The smoking gun: How SEC regulatory exemptions helped lead to collapse

Proof positive that the anti-regulatory policies of the Bush Administration directly led to the current financial crisis.

The SEC gave a special exemption in 2004 to five firms permitting them to exceed a debt-to-net capital ratio of 12-to-1 and leverage up to 30 or 40 to 1, thus greatly increasing their risk (and possible reward, except of course where their overly leveraged house of cards collapses)

“The SEC modification in 2004 is the primary reason for all of the losses that have occurred,” Mr. Pickard, who is now a senior partner at the Washington, D.C.-based law firm Pickard & Djinis, said.

The five firms were, no big surprise here, Goldman, Merrill, Lehman, Bear Stearns, and Morgan Stanley. Due to the reckless policies of the SEC and the greed of these investment firms, it’s all blown up in their faces. Merrill recently collapsed and was bought by BofA, Bear self-destructed and the scraps were bought by JP Morgan Chase, Lehman is bankrupt. And now Goldman and Morgan are wobbling badly with Dealbreaker reporting that hedge funds are rapidly fleeing from them.

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