During the bubble, the investment banks were borrowing heavily, to buy
more loans, and create more CDOs.
The ratio between borrowed money and the banks' own money was called leverage.
The more the banks borrowed, the higher their leverage.
In 2004, Henry Paulson, the CEO of Goldman Sachs, helped lobby the Securities and
Exchange Commission to relax limits on leverage, allowing the banks to sharply
increase their borrowing.
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