As recently as 2007, Lehman had reported record profits, thanks largely to its leverage of thirty to one, meaning that for every dollar of tangible capital it had thirty dollars of debt.
I'm talking leverage of five, 10 and even 20 times invested capital, making even the slightest move look monstrous.
"Banks should live on leverage of six or eight to one," Patten remarks, not the more typical 30-to-one of recent years.
Shilling: We're going through a massive de-leveraging of two sectors of the economy that built up huge leverage over the past three decades.
Here's why: Let's say that an investor is able to purchase shares at a maximum leverage level of four times and at an interest cost of 5%.
The actors' union sought the date in hopes that the combined leverage of the four unions would allow them to put more pressure on the Hollywood studios for better terms on compensation for digital content, an area that was a major source of disagreement going into the latest round of negotiations.
With SoftBank, Sprint will have roughly $15 billion to $20 billion of net debt and a leverage ratio of three times earnings before interest, taxes, depreciation and amortization, or Ebitda, as opposed to $40 billion to $45 billion of net debt and a leverage ratio of five times Ebitda with the Dish transaction.
In recent months, Citigroup, Bank of America, and other banks have been boasting that they will soon have a dollar in equity for every twenty dollars in assets on their balance sheet: a leverage ratio of twenty to one.
There has even been talk that Alliance Boots, which was bought for £11.1bn last year by private equity giant KKR before the credit crunch hit world markets on a leverage multiple of nine times equity, could have difficulty repaying debt if the downturn is prolonged.
The first is a provision that would free big banks from major Dodd-Frank regulations, as well as from some international rules on capital and liquidity, if they meet higher capital requirements — including, notably, a non-risk-weighted leverage ratio of ten per cent, barely higher than the current (risk-weighted) 8.5-per-cent requirement.
