For the same reason why insider trading and price fixing is illegal: It's a scam to siphon money from others, and in doing so destabilizes the whole system.
If you don't protect against this sort of behavior, public confidence erodes and eventually the system collapses because nobody's actually producing anything; they're just scamming each other.
Once the rich own everything, your country's productivity and competitiveness falls through the floor (banana republic) because nobody doing the actual work has anything left to strive for other than subsistence.
Separating assets from liabilities, and cross-charging between related entities often seems to surprise those who don't own and run businesses. But it's basic business 101 which is pretty common everywhere.
Think of it this way. You build a business over 40 years, accumulating value along the way. You would be crazy to leave all that accumulated value in a high-risk entity (which a business naturally is.) So periodically the value is separated from the risk.
So, for example, a business owning the building is nuts. The building is a different asset class, and should be in its own structure. Any reasonable new owner who acquires a business and building in one bite will move to separate them.
This is not scammy or fraud, its the ways things are done and should be done by the original owner.
"separating the value from the risk" is euphemism for removing all financial cushion and making sure the pain of any downturn is borne only by employees and customers, or it could even mean purposefully killing off what is considered to be a worthless business and an inefficient use of assets. It's usually done by monstrous new owners who have zero care for the people or community or legacy that they destroy. Their view of the world is only through maximizing financial calculations.
Progressives' general anti-business bias blinds them to the need to protect small to medium businesses from the true capitalist evils such as vulture capitalists. Things like rent control could be useful tools for protecting communities from the devastation that can be caused by financial engineering preying on real businesses.
I agree that businesses that have unproductive assets become targets for PE takeover. Typically these are small businesses that have kept their assets and business together, without separating them. At some point the value of the asset exceeds the value of the business and it becomes ripe to be bought out, sold for parts, and closed.
Thus keeping them bound together makes things worse for employees and customers, not better.
Separating them makes it worse for creditors. Specifically creditors are less likely to institute bankruptcy if there are no juicy assets to liquidate. Most small businesses can survive a cash squeeze, at least for a short while, as long as creditors don't preemptively move to shut it down.
Equally, business owners are less tempted to over-extend if there is less "equity in the business". Obviously they can still borrow against the asset, but that's then a conscious decision.
Of course large companies know all this, and do it. Yhe way to protect small businesses from predatory buyouts or creditors is to educate small business owners.
> For the same reason why insider trading and price fixing is illegal: [...]
Insider trading isn't illegal everywhere, and it's not even illegal for the same reasons in different jurisdictions. (Specifically, I know that the reasons are different in eg France and the US.)
> If you don't protect against this sort of behavior, public confidence erodes and eventually the system collapses because nobody's actually producing anything; they're just scamming each other.
That would be easy to test: compare different market with different degrees and kinds of 'protection' against the ills you mention, and see how confidence differs. I doubt you'll find the kind of correlation you are asserting here. (But, of course, we need to watch out for correlation vs causation.)
You don't even need to look at different countries: even in the same country different assets are often traded under different rules. Eg equities vs bonds vs commodities vs commodity futures etc in the US.
If you don't protect against this sort of behavior, public confidence erodes and eventually the system collapses because nobody's actually producing anything; they're just scamming each other.
Once the rich own everything, your country's productivity and competitiveness falls through the floor (banana republic) because nobody doing the actual work has anything left to strive for other than subsistence.