They are the rotten core of the shadow banking system providing ridiculously cheap leverage to speculators courtesy of the American taxpayer.Money market funds were created to get around bad regulations.
This year, UBS conceded it had fundamentally misread the market for mortgage securities as it took advantage of cheap leverage in Switzerland to load up on what appeared to be low-risk, high-yield mortgage-backed securities flowing from America.
A study by Qiao Liu, a professor at the University of Hong Kong, concludes that the average return on equity for companies wholly or partly owned by the state is barely 4%, despite the benefit of cheap leverage provided by government-controlled banks.
Our recent boom was produced by cheap leverage, tolerant regulators and faith in markets.
The Treasury's plan involves the government subsidizing buyers of banks' bad assets by offering cheap nonrecourse leverage.
Buying cheap and leveraging high has come a long way since the age of the barbarians, when Kohlberg Kravis Roberts & Co. took over RJR Nabisco in 1989 with a little money and a lot of debt.
Backed by big names you recognize — Intel, AMD, Google, Cisco, Nokia, Adobe, Sony, and many more — the Open Compliance Program is an effort to make it easier and cheaper to properly leverage open source software.
But throughout history, loose monetary conditions have fuelled the cycle: cheap money encourages leverage which boosts asset prices, which in turn encourage further leverage.
Over the last decade, America's banking sector got pumped up by steroids — in the form of cheap credit and leverage — every bit as much as Major League Baseball's home run hitters.
Their fears have been doubled because many of these, hedge funds being the most obvious, had taken advantage of ultra-cheap borrowing to leverage these bets.Betting with borrowed money worries many because, although it allows investors to make more when markets go their way, it multiplies their losses when they do not.
