At that point, the main piece of security other than the charge over the underlying real estate (assignments of leases would be worthless as the tenants would no longer be paying rent) would have been the assignment of insurance proceeds. The banks, not the owner of the buildings, would have been paid first out of those proceeds, until their loans were completely paid off. The banks no doubt have this money now, and will probably, but not necessarily, be intending to lend it to the owner if and when he ever builds the replacement WTC. All the owner received was the return of his equity, after the banks were fully paid and limited to the amount of his provable loss and to the limits in the insurance binders. He is not one cent ahead of the game, and no doubt has lost considerable money in the opportunities lost in time wasted to negotiate the new building.


The added angle in all this is that there was litigation over the terms of the insurance payout, with the insurance companies arguing that the terms of the insurance binders meant that they only had to pay for the losses in the collapse of one of the two towers. As it happens, they lost that argument, but they would not have even tried to make it if they were involved in some wild conspiracy with the owner of the buildings. Since the owner of the buildings could not know he would win this argument, but could have anticipated that such an argument would be made, controlled demolition would have been foolhardy, as he might have been destroying an asset with the possibility of only receiving half its value (and of course the banks had first claim on the proceeds anyway, which would have left him owing money with no net assets left to pay it back). Since the owner controlled access to the building, and the explosives needed for the demolition could not have been installed without his knowledge, controlled demolition is impossible.


It is very rare that you can prove, with 100% certainty, that a conspiracy is impossible, but this is one such case. People who argue for conspiracy in this case don't seem to grasp the business realities.

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