Volcker Rule

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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

Befitting the holiday season the regulators recently decided to bestow upon us all the much anticipated (dreaded?) Volcker Rule. At 1100 pages of truly riveting reading material, Volcker has certainly given all of us plenty to wade through during these recent cold winter weeks and much to the surprise of the structured credit industry there were material provisions sprinkled throughout the 1100 pages that significantly affected the collateralized loan obligation market.
Continue Reading CLOs under the Volcker Rule: New Exemptions, New Issues, New Obligations – Part I

It’s the Christmas season and this week we got the Volcker Rule. How seasonably appropriate! Now, I get the whole Christmas trade. You’re good, you get toys; bad, coal in the stocking. But this is bad in a regifted, four-year-old fruit cake sort of way. My desk now groans under the 1100 pages of Volcker whilst I’m trying to gin up some Christmas cheer – it’s not fair. We at Dechert will be sending out a more thoughtful analysis of the Rule by way of Dechert OnPoints, with more to come as the digesting process continues.Continue Reading Santa-baby: Volcker in the Sack

Dow at 16,000, government up and running and the first Single-Family Rental deal now safely in investors’ hands – we are in pretty good shape. As is our tradition here at Crunchedcredit.com, we present to you our nod to the stories and happenings that struck us as amusing or important. (Or both). (Or neither).Continue Reading CrunchedCredit.com’s 4th Annual Golden Turkey Awards

There’s a lot of talk these days about the growth of a shadow banking market. Shadow is right! The growth of the commercial lending market outside of the universe of insured depository institutions and life insurance companies is real and its growth is accelerating, yet it is not easy to discern its size, shape and taxonomy. The shadow banking market, which simply means the community of lenders outside of the bank and lifeco cadres, is a logical response to a worldwide tsunami of regulatory activity designed to constrain innumerable facets of financial institutions’ operations which often seems more about retribution than the safety, soundness or integrity of the financial markets life.Continue Reading The Shadow Banking Market: The Shadow Knows

Dechert’s securitization team is looking forward to the American Securitization Forum 2013 (“ASF 2013”) conference starting this Sunday, as it is expected to be once again the largest capital markets conference in the world. ASF 2013 is expecting over 4,500 participants who will all convene at the Aria Hotel and Convention Center in fabulous Las Vegas.Continue Reading ASF 2013 (“Viva Las Vegas”)

The election’s over and elections matter we’re told, albeit most of the denizens of Washington seem to have remained in their seats. The fiscal cliff awaits. We wait, with various levels of trepidation, for a workable compromise or, perhaps, to find out that life goes on regardless of what our elected leaders do. A bit of leadership, perhaps? One hopes that the Congress and the Senate, so mad at each other and so dug in on many issues, will, in the New Year, strive to find areas where compromise and commonality can be found. Indeed, whether the noise about principles and non-negotiable positions has content or is merely the expelling of political gasses, it’s pretty clear both parties better find some place to start agreeing and actually do something for the country if they really want to continue to be honored with the right to engage in public service; e.g., keep their rumps in their elected seats.Continue Reading A Christmas Wish: Fix Dodd-Frank (Just a Little)

Back from vacation … The sheer joy of re-engagement cannot be captured in words.  But, can there be a better way of restarting than perusing FinReg?  Being the parochial structured finance lawyer that I am, I start with Subtitle D with the Potemkin village-like name of  "Improvements to the Asset Backed Securitization Process" and Section 13, which is the Proprietary Trading or so-called Volcker Rule provisions.  I’ve got some thoughts.

Let’s start with the improvements to the securitization process.  The good news, as I’m sure everyone knows by now, is that some sensible asset class-specific provisions for commercial mortgages were included in the risk retention language.  More flexibility in sorting out what alignment of interests ought to look like.  Included was the notion that a B piece buyer could meet the retention requirement as could really good reps or underwriting.

The bad news is, just as in almost every other corner of this massive regulatory exercise in political self-indulgence, all the tough and important issues have been kicked down the road to the “Regulators”.  The scope of that delegation is breathtaking.  The regulators have been invited to sort out what is and what is not risk retention (vertical strip, horizontal strip, L strip), what is the “credit risk” for which 5% must be retained, what are good hedges and bad, what is the minimum hold period for risk, what is high quality underwriting, and what appropriate risk management practices of securitizers ought to be.  Wow!  They can do all that?  We won’t have to think at all.Continue Reading Securitization Survives Round One