As the Volcker Rule gets implemented to prevent banks from engaging in risky trading in C.L.O.s [collateralized loan obligations, which are bundles of loans, usually made to junk-rated companies, which use the same techniques as collateralized debt obligations, made up of subprime mortgage investments - these losses helped caused the Great Recession], the banking lobby and its Congressional puppets are arguing that any such threat to the C.L.O. market is a threat to small and midsized banks and others businesses, which supposedly will have difficulty raising capital as a result of the rule. The truth, however, is far different. “Like the [fight in Congress over] TruPs [trust-preferred securities, which are bundles of investments in banks], and countless other similar Washington showdowns, this skirmish is largely about preserving a market for the largest banks. Just three ‘too big to fail’ banks — JPMorgan Chase, Citigroup and Wells Fargo — account for 71 percent of bank C.L.O. holdings, according to Better Markets, the banking reform group. And the large banks get fees for creating the deals.” “Banks and their political allies fought the financial overhaul before it was passed. To paraphrase a famous orator: They shall fight it in the courts, they shall fight it with the regulators, they shall fight it in the halls of Congress. They will search ceaselessly for vulnerabilities and loopholes. They will sow doubt about the rules. [¶] Even when they lose, their harassing tactics will have benefits. A distracted Securities and Exchange Commission has failed to complete many important Dodd-Frank rules covering securitization.”
Posted on: Thu, 06 Mar 2014 08:55:05 +0000
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