IMF sounds the alarms on CLO's:
https://qz.com/1465460/the-risky-lev...en-and-others/The International Monetary Fund has decided its time to sound the alarm about leveraged loans. It’s a $1.3 trillion global market comprised of debt built up by companies in precarious financial positions.
The IMF expects global issuance of these loans to companies that are either heavily indebted already or have weak credit ratings to be around $750 billion this year, after a record $788 billion in 2017. Ten years after the global financial crisis, investors are once again showing increasingly risky behavior as they search for sources of high yield in response to a decade of low interest rates (enacted by central banks in response to the crisis).
non-bank new issuance is largely "covenant-lite" CLOs:
The IMF added that “the most highly indebted speculative grade firms” make up more of the new issuance of leveraged loans than they did before the financial crisis. Meanwhile, there are fewer investor protections—known as covenants—in new loans. These “covenant-lite” loans make up 80% of new loans arranged for nonbank lenders, up from about 30% in 2007. To make matters even worse, the quality of covenants has deteriorated, the IMF added.
Janet Yellen add her voice to the chorus:
“You are supposed to realize from the crisis, it is not just a question of what banks do that imperils themselves, it is what they do that can create risks to the entire financial system,” Yellen said last month in an interview with the Financial Times(paywall). ”That lesson to me seems to have been lost.”
BofE warns as well:
[QUOTE]The £31bn total of so-called "leveraged loans" to highly indebted businesses compares with £10bn of standard lending by UK banks to this type of company.
UK banks are unwilling to make this kind of loan due to the risks involved.
The leveraged loans are then "typically sold to non-bank investors, whose ability to sustain losses without materially impacting financing conditions is uncertain", the bank said.
The FPC said there had been similar increases across Europe and in the US, showing an increased appe e among investors to take risks.
The lending, which is mainly done by investment banks, will be reviewed to see if it poses any risk to financial stability and the ability of companies to service their other debts.
[/QUOTE]https://www.bbc.com/news/business-45797963
Fund managers highlight corporate indebtedness:
https://citywire.co.uk/funds-insider...-debt/a1128570While managers may believe in prospects for company profits, they were worried about the amount of debt that businesses have taken on. A record 42% of investors said companies are over-levered, far exceeding the 32% peak in 2008.
The number of managers who believe corporate balance sheets are overleveraged in general is also at an all-time high of 34%.
The only power that can regulate / stabilize / stop BigFinance/predatory Capitalism is BigGovt, for which the oligarchy has had a 45-year SUCCESSFUL strategy of been corrupting, "capturing", weakening.
There is ALWAYS another disastrous financial crisis/depression, with the oligarchy coming out on top, and everybody else way down on the bottom.
never you worry, Sen. Warren has written the Treasury Department and relevant regulatory agencies a sternly worded letter.
https://www.warren.senate.gov/imo/me...%20Lending.pdf
https://www.nakedcapitalism.com/2018...d-lending.htmlFar from being directed into productive investment – the stated rationale for the past decade of low interest rates — the IMF instead notes that more than half the total of leveraged loans issued this year has been used to finance mergers & acquisitions activity, leveraged buyouts (LBOs), or share buybacks...and pay dividends.
half of all leveraged loans issued in the United States are purchased by collateralized loan obligations (CLOs), which bundle them and then resell them to other investors.
The IMF notes, “Ins utional ownership makes it harder for banking regulators to address potential risk to the financial system if things go wrong.”
We would need 60+ Warrens and 230 progressives in the House to even admit how BigFinance is a disaster for the non-oligarchy.
Aint EVER gonna happen
non-oligarchy America will be ed, sooner or later, by Capitalists/BigFinance. Always has, always will be.
no doubt, but how we respond makes a difference.
there's a world of difference between FDR and Barack Obama.
come on, the only power big enough to respond is Fed govt, and the oligarchy controls it totally, and its Repug s continue to kill (financial) regs, with Dem support, and defund govt, esp enforcement, into dysfunctionality, eg, IRS going after tax evaders, closing loopholes written directly by Capitalists.
Look at how the "independent" captured Fed, and Obama's Treasury, bailed out Wall St / BigFinance in the Banksters Very Own Great Depression but did essentially nothing for the non-oligarchy, aka, Main Street.
regulatory capture is undeniably relevant and I agree that government is the only power sufficient to countervail predatory financial interests.
isn't that the way it worked in the New Deal?
2000s aren't the 1930s.
"The American people were generally extremely dissatisfied with the
crumbling economy,
mass unemployment,
declining wages and
profits
Roosevelt entered office with enormous political capital.
Americans of all political persuasions were demanding immediate action"
https://en.wikipedia.org/wiki/New_Deal
We now have a totally different country, different economy, and communication / information technology.
So 21st New Deal ain't gonna happen.
America is ed and un able, as is the planet's environment ( A G W ).
Note that the oligarchy HATES FDR and the social progress of the 1950s - 60s, and has the power to undo all of it.
To repeat, the oligarchy / Repugs have realized that there is no power that can stop them, no power will punish them, while they have to power to stop all progress, ratcheting America of the non-oligarchy deeper into .
actually, you don't know what's going to happen.
nobody does.
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