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  • Not vetted for CNN

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    Posted October 17, 2008 by
    skgala |
    Assignment
    Assignment
    This iReport is part of an assignment:
    The Great Depression

    More iReports you should see

    Major cause of Financial Crisis

    By skgala  |  Posted October 17, 2008  
     

     

    No body has reported following as major cause for the Financial crisis.

     

     

    In 2004 five US investment banks, namely Goldman, Lehman, Merrill,

    Bear-Stearns and Morgan Stanley prevailed upon the Securities and

    Exchange Commission (SEC) to allow them to increase their leverage. The

    SEC relaxed its three-decade-old rule, which restricted debt to net

    capital ratios to 12:1 and allowed these five banks to increase their

    leverage ratios to 30 and even 40:1. If leverage is around 30:1, a

    reduction in the value of a bank’s assets by a little over 3 per cent

    will wipe out its entire equity capital.

     

     

     

     

    I got it from following article,

     

     

    http://www.business-standard.com/india/storypage.php?autono=337592

     

     

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