Commentary on the Commercial Real Estate Debt Markets, Economics, Politics and More.
The Wall Street Journal recently reported that the Papacy has denounced securitization characterizing it (in such an intellectually balanced way) as tainted by “predatory and speculative tendencies.”
Good Lord!
Now, I’m not perfect — I can’t remember the last time I participated in a black mass, inverted a crucifix or committed any of the more striking of your basic mortal sins — but I did close a securitization last week and now I’m worried.
Continue Reading God Hates Securitization?
In seven short years, the Consumer Financial Protection Bureau (CFPB) has managed to court controversy across the political spectrum. Under the leadership of former Director Richard Cordray, the bureau (for better or worse) tested the limits of its jurisdiction and enforcement power in a wide range of areas, including the Home Mortgage Disclosure Act and Equal Credit Opportunity Act, student loan servicing, and let’s not forget the since-disavowed arbitration rule. Enter new Acting Director Mick Mulvaney, who, along with the rest of the Trump administration, is sending the clearest of signals that he does not intend to “push the envelope” at the CFPB. In short, the CFPB’s mission has turned inward—instead of policing the markets, it’s policing itself and the regulatory state, and with about the same degree of fervor.
Continue Reading D.C. Circuit to CFPB: “Go forth and conquer!” CFPB Responds: “No thanks.”
As we all marinate in the difficulties of Mr. Zuckerberg, who, at the end of the day, can certainly salve any wounds with a net worth measured in the tens of billions of dollars, I was struck by the continued drumbeat for “REGULATION.” Now, perhaps I am ill equipped to discuss Facebook, not being a participant and therefore never having clicked through a lengthy agreement on privacy (or the lack thereof), but I have some thoughts. I’ll largely leave the ethics of the privacy contretemps to others, but I was struck by the parallels between the current kerfuffle over Facebook and privacy and the Dodd-Frank mess, lo these ten years past.
Let’s start with this dictum: Beware the politician bearing new and comprehensive regulatory gifts for the American people.
Continue Reading I Hear This Cries Out for Regulation!
Geeking out, I just finished reading the second report from the Alternate Reference Rates Committee that was just published jointly by the Financial Stability Board (FSB) and the Financial Stability Oversight Council (FSOC) in cooperation with the Alternate Reference Rates Committee (ARRC). Does that scream bureaucracy in full, or what? The report runs 40 pages, awkwardly pats itself on the back (with a net back-patting surplus allocated amongst the Federal Reserve, the U.S. Department of the Treasury, the U.S. Commodities Future Trading Commission and the Office of Financial Research) for confirming that we need a LIBOR replacement and the Secured Overnight Funding Rate (SOFR) is way better than the Effective Federal Funds Rate (EFFR) or the Overnight Bank Funding Rate (OBFR). Ergo SOFR is the ARRC’s preferred alternate rate upon the expiry of the spavined LIBOR.
Continue Reading More Fun with LIBOR
Did you know that the District of Columbia has assigned officers to enforce its police-your-dog laws? The Poop Police. How low do you have to go, how badly do you have to screw up to be assigned in the District of Columbia to the Poop Police? Do they go under cover? Do they pack heat? In risible juxtaposition to this Singapore-like nod to order and governance, we see our Congress attempting to do tax reform. What a mess. As I write this, the Tax Conference Committee has apparently settled on something and we will likely see a vote in both Houses this week. The belly-scratching, horse trading, posturing and the manufacturing of sly optics…ugh. At least it is almost over. Something to be said for that. It was a sorry exercise.
Continue Reading Our Nation’s Capital Has Dog Poop Police, But We Let the Congress Do This?
Every once in a while we get some good news around the capital markets hood and this is one of those times. Admittedly, all we’re doing here is fixing a problem which was one of the unintended consequences of the Dodd-Frank regulatory regime and just gets us back to where we thought we were before the issue arose, but hey – a victory is a victory.
Continue Reading Third Party Purchaser Agreements Don’t Destroy Sale Treatment: A Victory for the Unintended Consequences Resistance
Or maybe not. At the outset, let’s give credit where credit is due. It was gratifying to read a governmental missive on the capital markets that made sense, showed an actual grasp of how markets function and an awareness of the issues confronting capital formation. Best damn thing I ever read coming out of the swamp.
The Treasury Report on the capital markets published in early October is indeed pretty fantastic stuff. The Report covers the Treasury’s recommendation on re-centering many of the rules around the capital markets over a wide range of regulatory issues important to securitization and capital formation.
Let’s focus on the provisions in this Report that are central to securitization.
These can be summarized as follows:
In other words, our regulatory regime needs a certain amount of recalibration to achieve its goals of safety and soundness in the financial market place while not impeding capital formation.
Continue Reading Treasury Report on the Capital Markets: A New Day
In this commentary we have talked about a lot of challenges facing commercial real estate finance and other capital market activities over the years. With more or less “pants on fire” anxiety, we’ve talked about Dodd-Frank’s regulatory compliance burdens, the Volcker Rule, Risk Retention, the glorious and multitudinous products of the gnomes of Basil, the efforts of the “we hate all Anglo-Saxon bullshit” gang in the European Community to strangle securitization, the LIBOR scandal, geopolitical risk, and the famous unknown unknowns.
But, right now, we need to concentrate people: it’s the tax code, stupid. For those with limited bandwidth, and I count myself among them, this is where much of our energy needs to be focused.
Continue Reading It’s the Taxes, Stupid
You know, sometimes life’s problems smack you against the side of the head like a 2×4, and sometimes it’s just a multiplicity of middling offenses that become so annoying that you might just want to roll over and die. Think anything involving a conversation with the DMV or the phone company. Today, we’re talking the death of a thousand paper cuts brought to us by those well-meaning folks who are beavering away to replace LIBOR.
Continue Reading The End of Days (Or At Least LIBOR)
The Trump administration and Congress have lots on the agenda: tax reform, financial regulation reform, job creation (think infrastructure spending, maybe?) and more. While it seems unlikely that much of anything “real” is going to happen anytime soon or even this year (other than more drama, more tweets and more Trump-isms), there’s some hope for a fix for the many failings of the High Volatility Commercial Real Estate (HVCRE) Rule.
Continue Reading HVCRE: Busting Myths
