How SEC Regulatory Exemptions Helped Lead to Collapse

The losses incurred by Bear Stearns and other large broker-dealers were not caused by "rumors" or a "crisis of confidence," but rather by inadequate net capital and the lack of constraints on the incurring of debt.

This is probably just one aspect of what was going on, albeit a major one. The Fed effectively decreased (if not eliminated) reserve requirements throughout the banking system in the early 90s, and regulators have been turning a blind eye to off-balance-sheet vehicles as well (despite the lesson of Enron).

Does it comfort you, then, that now the regulators are letting banks count "goodwill" as core capital, and the Fed is letting investment banking operations borrow from their commercial banking wings?

The philosophy seems to be to go whole-hog with eliminating reserves, since we've gone so far already.