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After three years of waiting, we now have our Risk Retention Rule.  All six of the Agencies responsible for the Rule – the FDIC, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Department of Housing and Urban Development, the Federal Housing Finance Agency and the SEC – have finally managed to agree, albeit with significant dissent at the FDIC and the SEC, on a Final Rule.  Note that Richard Cordray of the Congregation for the Doctrine of the Faith (in Progressive Causes) …er…the Consumer Financial Protection Bureau, apparently had a heavy finger on the scales, which is why there was material dissent at the FDIC and SEC.  So, after all those years of waiting, we have “it.”  “It” of course is another five hundred some odd pages of commentary and bloviating and a relatively few pages of actual Rule which, as we study it more, will inevitably have left much that will need to be subsequently clarified.  We have already found technical inconsistencies between the commentary and the Rule. 
Continue Reading Risk Retention and Stockholm Syndrome

I told the Blog team that I had sworn off writing about Europe for a while; but really. The FT opinionized last week that the EU ministerial decision to agree on a standard “bail-in” to fix broken European banks was a good thing. The editorial ended with a ringing endorsement “something is, however, better than nothing.” Really? It reminds me of Wile E. Coyote bravely trying to use a handkerchief as a parachute as he falls off the butte, again. Beep, Beep.Continue Reading The Consequences of a Failed Banking Union

I was entertaining myself early this morning by looking over a joint agency report just released entitled “An Analysis of the Impact of the Commercial Real Estate Concentration Guidance”. This report summarizes the performance of bank CRE portfolios following the issuance of interagency guidance in 2006 entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices”. Everyone will be shocked, shocked to know that through the course of the worst recession in post-war history, banks lost money because of commercial real estate exposure and many smaller and regional banks went casters up. Well, there’s startling news. We taxpayers pay for this sort of thing. Where is the sequester when we really need it?Continue Reading Undue Commercial Real Estate Risks Are Bad: The Mathematical Proof of the Blindingly Obvious

The second annual IMN CLO and Leveraged Loan Conference returned to New York this past week. Building on last year’s momentum (discussed here), over 1,500 managers and investors, in addition to structurers, bankers, lawyers and other industry actors, filled the convention space at the Conrad Hotel, doubling last year’s attendance and causing standing room only conditions in the large downtown venue. Yes, many conference attendees were literally prevented by conference staff from entering the fully packed Conrad ballrooms.Continue Reading Second Annual IMN CLO and Leveraged Loan Conference Update

The FDIC’s new rules (promulgated per the requirements of the Dodd-Frank Act) for calculating deposit insurance assessments for insured depository institutions, including "large institutions" and "highly complex institutions," are set to become effective on April Fool’s Day, 2013. No kidding. As institutions of this type are active investors in CLOs, particularly the “AAA”-rated tranche of CLOs, there has been significant consternation among market participants on the immediate and long-term effect of such new rules.Continue Reading CLO Update: New FDIC Rules on “Higher Risk Securitizations”

Any number of banks in the United States have been courting, in a desultory sort of way, the covered bond. The Street has been scratching its head for many years trying to determine whether a U.S. covered bond could be done and, if so, whether it would be good. Congressman Garrett, who certainly can’t be faulted for lack of effort, has repeatedly introduced covered bond legislation, the most recent one of which was captioned the United States Covered Bond Act of 2011. As those with nothing better to do than follow the covered bond sausage-making know, an effective U.S. covered bond market really does require enabling legislation, which we do not have for a number of reasons, including the unremittant hostility of the FDIC.Continue Reading As Covered Bond Markets Retreat

Senators Kaye Hagan and Bob Corker’s co-sponsorship of Chuck Schumer and Mike Crappo (who says we all can’t get along) filed “The United States Covered Bond Act of 2011.” I almost think this bill gets support because no one can figure out a compelling reason to be for or against it, so why not show a little whiff of bi-partisanship? The new bill broadly tracks the bill that Congressman Garrett introduced into the House earlier this year, HR-940. We’ve written about this before (it is getting to be quite a list, see here, here, here, here, here, here, here, here, here, here and even as a Golden Turkey), and, I gotta say, my views have not materially changed. This remains an answer to a question no one has. Please, someone, tell me why this is important and useful!? Continue Reading Covered Bonds Redux

It looks like our recap on covered bonds came not a moment too soon. Representatives Scott Garrett (R-NJ) and Carolyn Maloney (D-NY) teamed up this week to co-sponsor the bipartisan H.R. 940 (pdf), the United States Covered Bond Act of 2011. The new bill is much in keeping with the recently distributed discussion draft (examined in a recent Dechert OnPoint (pdf)). Currently, it is in committee before both the House Committees on Financial Services and on Ways and Means.Continue Reading Covered Bond Update: Rolling the Boulder up the Hill?