This has been covered ad nauseam, so I will just say they (Wall Street) had a lot of really bad loans on their books. Now we come to the final and most important reason by far, which is excessive leverage (poor management). All banks/financial institutions are required to have a certain ratio of debt-to-net capital...
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All banks/financial institutions are required to have a certain ratio of debt-to-net capital. This keeps risk in check and prevents a major economic catastrophe, like bad mortgages, from destroying our financial institutions. Here is an excerpt from the Big Picture (Barry Ritholtz), who is also quoting Julie Satow from the NY Sun: As we learn this morning from Julie Satow of the NY Sun, special exemptions from the SEC are in large part responsible for the huge build up in financial sector leverage — and the current massive unwind...
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