Monday, September 15, 2008

Leverage without props

Read this article by Randall Forsyth at Barron's:
Wall Street found it could construct a lever nearly infinitely long. But it ultimately lacked a prop -- that is, capital -- sufficiently strong. As a result, it finds itself turning to the government and the Fed to support it. Regulators are providing a prop, and preventing a collapse. But that will mean a far different world, and one less easily moved by leverage or those who manipulate it.

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