READ THIS
``They're going to have to protect their deposit bases by law, and the days of high leverage are gone,'' said Charles Geisst, a finance professor at Manhattan College in Riverdale, New York, who wrote ``Wall Street: A History.'' ``The days of the big bonuses are gone.''
Today really does mark the end of an era. An era when you could borrow 25$ for every 1$ you owned and repeat this process for every dollar your earned. An era where wall streets financial engine was a series of Ibanks with exec's and partners making multi million dollar bonuses from leveraged money. Its the end to the over the top greed that swept through Ibankers everywhere.... cue the hedgefunds!
Who the care's about salaries, the fact that the powerhouses of wall street are now completely gone is the more relevant point. All in all, I was right. Leverage did this to these ibanks. In theory it worked beautifully, but even high-schoolers know that buying things with money you don't have is dangerous. Further, who in their right mind would have leverage ratios of 25-1????? The banks ate it hard this year for the years of leverage they used.
I'm still in awe. I thought these giants were full proof this summer. I thought Goldman was god. Let this be a lesson in how dangerous leverage is. For me, my father taught me this long before any economist did. Regulation is needed, and it is very funny that the CNBC reporters and Goldman officals are now asking for those regulations. Last week, we thought the government was interferring too much, now we've realized they're just being the parents to reckless teens. Of course they have the oversight to have stopped this to begin with, but if they put a damper on private banks when they were getting of their feet, liquidity, money markets, and securities would be all be responsibilities of the government and commercial banks. Who knows, since that is how it is now, things will turn out for the better!
The glass steagal act was supposed to separate the men from the boys, the risk takers from the conservative players. The comerical banks slowly matured to handle crisis very well, but the ibanks had no defense, and this was only amplified by leveraged bets.
Anyone who is winning in the market just hasn't been around long enough, today was the last day for ibanks.
What a market correction!
p.s. taxpayers are paying for this. Score!
