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Greed and Glory on Wall Street: The Fall of the House of Lehman by Ken Auletta

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Greed was a melody running through the debate that autumn about “capital adequacy.” There was no debate, however, that capital does in fact matter to an investment bank. Nor was there disagreement that there is no objective right or wrong answer to the question: What is an adequate level of capital? “It depends on what you want to do with the capital,” says Peterson. Clearly, certain activities require more capital than others. A full-service financial supermarket like Merrill Lynch, for example, has a higher overhead than a banking boutique like Dillon, Read, which concentrates on traditional banking services. To maintain a distribution and sales force or offices overseas demands a reservoir of capital. Similarly, as a firm moves away from a ...

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