Going on the premise that the leverage of Wall Street bank balance sheets were between 40:1 and 50:1 pre-crisis, what does everyone think the new leverage limit will be that Congress imposes? My guess is between 20:1 and 30:1, but would like to hear what everyone else thinks as well.
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Congress won't impose leverage requirements. Read the Basel III draft; it will basically change the requirements for what constitutes tier I capital, as well as altering a few structures. If you don't want to read the whole thing, most of the banks ER departments have put out notes about what it means; if you can't access those, FT Alphaville has summaries of most of them. Also, strict leverage or tier I K ratios are useless; LEH failed with something like 11% tier I, so it should really be seen as a lagging indicator. Unfortunately, useful indicators are more difficult to calculate and less transparent for a number of factors, so most of this increased regulation is basically going to change the valuation of the financial sector and force different accounting mechanisms without really doing anything of substance.
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