Information Matrix

Another week, another giant financial institution comes crashing down.  This time it is the turn of HBOS, a large UK mortgage provider.  The problem was not one of leverage as such, since all banks are highly leveraged.

The recent bankruptcy filing for Lehman Brothers follows hard on the heels of the forced takeover of Bear Stearns earlier this year. Debt played a role in the demise of both: as with many banks and other businesses, they used borrowed money to enhance shareholder returns, a phenomenon known as leverage.