Lehman Brothers, in 2007, had a leverage ratio of about 33 to 1,73 meaning that it had about $1 in capital for every $33 in financial positions that it held. This meant that if there was just a 3 to 4 percent decline in the value of its portfolio, Lehman Brothers would have negative equity and would potentially face bankruptcy.

One of the major contributing factors of the recession of 2008–9 was the use of enormous amounts of Leverage by investment banks. It wasn’t uncommon for banks to Leverage their investments by a factor of thirty or forty. Millions (or billions) of dollars were made or lost when the value of a particular stock went up or down by a single percentage