April 2014

During the past several years, CRE Securitizations were airbrushed off the financial products reviewing podium like a discredited Politburo member. Not here, never ever here; nope, never heard of it. This was a mistake rooted in populous politics and the conflation of the tools of finance with the tool users (okay, with some very unhelpful help from a few admittedly alarming design failures in the tool itself).

But now, eight years on, plenty of political and regulatory water has gone over the dam. As we said in a recent blog, it’s time for a reset and not just in the legal and regulatory arena, but in the market itself. Taking some liberties with recent news from Detroit, this nifty little coupe of a financial tool has had its successful recall, it’s new and improved, the engineering errors of the early models have been fixed and we’ve sorted out that neither the underaged nor the ethically challenged ought to be allowed to take this little guy out for a spin.
Continue Reading CRE Securitization: Rehabilitation Still In Progress

The Financial Times reported on April 2 that the Eurozone Banks continue to load up on sovereign debt; generally, the debt of their respective host countries.  A few days later, the Financial Times reported a bevy of talking heads crowing over the end of the EC financial crisis.  And then on April 16, the European Parliament voted to approve a slew of new laws for the EU banking marketplace, including a single resolution mechanism so comprised to be almost useless and a common rulebook for winding down the banks.  Does anyone here or there think any of this really matters?  First, it’s going to take years to generate the rules that this legislation birthed and even after the Euro apparatchiki spend years creating detailed rules, the dynamics of Brussels will ensure there will be so many loopholes it would make a block of Swiss cheese blush.  Moreover, does anyone actually think the various nation states will honor these rules if a champion bank is in trouble?  I, for one, do not. 
Continue Reading EU Banks –Dog Bites Man, Again

On April 7th the Federal Reserve Board (the “Fed”) announced that it would provide banking entities with two additional one-year extensions to conform their ownership of CLOs covered by the Volcker Rule.  The Fed stated that it would act on these extensions in August of 2014 and 2015.  The Fed’s action would extend the conformity period from the current deadline of July 2015 to July 2017.  The Fed’s approach to remediating the unintended consequences created by the Volcker Rule brings to mind a famous quote by famed publisher Malcolm S. Forbes, that “[i]t’s so much easier to suggest solutions when you don’t know too much about the problem.”  While the extension offers some relief for CLO 1.0 (i.e. pre-2008) deals, it fails to alleviate the effects of the Volcker Rule on the CLO market.  Considering the overwhelming testimony regarding the potential impacts of the Volcker Rule, one must wonder if the regulators appreciate the Volcker Rule’s material impact on the CLO market.
Continue Reading Federal Reserve Extends Volcker CLO Compliance Period