What funny times in which we live; an observation perhaps highly dependent upon your notion of fun. Maybe curious is the better description. Daunting? Frightening? Opaque and unknowable? All probably good descriptions. True of politics. True of business.
Sticking to business, it’s hard to get conviction around anything right now. Nonetheless, we must. Everyone needs
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!
Continue Reading Life (and Opportunity) in the Time of Considerable Government Malfeasance
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 Get Ready for the Distressed Debt Wave (HONEST!)
So, once again, time for Dechert’s acclaimed (at least by us) Annual Golden Turkey Awards. It is rather a difficult time for comedy; we are in the throes of a completely unfunny pandemic. Sitting down to finalize this year’s list gave me some sympathy for our late-night talk show hosts who are very publicly pining over the end of the Trump administration and trying to find humor in the anticipated Biden administration, where the watchword is “dull is cool.” But perhaps looking for inanity and making gentle fun of it might even be more important in tough times than good. So, with that in mind, we went digging for gems in 2020. Nothing seems quite so risible as in past years, but here’s the best of a bad lot:Continue Reading 2020 Golden Turkey Awards
Here is something helpful that has surfaced amidst the fallout, pain and confusion of the global COVID-19 crisis. The implementation date for the all-too-simple in theory but not-simple-at-all in practice CECL accounting standard has been pushed back by the passage of the CARES Act for banks until the COVID-19 national emergency declared by the president ends or December 31, 2020, whichever is earlier. In addition, an interim final rule released by the FRB, OCC and FDIC on Friday, March 27th, now provides an option to delay the effects of CECL on regulatory capital for two years (in addition to the original three-year transition period for banks required to adopt CECL during their 2020 fiscal year). Banks opting to use both forms of relief would be subject to a modified transition period which would be reduced by the amount of quarters CECL was delayed due to the CARES Act. No relief was provided for non-banks who are otherwise required to follow CECL.
Continue Reading CECL: The Ugly Pig Running Out of Lipstick
As is our tradition here at Crunched Credit, each year, about this time, we award our Golden Turkey Awards. Once again, I must say that we are utterly blessed with so many worthy candidates. The truly deserving have once again wrangled with vision and astounding persistence to earn a spot on our acclaimed list. To
Just a few short months ago we took on the breathtakingly ill-conceived Current Expected Credit Loss (CECL) standard that the Financial Accounting Standards Board (FASB) proposed to implement starting in 2020. CECL will require major shifts in the way lenders model, forecast and reserve for future losses. It would materially drive up capital requirements, impair earnings and ultimately drive spreads higher to the borrowing community. And by the way, it would be pro-cyclical. If we were actually going to do these things (and we shouldn’t), an unelected financial standard setting committee is surely the wrong party to hold the pen.
The lending community screamed bloody murder, and for good reason. Luckily, the small banking community was at the forefront on this cri de coeur. While the money center banks may be one of our pols’ favorite whipping boys, everyone in politics loves the small banker (visions of Jimmy Stewart dancing in their reptilian brains) because those bankers made loans to their constituents, support their local community and, oh, by the way, made significant political contributions.Continue Reading Beany & CECL – Episode 2
Beany & Cecil was a cartoon. The Current Expected Credit Loss accounting rules, better known as CECL, which the FASB is insisting will go into effect at the beginning of next year for publicly traded banks and lenders and a year later for all other GAAP reporting entities is not. Now, heaven forfend that I suggest that the work of the Financial Accounting Standards Board is cartoonish, but there’s a parallel in this pairing of harmless and obscured menace worth noting.
Continue Reading Beany & CECL