Once upon a time, way back in 2003, an investment bank could only have leverage of up to twelve to one. In 2004, the Security and Exchange Commission gave five investment banks, and only five, the ability to leverage up to 30 or 40 times or so. Guess which five they were? I almost don’t want to bother listing them, because the list is so obvious. But for the benefit of all the readers who have just awakened from a coma they’ve been in for most of the year, they are Bear Stearns, Lehman Brothers, Merrill Lynch, Morgan Stanley and Goldman Sachs.
There’s a lesson there somewhere.