The Big Picture | How SEC Regulatory Exemptions Helped Lead to Collapse

"The current excess leverage now unwinding was the result of a purposeful SEC exemption given to five firms.

You read that right -- the events of the past year are not a mere accident, but are the results of a conscious and willful SEC decision to allow these firms to legally violate existing net capital rules that, in the past 30 years, had limited broker dealers debt-to-net capital ratio to 12-to-1.

Instead, the 2004 exemption -- given only to 5 firms -- allowed them to lever up 30 and even 40 to 1.

Who were the five that received this special exemption? You won't be surprised to learn that they were Goldman, Merrill, Lehman, Bear Stearns, and Morgan Stanley."

Three of those have blown up and a fourth, Morgan Stanley, is rumored to be on the verge of a buyout from Chinese firms.

For another take on the problem, linking Fannie/Freddie to the same "Gnu Age" financial paradigms, read this.

And to pinpoint the the bill that led to Enron's eventual collapse and the current meltdown, a bill that netted the senator's wife a cushy $2 million salary, a bill that a much-lauded Federal Reserve chairman is now backpedaling from with Keystone Kops grace, read this.