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This month marks the 10th anniversary of the financial meltdown. However, a critical turning point took place on a single night at the Capitol when the banking system was within hours of shutting down ATMs across the country.

I heard the story at a dinner party, as told by a former U.S. senator and finance committee member who was interrupted at a black-tie charity function in October, 2008 and told to come to the Capitol immediately. On arrival, he was met by a gaggle of luminaries including then-Federal Reserve Chairman Ben Bernanke, then-House Speaker Nancy Pelosi, then-U.S. Rep. Barney Frank (D-Massachusetts) — basically everybody who was anybody. Then-Treasury Secretary Henry “Hank” Paulson was present, but had collapsed from stress and was lying virtually comatose on the floor. Aware of his Christian Science religion, the others were reluctant to call a doctor, but fortunately he revived a short time later — waking up to announce that the legislators needed to approve a $700 billion bailout.

At that point, Nancy Pelosi marched a reluctant Barney Frank into his office to confirm the importance of making the Troubled Asset Relief Program (TARP) bailout happen. Republicans had defeated an earlier attempt. Later, when my dinner companion asked “Hank” Paulson how he came up with the $700 billion number, he answered, “I knew it had to be at least $350 billion to buy the bank’s subprime mortgages, so, while driving here, I decided to just double the number to make sure everyone understood the magnitude of the problem.”

What led to this critical juncture, of course, was the steady erosion of financial industry restraint, allowing the industry to take excessive amounts of risk. A long-time statutory limit of 8-to-1 leverage had slowly dissolved away. The Bear Stearns investment bank was leveraged 50 to 1 when it went under in March, 2008. Other falling dominoes included Lehman Brothers, Merrill Lynch, Morgan Stanley, Wachovia and so on. The surviving banks, like Bank of America, were forced to take over the losers or they wouldn’t get TARP protection themselves.

Industry-wide, the typical exposure was around 30 to 1. That means that if you lose 3 percent of total asset value, your equity is wiped out, which explains why the downhill spiral happened so quickly. Leverage works both ways, of course, meaning if you make 3 percent you have just doubled your equity.

We can thank people like former Fed Chairman Alan Greenspan, who had been an Ayn Rand acolyte from her early salon days. He proclaimed, “House prices have never dropped in value.” Moreover, he said that financial managers in a free-market economy would never do anything that would jeopardize their self-interest. But lucrative mortgages had been sliced and diced into various levels of risk and proved to be a feeding trough for everyone in the process — especially those leveraged 30 to 1. Financial services companies in 2007 represented 35 percent of the entire value of the S&P 500. Meanwhile, the avuncular Federal Reserve chairman had apparently forgotten the housing price plunge of the 1980s.

So, with the banks lining up today in an effort to begin the emasculation of the Dodd-Frank constraints, I decided to go back and review “Bull by the Horns” — Sheila Blair’s book written after she had left her position as chairperson of the U.S. Federal Deposit Insurance Corporation. She describes in detail how the pieces of the puzzle fell apart — and who was responsible. She also explains how a simple fix is to return to the time-tested 8-to-1 leverage limitation which, in fact, was the case with smaller, healthy banks that survived the crisis as well as with Canadian banks that were left unscathed. This limit should apply to all financial institutions including banks, hedge funds, insurance companies, securities firms and private equity firms.

But noooo. None of that happened, and “stress tests” have been adopted instead. That’s an approach that is much more complicated and that can be gamed by big banks while it burdens small banks with reporting functions that can cost millions of dollars.

The argument against a simple capital requirement increase for everyone was that higher capital standards would restrict credit, raise rates on mortgages and credit cards, hurt job creation, and so on.

Well, it’s been 10 years, and we’re still waiting to see any of that happen. In fact, the reverse has been true in every case. So, let’s sit back over the next few weeks and watch the next round of what I call “the politics of selfishness” unfold.