Well, it’s been an interesting week and a bit. First Silicon Valley Bank and Signature Bank were closed by their respective State banking authorities with the FDIC stepping in as receiver and then the extraordinary action by the Fed and Treasury to address liquidity concerns and a bunch of rather disingenuous assurances from the great and good that all is well. What actually happened? We’ll undoubtedly learn more over the next couple of days and weeks, but in the meantime, we need a plan.
The SEC As Bad Santa: The Proposed Securitization Conflict Rules
The current administration’s legislative initiatives are largely bottled up in a split Congress, so the path toward achieving the White House’s policy priorities runs almost exclusively through the executive order and rule-making process and boy, have they worked it hard.
But Santa is coming down the chimney delivering lumps of coal so often these days, his knickers are smoldering (I hope they do). The pace of regulatory initiatives from the White House, the Department of Labor, the FTC, the CFPB, from the Fed banking regulators and the SEC has been blistering and shows no signs of abating. Comments are due March 27, 2023.
Birds Do It, Bees Do It, Even Educated Fleas Do It. Should The CRE Securitization Industry Advertise? 
If the wisdom of crowds has any validity (and there’s no real evidence that it’s any worse than the pontifical huffings of the chattering class), then there’s hope for 2023. Optimism did itself proud at CREFC. We’ll see if that optimism is recapitulated at SFVegas and at the MBA CREF meeting coming up in the next few weeks. It has been said that we’re capable of talking ourselves into a recession. Are we capable of talking ourselves out of one?
To Hell with Predictions; I’m Embracing My Inner Fabulist This Year
Each year about this time, I sit down and try to cobble together predictions for the performance of the economy and the performance of the CRE market in the coming year. Of course, I’m wrong every time. It’s not for lack of trying. I do try to think hard about where we’ve come, what things are likely to impact our market, add a splash of uncertainty and voila, predictive omelet…or more likely, dumpster fire. I give up. Tee up Yogi Berra. Periodically, amongst the prognostications wrapped in faux sagaciousness, I and other talking heads actually get one or two things right. More Brownian motion than insight. If you predict enough stuff, something is bound to actually happen.
2022 Golden Turkeys
It’s Golden Turkey Awards Time, Folks!
Our Turkeys are a little late this year but hey, we’ve been busy worrying about the collapse of the world’s economy. This is the 10th edition of our Turkeys and much thanks to our disorderly, often dysfunctional, regularly inscrutable and absurd government, polity and marketplace for continuing to provide us with materials for this annual compilation of that we find most silly, absurd and worthy of a Turkey.
Last year at this time, the market was on fire. I was shocked that we actually found time to put out a Turkey. This year, the market looks more like a smoldering ruin rather than a roaring bonfire, but hey, maybe that means we have an upside to look forward to. So, with irrational exuberance and hope that sometime in 2023 it’s better than now, here are our 2022 Turkeys. Continue Reading
CREFC Capital Markets Conference Recap
On October 26, 2022, Dechert partners Laura Swihart and Stewart McQueen attended the CREFC Capital Markets Conference in New York City. Stewart gave opening remarks and Laura moderated a panel on the current housing market and its intersection with multi-family, single-family and build-to-rent properties. Laura and Stewart sat down with Law Clerks Jared Goldstein and Sarahan Moser to recap the conference. Continue Reading
Auto ABS: Uncertainty and Excitement Ahead
Recently, Dechert Partner Sarah Milam partook in an auto ABS panel discussion at ABS East in Miami, Florida. Sarah and four distinguished panelists discussed the state of the ABS auto loan market, issuance, yields, collateral performance, ESG trends, and deal structures. Sarah sat down with Associate Griffin Hamilton to recap the conference.
Can We (Should We) Try to Fix the Conduit Before It’s Gone?
The conduit market does not absorb a lot of bandwidth in my day-to-day practice; I’m more of a CRE/CLO/warehouse/SASB/new products/innovation sort of guy. But it’s painful to watch this marquee capital markets product wither away, a product that transformed $200 billion of mortgage loans into securities in a single year. That biz might limp over the finish line with a meager $25 billion this year. What happened? The demand for CRE leverage certainly hasn’t changed. The CRE market has gotten significantly bigger since 2008 and consequently, the need for leverage has grown concomitantly. The nature of the underlying real estate assets hasn’t changed all that much, nor the nature of the ownership structure, albeit it is probably a bit more institutional today than it was in 2008. The product is no different, in large measure, today than it was back then and indeed in some minor, twiddling respects might even be better from the perspective of the borrower. Continue Reading
Life (and Opportunity) in the Time of Considerable Government Malfeasance
I wrote a week or two back about my expectation that significant economic dislocation awaits us. I still think that. The morning after I published, hordes (ok, maybe not hordes) of PhD Villeins were outside my house with pitchforks and burning torches, loudly asserting that I had wildly overstated the likelihood of material distress in the marketplace. “No, no, no, the White House has assured us of a soft landing and a soft landing we’ll have.” (The Council of Economic Advisers, not surprisingly, if professionally embarrassing, seem to think so, too.) And, while inflation is bad, it’s not that bad. (I don’t yet need a wheel barrel to buy bread!) No recession, they perorate loudly and insistently. We’ll be back to 2% inflation, sub 4% unemployment and 2% GNP growth by Q4 of 2023!
Get Ready for the Distressed Debt Wave (HONEST!)
As I was saying in my last commentary, it’s time to stay calm and carry on in a market that is flashing green, red and yellow signals simultaneously. These are market conditions in which nimbleness will be rewarded. Whether the economy is going to continue to grow, albeit in a very low gear, or whether we’re going to have a recession of one species or another, things are not soon going to return to the BEFORE. Continue Reading