Not Since Mother Courage and Her Children…*

At a high level, Floyd Norris explains it all to you.

UDATED, AND PULLED TO THE FORE: For the more detailed view (h/t Barry R.), the soon to be late, not very lamented, New York Sun presents the details:

The SEC allowed five firms — the three that have collapsed plus Goldman Sachs and Morgan Stanley — to more than double the leverage they were allowed to keep on their balance sheets and remove discounts that had been applied to the assets they had been required to keep to protect them from defaults.

Making matters worse, according to Mr. Pickard, who helped write the original rule in 1975 as director of the SEC’s trading and markets division, is a move by the SEC this month to further erode the restraints on surviving broker-dealers by withdrawing requirements that they maintain a certain level of rating from the ratings agencies.

and the solution going forward (that is, after you give these guys $700 billion) will be an even weaker form:

The SEC said it has no plans to re-examine the impact of the 2004 changes to the net capital rule, and last week, it put out a proposal to revise the rule once again. This time, it is looking to remove the requirement that broker dealers maintain a certain rating from the ratings agencies.

Because nothing says “faith in the institution” like a non-investment grade rating.

*Title explanation: Mother Courage at the beginning of the play has two (2) children. By the end, she has two less than that. The play closes with her “silent scream” as she drags her cart along.

If you had only seen that final scene, you would think it is a tragedy of Mother Courage, not one caused by her. Working from memory: One of her children dies because she sends him(?) something that might be salable—in the middle of a battlefield. The other is similarly sacrificed. It is the reverse of the “because he’s an orphan” joke.