Here’s some more info (see an
) about the SEC’s 2004 decision to allow five investment banks to
increase the leverage they were able to use. Guess which five companies? The
five that went belly up and/or merged with regular banks these past few months:
From The
Reckoning – Agency’s ’04 Rule Let Banks Pile Up New Debt

Over the following months and years, each of the firms would take advantage of
the looser rules. At Bear Stearns, the leverage ratio, a measurement of how much
the firm was borrowing compared to its total assets, rose sharply, to 33 to
1. In other words, for every dollar in equity, it had $33 of debt. The ratios at
the other firms also rose significantly. ”