{"id":27440,"date":"2017-10-30T07:23:39","date_gmt":"2017-10-30T12:23:39","guid":{"rendered":"http:\/\/olduvai.ca\/?p=27440"},"modified":"2017-10-30T07:23:39","modified_gmt":"2017-10-30T12:23:39","slug":"record-surge-in-riskiest-loans-fattens-wall-street-banks","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=27440","title":{"rendered":"Record Surge in Riskiest Loans Fattens Wall Street Banks"},"content":{"rendered":"<header>\n<h3 class=\"entry-title\"><a href=\"https:\/\/wolfstreet.com\/2017\/10\/30\/junk-rated-risky-loans-fatten-wall-street-with-record-fees\/\">Record Surge in Riskiest Loans Fattens Wall Street Banks<\/a><\/h3>\n<\/header>\n<div class=\"entry-content\">\n<p><strong>Crackdown efforts by bank regulators are put on hold.<br \/>\n<\/strong><\/p>\n<p>The volume of leveraged loans \u2013 the riskiest loans Wall Street banks provide \u2013 has surged 38% year-over-year and has already beaten the full-year record set in 2013, according to Dealogic. Total of leveraged loans outstanding has reached $1.25 trillion.<\/p>\n<p>Nine of the 10 largest banks in the leveraged-loan business have already surpassed their respective 2016 full-year totals, according to Bloomberg data, cited by the <a href=\"https:\/\/www.ft.com\/content\/7882045e-bb5d-11e7-9bfb-4a9c83ffa852\">Financial Times<\/a>, including Bank of America (about $120 billion in leveraged loans so far this year); JP Morgan (about $110 billion), Goldman Sachs ($79 billion); and Barclays ($72 billion). Of the top ten, only Wells Fargo ($69 billion) is still lagging behind last year.<\/p>\n<p>The fees are also record-breaking: $8.3 billion so far this year, just 6% below the full-year total of 2016.<\/p>\n<p>The borrowers are junk-rated over-indebted companies. Leveraged loans are too risky for banks to keep on their balance sheet. So banks structure these loans, arrange them, and sell the structured products to loan mutual funds or ETFs so that they can be moved into retirement portfolios, or they repackage them into Collateralized Loan Obligations (CLO) to sell them to institutional investors, such as mutual-fund companies.<\/p>\n<p>Leverage loans are bought and sold like securities. But the SEC, which regulates securities, considers them loans and doesn\u2019t regulate them. No one regulates them.<\/p>\n<p>Since 2013, bank regulators \u2013 the Fed, the OCC, and the FDIC \u2013 have been exhorting banks to be prudent with leverage loans, and they\u2019ve been trying to crack down on leveraged lending because banks got stuck with these loans during the Financial Crisis. But that crackdown \u2013 however ineffectual it might have been \u2013 is now on hold because earlier this month, the Government Accountability Office questioned the legality of the standards set by the regulators.<\/p>\n<p>And given the big-fat fees \u2013 potentially hitting $10 billion this year \u2013 banks are in no mood of cutting back.<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Record Surge in Riskiest Loans Fattens Wall Street Banks Crackdown efforts by bank regulators are put on hold. The volume of leveraged loans \u2013 the riskiest loans Wall Street banks provide \u2013 has surged 38% year-over-year and has already beaten the full-year record set in 2013, according to Dealogic. Total of leveraged loans outstanding has [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[58,488,690,860,1669,4254,4255],"class_list":["post-27440","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bank-regulations","tag-loans","tag-risk","tag-wall-street","tag-wall-street-banks","tag-wolf-richter","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/27440","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=27440"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/27440\/revisions"}],"predecessor-version":[{"id":27441,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/27440\/revisions\/27441"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=27440"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=27440"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=27440"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}