Another wheeler and dealer on Wall Street goes belly up making bets at 40 to 1 leverage. That is right 40 to 1. Imagine going into a Casino with your net worth of say 1/2 million and trading it for $20 million in chips. You loose 1 or 2 hands and you don't make it out of the casino with anything but the shirt on your back.
This snip tells it all.
snip
The balance sheet reached 40 times the firm’s equity, Egan said.
“They should have been levered in the area of maybe about six-to-one,” he said. “Having only 2.5 percent equity to assets is ridiculous. That means if you have a 2.5 percent downdraft in the balance sheet, which is very likely, then they’re bankrupt.”
snip.
There is much more here at the link
You would think with Lehman and Bear Stearns going belly up (years ago) these guys would take risk off the table. If you had credit problems and could benefit from a free credit repair evaluation give Consumer Credit Capital a visit at: credit repair Houston or credit repair Texas for a quick and easy sign up.
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