Excessive leverage

Excessive leverage leads to trouble. Wherever it pops up, not necessarily in the banking system—it can be in households—but the idea that you have to leverage yourself to buy something you can’t pay for in its entirety, has its merits and limitations. It’s kind of like alcohol. One drink is fine, but 10 will get you in a lot of trouble. With leverage, people have a great propensity to use it because it’s so much fun when it works. There should be some ways of controlling leverage, and that applies to individuals with home mortgages. The idea of people buying houses at 2–3 percent down is going to lead to trouble.