General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsThe junk debt that tanked the economy? It's back in a big way.
Loans to highly indebted businesses that are packaged into securities are up 38 percent this year.
Like most people, you probably assume that the level of lending done by banks at any moment is largely driven by how much demand there is from borrowers. But in the world of modern finance, thats only part of the story. For just as important is the level of demand from investors pension funds, hedge funds, mutual funds, sovereign wealth funds and insurance companies to buy the loans that banks make. Indeed, there are times when theres so much demand for loans from investors and the profit from selling them is so lucrative that bankers are only too happy to go out and make bigger and riskier loans than they would if they were keeping them on their own books.
That was the situation back in 2006 when investors were so keen to own mortgage-backed securities that Wall Street was begging lenders for more and more product. You know how that turned out.
Now it is happening again, as investors and money managers scramble to buy floating-rate debt debt offering interest payments that will increase as global interest rates rise, as they are expected to over the next few years. A big new source of floating-rate credit is the market for leveraged loans loans to highly indebted businesses that are packaged into securities known as collateralized loan obligations, or CLOs. Because the market seems to have an insatiable appetite for CLOs, leveraged lending and CLO issuance through the first half of the year are already up 38 percent over last years near-record levels.
https://www.msn.com/en-us/money/markets/the-junk-debt-that-tanked-the-economy-its-back-in-a-big-way/ar-BBL9ef2?ocid=spartandhp
But Frank Dodd was so onerous.
alwaysinasnit
(5,066 posts)Congress chipped away at Dodd-Frank with the passage of the Crapo bill.
https://www.americanbanker.com/news/its-the-law-trump-signs-off-on-reg-relief-bill
FirstLight
(13,360 posts)They were saying that the "positive GDP is good for Repubs heading toward midterms" and stupid shit like the economic growth is a "win" for Trump... I call BS!
I am not economically or financially smart, I understand a little about how shit has gone down in the past but since I am not into playing money games so I don't follow a lot of the details.
However - My first instinct in the reports about economic growth as of late is that it's just another bubble waiting to pop and screw us all...again.
Demovictory9
(32,453 posts)A HERETIC I AM
(24,367 posts)Paraphrasing Warren Buffet