Over the summer, U.S. regulators announced new rules that would limit the leverage (ratio of debt or assets to equity) that the biggest U.S. banks can use in their business. The reasoning, backed by several respected scholars, is that leverage was a leading cause of the financial crisis. The argument makes intuitive sense, and leverage ratios provide a clear quantitative measure for regulators to monitor, so regulations have followed.
Culture, Not Leverage, Made Wall Street Riskier
Interconnectedness and personal liability fell by the wayside.
October 11, 2013
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New!
HBR Learning
Ethics at Work Course
Accelerate your career with Harvard ManageMentor®. HBR Learning’s online leadership training helps you hone your skills with courses like Ethics at Work. Earn badges to share on LinkedIn and your resume. Access more than 40 courses trusted by Fortune 500 companies.
Avoid integrity traps in the workplace.