As much as the idea of more federal interference into private business irks our free market soul, the billions of tax dollars being committed to bail out gamblers masquerading as investors and bankers shows clearly that at least one facet of Wall Street life needs to be reined in.

And that factor is leverage.

Leverage is the act of using borrowed money—real or notional—to finance purchases. Ordinary Americans use leverage when they get a mortgage to buy a house or finance a car on monthly payments.

Business uses leverage in a variety of ways. Companies may u...

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