Now we learn the Investment Banks pay 50% of their revenue in compensation which causes them to lever up their investments. This turns even safe investments into risky ones. In fact the story is beginning to sound a lot like the subprime debacle.
A few weeks ago the financial world was presented with the imminent failure of a publicly traded entity called Carlyle Capital Corporation. ... it had leveraged itself more than thirty to one. ... the Carlyle portfolio consisted of government agency securitities, ... among the safest around. ... Carlyle's investors lost most of their investment and [we] learned that investment companies with thirty times leverage are not safe.
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