Without Leverage banks are nothing, maybe even worthless. They created this excess liquidity using leverage ratios or debt-to-net capital ratios of 30 to 1 to as high as 40 to 1, who knows if they even went higher. These firms violated existing rules that only allowed debt-to-net capital ratio to 12-to-1 set back in 1975. What about a debt to net capital ratio of 10 to 1 or how about keeping it real and limiting it to just a 3 to 1 or 2 to 1. This excessive leverage has destroyed this economy and has completely broken the system. The failure to to keep this regulated has caused massive bubbles across many asset classes. Or course many will ignore the fact that these so called great earnings out of the likes of many of these top broker dealers only happened because of high use of extreme leverage. The business model for all of these brokers and banks has changed for good. Going to be interesting to see how these businesses run on a debt to net capital ratio of 12 to 1 or less which I believe is still to high.
leverage can increase both losses and profits. leverage killed banks/financials, since EVERYTHING was overvalued: real-state, stocks, oil, etc.