apr 1, 2004 - Wall st places riskier bets

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In April, the Securities and Exchange Commission (SEC) loosens the net capital rule, which had limited broker-dealers and investment banks to a 12-to-1 leverage (the ratio of debt to equity) on investments. The change allows firms with more than $5 billion in assets to leverage themselves an unlimited number of times. Qualifying firms at the time include Bear Stearns, Lehman Brothers, Merrill Lynch, Goldman Sachs, and Morgan Stanley. These firms greatly increase the amount of leverage they employ to a point where they routinely use thirty times leverage on investments. None of the five firms survive the 2008 credit crisis intact as independent investment banks.

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