PrefBlog

Under proposed legislation, the New York Fed will be politicized:

The Federal Reserve Bank of New York president, who supervises five of the seven largest U.S. banks, would be subject to White House appointment and lawmakers’ approval under legislation proposed today.

Also, one member of the Fed Board of Governors would be designated vice chairman for supervision, and no firm under Fed oversight would be allowed to vote for or have past or present employees serve as directors of regional Fed banks, according to the bill to overhaul financial regulation. Senate Banking Committee Chairman Christopher Dodd, a Democrat from Connecticut, unveiled the proposed legislation in Washington.

This might make a bit of sense if one could point to elements of the Credit Crunch and make a case that Fed failure to regulate was responsible. Unfortunately for logic lovers, however, it was basically Fed-regulated entitites who bailed out Non-Fed-regulated entities (JPM/BSC, BAC/MER) and the spectactular bankruptcies (AIG, LEH) were non-regulated. But it’s not logic, it’s politics!

CLOs are coming back!:

The market for collateralized debt obligations backed by high-yield, high-risk loans is poised to reopen in the U.S. for the first time in a year after losses on mortgages prompted investors to flee bundled securities.

Citigroup Inc. is underwriting a $500 million fund managed by New York-based WCAS Fraser Sullivan Investment Management LLC, scheduled to price as soon as this week, according to people familiar with the offering, who declined to be identified because terms are private. The deal refinances an existing collateralized loan obligation and increases its size by more than 50 percent.

The offering would mark the first new issue backed by widely syndicated loans in the $440 billion market for CLOs since last March and a return to investments that contributed to $1.76 trillion of writedowns and credit losses at the world’s largest financial institutions. Citigroup and WCAS Fraser Sullivan are marketing the deal after prices on CLO debt staged a record rally on signs of economic recovery.
…
JPMorgan Chase & Co., Bank of America Corp. and Deutsche Bank AG have also been approaching managers of leveraged loans since last year to offer terms for new CLOs to restart the market, according to people familiar with the discussions. CLOs pool loans and slice them into securities of varying risk intended to provide higher returns than similarly rated investments.

Volume slackened off today, with only twenty-two issues trading more than 10,000 shares. PerpetualDiscounts lost 9bp on the day – yields are approaching 6.00% – and FixedResets hovered at their 3.50% yield level.

This entry was posted on Monday, March 15th, 2010 at 7:40 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.