Equity margin did not cause the market crash. The leverage and losses were in other much bigger markets.
Cool! Thanks for finding this 1245. Good news everybody - we can all breath a sigh of relief. Portfolio margin assets are only in the low hundreds of billions of dollars. Actually, the funny part is I'm not even sure if I'm being sarcastic or not.
The 6:1 seems to be illusory, what with the extra charge for concentration and no relief for long-short equity. Still much better than Reg T.
You can do close to the 6:1 especially for day trading. Not a good idea to push the limit unless you can handle margin calls. This does not help most traders here, but if your PM account has over $5M and your broker lets you from a risk perspective, they are not required to calculate haircut during the day, only at the close. That means that a traditional prop firm, hedge fund or wealthy investors can play much bigger during regular trading hours.
While it's clear that any access to more leverage would overall add risk to the system. The premise of the paper is that it was PM that "influenced and triggered the U.S. stock market crash in October 2008", which is very questionable. In any case, I have repeatedly found that good risk manger will have leverage at levels that are significantly lower then what's implied by PM calculations. This is assuming an options portfolio which is leveraged by default.
i'm still amazed at how closely i follow this thread and how yet it doesn't apply to me by like 80 grand in my account haha