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You can never go wrong starting off a commentary with a butchered bit from the Bard, right?  “Now is the winter of our discontent” spake Richard III, an unamiable leader perhaps reminding us all today of our unamiable governing class.  Old Gloucester rhymed to presage war and chaos.  Apparently, all that happened because the poor dear couldn’t buy himself a date.  But hey, chaos, war, desolation, burning and pillaging, etc., aren’t all bad, that is, if you are equipped to enjoy the carnage.

And now, back to the market.  What am I rambling on about?  Distressed debt opportunities are coming back.  This is the silver lining, at least for some, in the cracks beginning to develop in our long, Goldilocks credit cycle.  A slowdown is not here yet, to be sure, but it’s time to sharpen the knives and begin to think about our opportunities. 
Continue Reading The Winter of Our Discontent May Be Over (If you are a Distressed Debt Investor)

On September 27, 2017, the Federal Reserve, FDIC and OCC released a Notice of Proposed Rulemaking (NPR) that they describe as simplifying compliance with certain aspects of the agencies’ risk based capital (RBC) rules to, among other things, replace the standardized approach’s (SA) treatment of HVCRE loans with a simpler treatment for most acquisition, development or construction (ADC) loans called high volatility acquisition, development or construction (HVADC). Spoiler alert: it just replaces vague and confusing rules with a slightly different set of vague and confusing rules.
Continue Reading Yakety Yak – Talk Back: Regulators Respond to HVCRE Complaints

CREFC has surveyed some of its attendees—all major participants in the commercial real estate finance industry—at the 2017 CRE Finance Council January Conference in Miami.  CREFC’s 2017 market outlook survey confirmed what we observed at the conference this year, that for the most part survey respondents were cautiously optimistic in the face of the Trump Administration, Risk Retention and movement near the peak of the real estate cycle.  We decided to dig a little deeper to see how this year’s survey responses differed from last year’s. Armed with the benefit of a little hindsight, let’s consider the year we had, the year we expected, and the year we’ve just begun.
Continue Reading Reading the Financial Tea Leaves: CREFC Market Outlook Survey 2017

I’d like everyone to go out and buy a copy of Professor Paul Mahoney’s slender new book, Wasting a Crisis – Why Securities Regulation Fails.  Paul is a brilliant guy.  Until this spring, he was the dean of the University of Virginia School of Law where he is the David and Mary Harrison Distinguished Professor of Law and the Arnold H. Leon Professor of Law, teaching securities laws.  This is a great book and an important read.  Paul argues cogently that:
Continue Reading Why Regulation Fails

The Dodd-Frank Act was a cornucopia of opportunity for rule writers. To the regulatory community, this was almost a bottomless candy jar. And so our regulatory apparatchiki began to beaver away and produced, to date, something like 22,000 pages of rules which purport to moderate or prevent bad behavior by all those nasty institutions perceived to have some responsibility for the financial crisis of 2008. Curiously, at least, to me, Dodd-Frank included in among its bad boys, those institutions “significantly engaged in insurance activities.” Apparently, our Congressional grandees in the overheated environment of the Great Recession conflated insurance and banking. Hey, they are kind of like financial institutions, and they’re big, or at least some of them are, and are probably filing with nefarious types inclined to go off the reservation and therefore in need of “guidance” from the regulatory community.
Continue Reading Dodd-Frank Rulemaking Developments by the Fed for Fed-Supervised Insurance Firms

And now to return to our commentary a few weeks back about the stultifying impact of ill-thought through rules and regulations (at best) (Brexit has intervened).  This is our Regulatory State which broadly attempted to pick winners and losers and modify market behavior, to get an engineered outcome by using the blunderbuss of proscriptive rules and regulation.
Continue Reading A Trip Through the Labyrinth – The Regulatory Man in Full

globe - 01-16As we do each year at Crunched Credit, we take the end of a calendar year as an opportunity to stop and reflect on where we are, and what the next year might hold. Recognizing the certainty that a successful prediction is more a random event – a blind cat finding a dead mouse, than a product of wisdom and analytic prowess, it remains an important exercise.  It bears repeating that refusing to take a view is actually to make a choice, and a pretty silly one at that.  So as we at Dechert churn through our budgeting and planning process for 2016, we will make some assumptions about the economic environment and adjust our planning accordingly.  Let’s agree, we are going to be wrong about a lot of stuff – maybe everything – but that fact doesn’t excuse the critical need for having a macro view.
Continue Reading If Interesting and Prosperous is a Choice, I’ll Take Door Number Two: Perspectives on 2016

Is the Federal Reserve overreaching by broadening the scope of its policies?

If extremism in the defense of liberty is (reportedly) no vice, unremitting, continuous undisciplined chatter for the sake of transparency is no virtue.  God knows transparency has become the sine qua non of public ethics these days.  To be accused of not being transparent is pretty much the same thing as being accused of being an anti-Semite (with notable exceptions for certain parts of the world).  When it was reported recently that Mrs. Clinton had used a private email address as opposed to an official State Department email, someone suggested that this evidenced a lack of transparency.  The democratic establishment shuddered, only matched by the glee over at Fox News.Continue Reading Mrs. Yellen, What in the World Are You Doing?