3 ms·

> Neither databases nor the construction industry are leveraged 10x+. Maybe banking shouldn't be either?

• thedufer 10y ago
  How much leverage is the right amount? Regulators seem to think it is somewhere around 10x.
  • mjevans 10y ago
    It's probably context dependent; which is why it's //critical// to never lie about, cover up, or over-simplify that context. In my opinion, doing that is quite nearly as bad as murder. At the very least doing such things should bar someone guilty from working in the industry for many decades. "The right amount" then is when expected losses are less than expected profits; with some safety factor. This is complicated by allowance for both rare really bad sets of loss all at once and absorbing losses over a longer time. I think the solution for both is insurance. In fact, I really hope that the US FDIC (mandatory insurance for deposits, though it hasn't kept up with inflation) represents the basic insurance for the 10% figure you quote.